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Earnings Results: Nvidia earnings chopped in half, but tweaked servers to China offset earlier $400 million warning

Nvidia Corp. shares ticked higher in the extended session Wednesday after the chip maker’s expected exposure to a U.S. ban on certain tech sales to China did not prevent it from topping Wall Street revenue estimates.


shares rose 2% after hours, following a 4.5% decline in the regular session to close at $159.10.

Nvidia reported third-quarter net income of $680 million, or 27 cents a share, compared with $2.46 billion, or 97 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were 58 cents a share, compared with $1.17 a share in the year-ago period.

Revenue fell to $5.93 billion from $7.1 billion in the year-ago quarter as gaming sales slumped. Analysts had forecast 71 cents a share on revenue of $5.78 billion. 

Data-center sales rose 31% to $3.83 billion, while gaming sales dropped 51% to $1.57 billion from a year ago. Analysts had forecast $1.42 billion in gaming sales and $3.72 billion in data-center sales.

“We are quickly adapting to the macro environment, correcting inventory levels and paving the way for new products,” said Jensen Huang, Nvidia’s founder and chief executive, in a statement. Last quarter, the company announced it took a $1.32 billion inventory charge.

In late August, Nvidia had forecast third-quarter sales between $5.78 billion and $6.02 billion, which fell about $1 billion below what the Street was expecting at the time. That was before it estimated a possible $400 million in lost China sales, that Nvidia hopes to correct by selling a version of its A100 data-center chip called the A800 to China, which inhibits AI and supercomputing use and thus meets U.S. restrictions for sale.

“These restrictions impacted third-quarter revenue, with the decline largely offset by sales of alternative products into China,” said Colette Kress, Nvidia’s chief financial officer, in a statement.

Read: Nvidia’s gambit to salvage China data-center sales, gaming-card market questioned heading into earnings

For the fourth quarter, Nvidia forecast revenue of $5.88 billion to $6.12 billion, while analysts surveyed by FactSet, on average, have forecast earnings of 76 cents a share on revenue of $6.07 billion.

PC sales are seeing their steepest decline since data started being collected in the 1990s after a two-year surge, and spending on videogames and gear for them has also come back to earth. At the same time, drops in cryptocurrency prices have made crypto mining less profitable; Nvidia cards have been used extensively to mine for Ethereum 

 and other digital assets.

Nvidia has been slashing its outlook al year, sometimes twice with a quarter.

Earlier in August, Nvidia warned of a $1.4 billion revenue shortfall because of weak gaming sales. That was on top of the $500 million Nvidia pulled from its second-quarter revenue forecast because of the COVID lockdowns in China and the war in Ukraine.

Following that, analysts readjusted their estimates, settling on a consensus of $5.78 billion for the quarter, coming very close to the $5.57 billion Advanced Micro Devices Inc.

reported for its third quarter. The last time AMD topped Nvidia in quarterly revenue was the third quarter of 2014, when AMD reported sales of $1.43 billion and Nvidia reported $1.23 billion, according to FactSet data.

Over the year, Nvidia shares have dropped 46%. In comparison, the PHLX Semiconductor Index 

is down 32% year to date, the S&P 500 index 

is down 17%, and the Nasdaq Composite Index

is off 29%.

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