NVIDIA (NASDAQ: NVDA) reported fourth-quarter and full-year earnings for fiscal 2019 after the market closed on Thursday. For the quarter, revenue fell 24%, earnings per share dropped 48%, and EPS adjusted for one-time items plunged 53%.
Investors already knew the graphics processing unit (GPU) specialist’s headline numbers were going to be very disappointing. That’s because on Jan. 28, it ratcheted back its already-weak guidance for the quarter, citing slowing global growth, particularly in China, and other factors.
Continue Reading Below
Shares of NVIDIA closed up 1.8% on Friday. We can probably attribute the slight gain to the fact that much bad news was already priced into the stock — shares plunged nearly 14% on Jan. 28 after the company lowered its outlook — adjusted EPS came in a bit higher than the company had guided for in its revised outlook, and guidance for fiscal 2020 was probably not as bad as some had feared.
NVIDIA stock is up 17.9% in 2019 through Friday, though shares are down nearly 35% over the last year. The S&P 500 has returned 11% and 4.9%, respectively, over these same periods.
The key numbers
|
Metric |
Fiscal Q4 2019 |
Fiscal Q4 2018 |
Change (YOY) |
|---|---|---|---|
|
Revenue |
$2.21 billion |
$2.91 billion |
(24%) |
|
Operating income |
$294 million | $1.07 billion | (73%) |
|
Net income |
$567 billion | $1.12 billion | (49%) |
|
GAAP earnings per share (EPS) |
$0.92 | $1.78 | (48%) |
|
Adjusted EPS |
$0.80 | $1.72 | (53%) |
For the quarter, GAAP gross margin came in at 54.7%, down from 61.9% in the year-ago quarter. Adjusted gross margin was 56%, down from 62% in the fourth quarter of last fiscal year.
Advertisement
For fiscal 2019, revenue rose 21% year over year to $11.72 billion, GAAP EPS jumped 38% to $6.63, and adjusted EPS increased 35% to $6.64.
For the quarter, NVIDIA has originally guided for revenue or $2.7 billion, plus or minus 2%, but on Jan. 28 axed that back to $2.2 billion, plus or minus 2%. So its revenue result hit the lowered outlook on target. The company doesn’t directly provide earnings guidance, but from the expectations it does provide, we could calculate that it was anticipating adjusted EPS to come in at about $0.77. So NVIDIA slightly exceeded its lowered adjusted profit outlook.
Gaming’s poor results drag down overall results
|
Platform |
Fiscal Q4 2019 Revenue |
Change (YOY) |
Change (QOQ) |
|---|---|---|---|
|
Gaming |
$954 million |
(45%) |
(46%) |
|
Data center |
$679 million |
12% |
(14%) |
|
Professional visualization |
$293 million |
15% |
(4%) |
|
Automotive |
$163 million |
23% |
(5%) |
|
OEM and IP* |
$116 million |
(36%) | (22%) |
|
Total |
$2.21 billion |
(24%) |
(31%) |
Three of NVIDIA’s four target platforms — data center, professional visualization, and auto — managed to grow on a year-over-year basis, though they all lost ground from last quarter. However, their year-over-year gains were not enough to compensate for gaming’s terrible performance since gaming is so large. On the earnings call, CFO Colette Kress explained the three reasons for gaming’s poor quarter:
As to the slowdown in data center — which had been growing rapidly in recent years — NVIDIA said on Jan. 28 that a “number of deals in the company’s forecast did not close in the last month of the quarter as customers shifted to a more cautious approach.” This caution was widespread across verticals and due to concerns about a slowing global economy.
Guidance
For the first quarter of fiscal 2020, NVIDIA guided for revenue of $2.20 billion, plus or minus 2%. At the midpoint, this represents a decline of 31% year over year and is flat with the fourth quarter. For the full fiscal year, the company expects revenue to be “flat or down slightly.”
After what happened this quarter with the much-too-rosy initial guidance and the fact that Kress said on the earnings call that the company’s “visibility remains low in the current cautious spending environment, and we don’t forecast a meaningful recovery in the data center segment until later in the year,” investors might not want to place too much confidence in the full-year guidance.
A “turbulent quarter”
In the earnings release, NVIDIA CEO Jensen Huang summed up the quarter by saying that it “was a turbulent close to what had been a great year.” Some factors — such as the deteriorating macroeconomic conditions — were and are out of the company’s control, however, top management made some gaffes that added to the company’s woes.
While things could remain somewhat rocky for a while, the long-term picture for NVIDIA is still attractive. As I wrote last quarter:
Find out why NVIDIA is one of the 10 best stocks to buy now
Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. (In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the market!*)
Tom and David just revealed their ten top stock picks for investors to buy right now. NVIDIA is on the list — but there are nine others you may be overlooking.
Click here to get access to the full list!
*Stock Advisor returns as of November 14, 2018
Beth McKenna owns shares of NVIDIA. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool has a disclosure policy.
