NVIDIA Q2 FY 2020 Earnings Report: Continuing Crypto Disruption
by Brett Howse on August 15, 2019 9:25 PM EST- Posted in
- GPUs
- NVIDIA
- Financial Results
Today NVIDIA announced their earnings for the second quarter of their 2020 fiscal year, which ended on July 28. NVIDIA made tremendous gains during the cryptocurrency boom, and as we saw in Q1, the company has had to deal with the loss of the crypto sales which contributed a lot of revenue to their bottom line in the last year or two. Revenue for Q2 2020 came in at $2.579 billion, which is down 17% from a year ago, and while gross margin was also down 350 bps, it was still a healthy 59.8%. Operating income for the quarter was down 51% to $571 million, and net income was down 50% to $552 million. This resulted in earnings-per-share coming in at $0.90, down 49% from a year ago.
| NVIDIA Q2 2020 Financial Results (GAAP) | |||||
| Q2'2020 | Q1'2020 | Q2'2019 | Q/Q | Y/Y | |
| Revenue | $2579M | $2220M | $3123M | +16% | -17% |
| Gross Margin | 59.8% | 58.4% | 63.3% | +1.4% | -3.5% |
| Operating Income | $571M | $358M | $1157M | +59% | -51% |
| Net Income | $552M | $394M | $1101M | +40% | -50% |
| EPS | $0.90 | $0.64 | $1.76 | +41% | -49% |
Over the last couple of years, NVIDIA has diversified its portfolio, but even so, Gaming continues to be the largest revenue generator at NVIDIA, and by a wide margin. Despite gaming revenue dropping nearly $500 million from a year ago, gaming still accounts for over 50% of NVIDIA’s total revenue. For Q2, gaming brought in $1.313 billion, down from $1.805 billion a year ago. It’s a big drop, but NVIDIA did make gains over Q1 where the drop was 39% year-over-year, compared to the current quarter which had a 27% drop year-over-year. NVIDIA stated that gaming desktop GPU sales fell, which isn’t a surprise considering the crypto craze a year ago, but sales were partially offset by increased notebook GPU sales.
Professional Visualization, which is NVIDIA’s Quadro lineup, had revenue of $291 million for the quarter, which is up 4% from a year ago. As with the gaming segment, increased sales of notebook versions of Quadro were the reason for the increase.
Data Center also had a drop, with revenues coming in at $655 million, which is down 14% from a year ago. NVIDIA saw a large jump in data center GPU sales for AI over the last couple of years, but that growth has stagnated and now regressed. NVIDIA attributes the drop to lower hyperscale revenue, and NVIDIA has started to see some fierce competition in the hyperscale space with companies even creating their own custom silicon for specific workloads. It’ll be interesting to see how NVIDIA responds.
Automotive, which is the market NVIDIA moved their Tegra processor into when they dropped their mobile efforts, continues to do well. Revenue for automotive was a record $209 million, up 30% from a year ago. NVIDIA has made a lot of gains in AI cockpit solutions and autonomous driving solutions, and attributes the revenue gain to a development services agreement they signed in this quarter.
Finally, OEM and Other revenue was $111 million, down 4% from a year ago.
| NVIDIA Quarterly Revenue Comparison (GAAP) ($ in millions) |
|||||
| In millions | Q2'2020 | Q1'2020 | Q2'2019 | Q/Q | Y/Y |
| Gaming | $1313 | $1055 | $1805 | +24% | -27% |
| Professional Visualization | $291 | $266 | $281 | +9% | +4% |
| Datacenter | $655 | $634 | $760 | +3% | -14% |
| Automotive | $209 | $166 | $161 | +26% | +30% |
| OEM & IP | $111 | $99 | $116 | +12% | -4% |
Looking ahead to Q3, NVIDIA is expecting revenues around $2.9 billion, plus or minus 2%. Q3 FY 2019 NVIDIA had revenues of $3.2 billion, so NVIDIA is still expecting to be below those numbers, but edging closer to where they were a year ago.
Source: NVIDIA Investor Relations
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MadManMark - Thursday, August 15, 2019 - link
The crypto disuption wasn't in this quarter, it was in the year ago quarter, and then in the following couple quarters after it ended, and they needed to work through returned OEM inventory. This is literally the first quarter in maybe 6-8 that was *not* "disrupted" by crypto. As the CFO said tonight, Nvidia has finally returned to baseline.yeeeeman - Friday, August 16, 2019 - link
Crypto slowdown might be a reason, but another thing is the clear answer for their current situation. Margins on rtx gpus are at an all time low given the massive die sizes. Remember Nvidia was selling a few years ago the gtx680 at 500$ price point with a gpu size of 200ish mm2. Now they are selling the rtx 2070 at the same price with a size of 500+ mm2Yojimbo - Friday, August 16, 2019 - link
Go look at NVIDIA's historical margins. Margins are lower than during the crypto craze, and I think margins are probably lower comparing price point to price point for the last few years, but NVIDIA has had a higher ASP with Turing so far so the margins are good.The GTX 680 was 290 mm^2, btw. The 680 was at the top of their stack. It was a non-cut chip. The 2070 super is a cut chip with a higher priced part using the full die above it. You can't compare them directly. The 2070 non-super is 454 mm^2. The ASP of GPUs has been going up for a while. So, the 680 was NVIDIA's high margin part back then, but now you have the 2080 and 2080 Ti above the 2070 to take up that role. In any case, if you look at NVIDIA's gross margins for the quarter ending October 2012 (the 680 was released in March 2012), it was 53%. It mjst be noted that NVIDIA now has data center and automotive sales which are high margin areas, but NVIDIA was getting a 100% margin licensing fee from Intel in 2012, and with gaming now representing 50% of their revenue and with Switch sales being relatively lower margin, the GPU gaming margins cannot be too much worse than what they were getting in 2012, if at all.
In any case, all this is moot, because people aren't concerned about NVIDIA's margins, which are quite good at 60%. Rather, the issue raised in this article, and what is related largely to crypto and has absolutely nothing to do with die sizes or margins, is that their revenue is down.
yankeeDDL - Friday, August 16, 2019 - link
The dates seem all to have an offset of 1 year.The data is for Q2 2019 (not 2020) and it is compared with last years (2018, not 2019).
Ian Cutress - Friday, August 16, 2019 - link
Nvidia is currently in its 2020 fiscal year, which ends on Jan 27. After that, they'll call it 2021.zamroni - Friday, August 16, 2019 - link
i bet this confusing term is created by it's finance department's innovation teamTams80 - Friday, August 16, 2019 - link
"FY 2020" = Fiscal/Financial Year 2020.It's usually denoted by the calendar year in which it will end. I assume this is to help state what a companies finances will be like at the beginning of that calendar year.
UltraWide - Friday, August 16, 2019 - link
"A fiscal year is an accounting period of 365(6) days that does not necessarily correspond to the calendar year beginning on January 1st. The fiscal year is the established period of time when an organization's annual financial records commence and conclude."DanNeely - Friday, August 16, 2019 - link
In particular most larger companies offset their fiscal year from the calendar year because they don't want to do all the extra end of year reporting over the Christmas holiday.PeachNCream - Friday, August 16, 2019 - link
It's difficult to ignore the impact of the RTX GPU design costing a lot more and offering unimpressive gains in performance in order to incorporate a ray tracing capabilities. RTX cards are decidedly unappealing upgrades with regards to heat, power, price, and performance and it's bad to have an overall "meh" in those various dynamics all at once. Is there any word on developers making more titles that support it or is the tepid response on the software side still the norm?