Nvidia misses revenue targets, stock slides

Nvidia has released results for the third quarter of its 2019 financial year, and despite healthy margins and revenue growth its investors are unimpressed: The company's share price has plummeted more than 17 percent in after-hours trading.

In a press call late last night, Nvidia unveiled figures for its third-quarter 2019 financial year - which occurs comfortably in the fourth quarter of the 2018 calendar year, for reasons which make sense only to accountants - showing a 21 percent year-on-year growth in revenue from $2.6 billion last year to $3.2 billion this year. It came, however, with slower-than-expected quarter-on-quarter growth of two percent, and a slight slide in profit margin from 63.3 percent in the last quarter to 60.4 percent now. This, coupled with a six percent increase in operating expenses, dropped the company's operating income nine percent quarter-on-quarter - and coupled with warnings from founder and chief executive Jensen Huang on the company's issues with excess channel inventory those figures appear to have investors spooked.

'AI is advancing at an incredible pace across the world, driving record revenues for our data centre platforms,' claimed Huang in the company's earnings call. 'Our introduction of Turing GPUs is a giant leap for computer graphics and AI, bringing the magic of real-time ray tracing to games and the biggest generational performance improvements we have ever delivered. Our near-term results reflect excess channel inventory post the cryptocurrency boom, which will be corrected. Our market position and growth opportunities are stronger than ever. During the quarter, we launched new platforms to extend our architecture into new growth markets – RAPIDS for machine learning, RTX Server for film rendering, and the T4 Cloud GPU for hyperscale and cloud.'

Immediately following the earnings report, Nvidia investors began a sell-off of company shares: The company's stock was 2.64 percent up at close of markets, but in after-hours trading dropped an impressive 17.24 percent. Some of this can be traced to the company missing its revenue expectations for the quarter, but much is likely traced to concern over the excess channel inventory which chief financial officer Colette Kress admitted would drive 'very little shipment in the mid-range Pascal [GPU] segment to allow channel inventory to normalise,' something Huang claimed may take up to two quarters to address.

As always, the company's revenue was driven by gaming: Its gaming graphics arm brought in $1.76 billion of the company's revenue, with its data centre arm contributing $792 million and its professional visualisation division only $305 million. The company's burgeoning automotive division, meanwhile, reported revenue of $172 million, with its intellectual property licensing and original equipment manufacturing (OEM) business pulling in $148 million.