NVDA Earnings Preview: Gaming and Data Center in Focus

GPU maker Nvidia (NVDA) reports earnings after market close on Thursday, May 10. Here’s a look at what might be expected from the tech giant’s report.

Print
https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Gamer playing on PCs
5 min read

Nvidia (NVDA) is scheduled to report Q1 fiscal 2019 earnings after the closing bell on Thursday, May 10. Ahead of earnings, NVDA has been climbing closer to its all-time high of $254.50 it hit in mid-March. The stock closed at $250.40 yesterday and was up slightly in pre-market trading this morning. 

After better-than-expected earnings reports from competitors Intel (INTC) and Advanced Micro Devices (AMD), some analysts have suggested this could indicate a strong quarter for NVDA, although expectations are high for tomorrow’s report.

For the quarter, NVDA is expected to report adjusted EPS of $1.65 on revenue of $2.91 billion, according to third-party consensus analyst estimates. NVDA’s own guidance calls for $2.90 billion in revenue, plus or minus 2%. In the prior-year period, the company earned $0.79 on revenue of $1.94 billion. Also, the company has beat both earnings and revenue estimates in the past eight quarters.

Gaming and Data Center

The gaming segment still makes up a majority of the company’s revenue, and it has been its second-fastest growing segment behind data center. In Q4 fiscal 2018, gaming revenue was up 29% year over year to $1.74 billion. For all of fiscal 2018, gaming revenue increased 36% year over year to $5.51 billion. When NVDA reports on Thursday, analysts are expecting gaming revenue to be around $1.6 billion, up from $1.02 billion in the prior-year period.

Management has attributed strength in the gaming segment to continual growth in games that require the higher-end of their products. Strong sales of the Nintendo Switch, which uses NVDA’s Tegra processor, was another factor management cited as a growth contributor on last quarter’s earnings call. Management also acknowledged that cryptocurrency mining has been driving demand in the gaming segment as well, but it is difficult to quantify how much of their business comes from it.

NVDA’s data center segment is its second largest by revenue and has been its fastest growing recently. Last quarter, revenue was up 105% year over year to $606 million. For all of fiscal 2018, revenue in the segment was up 133% year over year to $1.93 billion.

NVDA launched the Tesla V100 GPU in Q2 fiscal 2018 and it has been a major driver of growth in the data center segment as sales ramped up over the past two quarters, according to management. Analysts are expecting data center revenue to come in at $656 million, up from $409 million in the prior-year period.

Automotive and Professional Visualization

Both the automotive and professional visualization segments have been two of the NVDA’s smaller segments, although management has said it is optimistic about the growth prospects of the two.

At CES 2018 in January, NVDA announced the DRIVE Xavier system on a chip (SoC) would start shipping to customers in a limited amount this quarter. The company has also announced numerous partnerships with major car companies and parts manufacturers that will use its autonomous vehicle platform, DRIVE PX.

When NVDA last reported, automotive revenue was up 3% year over year to $132 million and professional visualization revenue was up 13% to $254 million. 

Nvidia (NVDA) 2018 Stock Chart

CLOSE TO ALL-TIME HIGH.

Since the end of February, NVDA has climbed to the low-$250 range several times, but hasn’t been able to break higher than its all-time high of $254.50 hit on March 13. Over the past year, the stock is up 143.25%, outperforming the S&P 500 (SPX) and Nasdaq 100 (NDX) by a wide margin. Chart source: thinkorswim® by TD Ameritrade.  Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Options Trading Activity

Around NVDA’s upcoming earnings release, options traders have priced in about a 5.7% stock move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform. As of this morning, implied volatility was at the 44th percentile, not too high ahead of the report.

In short-term trading at the May 11 weekly expiration, calls have been active at the 250 and 260 strike prices, while puts have been active at the 240 strike. At the May 18 monthly expiration, recent trading has been a lot heavier on the call side and concentrated at the 250 strike.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.

What’s Coming Up

Next week there is a string of companies from the retail sector reporting earnings. Home Depot (HD) is scheduled before market open Tuesday, May 15, Macy’s (M) before market open Wednesday, May 16, and Wal-Mart (WMT) before market open on Thursday, May 17. Deere (DE) is also scheduled to report before the open on Friday, May 18.

Some of the next major economic reports coming up include the consumer price index (CPI),  which is released tomorrow morning. Next week, April retail sales are released the morning of Tuesday, May 15, and April housing starts are released the morning of Wednesday, May 16. If you have time, check out today’s market update for a look at what else is going on. 

Good Trading,
JJ
@TDAJJKinahan

Helpful Educational Content and Programming

Check out all of our upcoming Webcasts or watch one of the many archived ones, covering a wide range of topics from market commentary to portfolio planning basics to trading strategies for active investors. No matter your experience level, there’s something for everybody.
Looking to stay on top of the markets? Tune in to the TD Ameritrade Network, which is live programming that brings you market news and helps you hone your trading knowledge.

The TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation.

Call Us
800-454-9272

Probability analysis results from the Market Maker Move indicator are theoretical in nature, not guaranteed, and do not reflect any degree of certainty of an event occurring.

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other's policies or services.

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

adChoicesAdChoices

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.

Scroll to Top