Gaming and data centre demand are driving the world’s huge appetite for semiconductors, according to the second quarter earnings report from leading supplier Nvidia.
The Santa Clara, California-based business reported second quarter results overnight that beat analyst forecasts, led by record growth in its gaming and data centre businesses. Nvidia announced earnings per share (EPS) of $1.04 on revenue of $6.51 billion. Analyst consensus was pitched at $1.02 EPS on $6.32 billion revenue.
Nvidia stock nudged 1.25% up in after-hours trade on Wednesday following the report, hitting $190.40, just off its $204.87 all-time high struck early last month.
So far in 2021, Nvidia shares have rallied from $131.14, putting the stock on a forward 12-month price earnings multiple of 45.
GAMING UPGRADE CYCLE
Revenue in its gaming business grew 85% to a record $3.06 billion for the quarter year-on-year, while its data centre revenue also swelled to record of $2.37 billion, up 35% from a year earlier.
Gaming revenue was underpinned by demand for Nvidia’s GeForce RTX 30 Series GPUs, or graphics processing units. ‘NVIDIA RTX has started a major upgrade cycle as gamers jump to ray tracing, DLSS and AI,’ the company said.
Looking ahead to the fiscal third quarter, the company expected to generate revenue of $6.8 billion, give or take a percent or two, implying another beat to analysts’ $6.58 billion forecast. Gross margins are expected to be around 65%, well ahead of the rough 61% average the company has earned over the past three years.
ARM IN A HALF-NELSON
But last year’s deal to acquire UK chip designs champion Arm Holdings remains stuck in a regulatory rut. UK regulators are closely eyeing that deal and are considering blocking it, according to a report by Bloomberg this month.
Even Nvidia seemed to be hedging its bets, with chief financial officer Colette Kress saying on the firm’s conference call Wednesday that ‘discussions with regulators are taking longer than initially thought.’ She said the company remains confident that the deal can be sealed, though she didn’t reiterate the previous target closing date of early 2022.
If Nvidia cannot complete the deal by September 2022 then it will forfeit the $1.25 billion break clause fee already made to Softbank as a down payment.
