Nvidia reported second-quarter (Q2) earnings on Wednesday. The company delivered USD 1.04 per share on the revenue of USD 6.51 Billion in this quarter. On the earnings report, the shares of the firm tanked over 2% in after-hours trading yesterday. Its stock has gained 45% since the beginning of the year, beating the NASDAQ benchmark of 12.7% until the date.
The chip-making company had expected that its cryptocurrency mining processor (CMP) products’ sales would generate USD 400 Million in Q2 2021. However, it only reported USD 266 Million in this quarter, which is estimated to be the reason for the stock downfall. Most of the industry experts expressed that its CMP product won’t sustain for a long period of time. This is due to the crackdown in China on cryptocurrency, which led to the prohibition on crypto mining and trading. In Q1 2021, the company posted USD 155 Million in sales from its CMP components.
The company’s revenue grew 68% year-over-year (YoY) in this quarter, while in the March quarter it reported 84% YoY growth. Its graphic chip segment has penetrated various industries, which include cryptocurrency mining, gaming, and artificial intelligence (AI). Nvidia has beat the Wall Street expectation by reporting 66.7% gross growth in this quarter. For the next quarter, it expected its revenue to grow by 2% to USD 6.8 Billion.
The company’s revenue from the gaming segment increased by 85% YoY, while it reported a rise of 35% YoY to USD 2.5 Billion in revenue from its data center business segment. Its visualization business segment, which consists of graphic cards for workstations, contributed USD 519 Million in revenue. This is a significant increase of 156% YoY. Nvidia is striving to combat the chip shortage by introducing CMP components. It wants to ensure that are enough chips for gamers.
On the conference call, Nvidia’s CFO Colette Kress said that the company expects that revenue from CMP to grow marginally in the next quarter. She said that Nvidia is still facing supply chain issues. “We do expect gaming to be up slightly on a sequential basis, but remember we are still supply constrained,” she added. On the other hand, Jensen Huang, CEO of Nvidia, said on the call that “we have enough supply to meet our second-half company growth plans.”
“Meanwhile, we’re securing pretty significant long-term supply commitments as we expand into all these different market initiatives that we’ve set ourselves up for,” Huang added. “And so I would expect that we will see a supply constrained environment for the vast majority of the year, is my guess at the moment.”
Nvidia’s Arm Acquisition
The company is facing strong opposition in its acquisition of the UK-based chip technology company, Arm Limited for USD 40 Billion. It said that its deal would extend to more than 18 months. Not only the company is facing opposition from its competitors, but it is also facing antitrust questions from regulators in the UK. “It is appropriate that we properly consider the national security implications of a transaction like this,” the UK’s digital secretary Oliver Dowden said in a statement.
In addition to the UK’s probe, Federal Trade Commission (FTC) has also opened up an investigation after Qualcomm, Google, and Microsoft protested against the acquisition. However, it is confident that the deal would get a green light from the regulators. “Although some Arm licensees have expressed concerns or objected to the transaction, and discussions with regulators are taking longer than initially thought, we are confident in the deal and that regulators should recognize the benefits of the acquisition to Arm, its licensees, and the industry,” the company said in a statement.