What Factors Will Impact Nvidia’s Q1 Fiscal 2020 Earnings?

May 15th, 2019 by Trefis Team
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Nvidia (NASDAQ:NVDA) is expected to publish its Q1 fiscal 2020 results on May 16. This note details Trefis’ forecasts for Nvidia, as well as some of the key trends we will be watching when the company reports earnings. You can view our interactive dashboard analysis ~ How Is Nvidia Likely To Have Fared In Q1? for more details on the key drivers of the company’s expected performance in Q1. In addition, you can see more of our data for Information Technology companies here. 

How have Nvidia’s revenues changed over recent quarters, and what’s the forecast for Q1 fiscal 2020?

  • Total Revenues for Nvidia have largely trended lower over the last few quarters. They declined from $2.91 billion in Q4 fiscal 2018 to $2.20 billion in Q4 fiscal 2019, as the company saw a plunge in the demand for crypto related products.
  • The revenues could decline 31% to $2.22 billion in Q1 fiscal 2020, a figure 0.7% higher than what it reported in the previous quarter, and in line with the company’s guidance of $2.20 billion.
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What are Nvidia’s key sources of revenue?

  • Nvidia generates its revenues from graphic processing units (GPUs), and Tegra processors.
  • GPUs refer to revenue from Nvidia’s graphic processing units used in PCs and data centers.
  • Tegra processor segment includes products based on Tegra SOC (system-on-chip) and modem processor technologies, which includes Tegra for automotive computers, including infotainment and navigation systems; and gaming devices.

What to expect from GPUs segment in Q1?

  • GPUs segment revenues have declined from $2.46 billion in Q4 fiscal 2018 to $1.98 billion in Q4 fiscal 2019.
  • This can largely be attributed to a decline in demand for GPUs used for crypto mining. Crypto currencies have seen a massive decline in the recent past, and the demand for graphics cards has faded, which were earlier sought for crypto mining.
  • Moreover, the slowdown in the Chinese economy is impacting the sales of its newly launched Turing products. Trade tensions between the U.S. and China could further add to the woes.
  • This trend could continue in the near term, and result in close to a 28% dip in segment revenues to a little under $2 billion in Q1.

What to expect from Tegra processors segment in Q1?

  • Tegra processors revenue declined from $450 million in Q4 fiscal 2018 to $225 million in Q4 fiscal 2019.
  • The plunge in sales can largely be attributed to a decline in SOC modules for gaming consoles. Nintendo Switch sales itself has declined when compared to the previous holiday season, and this impacted Nvidia’s sales as well.
  • However, the company’s automotive business is doing well with 23% y-o-y revenue gains in the previous quarter, led by increased adoption of the company’s next generation artificial intelligence cockpit solutions.
  • The trends above, primarily on the gaming consoles, could impact the Q1 sales by as much as 48% to $230 million.

What will be the impact of the above on Nvidia’s EPS?

  • We expect the earnings to be $0.80 per share on an adjusted basis in Q1. This reflects a 61% decline over the prior year quarter.
  • Average consensus earnings estimate ~ $0.79 per share.
  • This can largely be attributed to lower revenues, as well as margins, given the company has to take pricing cuts to clear its crypto related inventory.

 

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