Nvidia Corp.’s forthcoming sales report promises to start in an era of first for the chip business, the most important of which formally forgets its past reputation as primarily a gaming card company and fully embraces its role in shaping data centers.
Nvidia NVDA,
is scheduled to report second-quarter revenue after the clock on Wednesday.
This quarter will be the first to record sales of Nvidia’s new data center products such as its A100 graphics processing unit, representing the first line of chips with a new GPU architecture that Nvidia calls “Ampere”.
To read: Nvidia Unveils Ampere GPU Architecture for AI Impulse, with First Target Coronavirus
This coincides with a crucial shift in balance regarding Nvidia’s business segments. So far, Nvidia’s gaming segment has always been its largest source of revenue, but that is expected to change significantly with the second quarter.
While Nvidia’s data center sales for the first time in the first quarter of 2020 were $ 1 billion, they were still behind gaming sales of $ 1.34 billion. For the second quarter, analysts expect data center sales of $ 1.72 billion, compared to gaming sales of $ 1.4 billion.
Also in July, Nvidia overcame Intel Corp. INTC,
as the largest U.S. chip company by market capitalization, so this will be the company’s first profit report in that position.
What to expect
Earnings: Of the 34 analysts surveyed by FactSet, Nvidia is expected to post an average adjusted earnings of $ 1.98 per share, up from $ 1.77 a share expected at the beginning of the quarter.
Income: Wall Street expects $ 3.65 billion in revenue from Nvidia, according to 32 analysts surveyed by FactSet. That’s up from the $ 3.11 billion forecast at the beginning of the quarter. Nvidia forecast revenue of $ 3.58 billion to $ 3.72 billion. Estimize, a software platform that uses crowdsourcing from hedge fund managers, brokers, buying analysts and others, expects revenue of $ 3.7 billion.
Action movement: In the second quarter, Nvidia shares grew by 44%, while the PHLX Semiconductor Index SOX,
32% won, the S&P 500 index SPX,
rose 20%, and the Nasdaq Composite Index COMP,
advanced 31%.
What analysts say
Prior to profit, Wedbush analyst Matt Bryson, who has a better rating, raised his price target to $ 500 from $ 420, saying he expects “only good news” from Nvidia.
Bryson expects gaming trends to be substantial in the fourth and continuing into the third quarter. In data center, Bryson said his checks suggested that the demand for Nvidia GPUs was more in supply. As a result, “that should provide a strong outlook” for the third quarter and offset any potential weaknesses for Mellanox network interface cards, he said.
Raymond James analyst Chris Caso, who has an outperform rating, recently raised his price target to $ 500 from $ 370.
“While the stock has performed well, we consider NVDA to be one of the strongest product cycles in semis, given the ongoing disaster of Ampere for data center, and the upcoming disaster of the new gaming chip, where it looks like the launch will happen on August 31, ”said Caso.
Caso also expects a large third quarter for data center sales, as “we expect October to be likely to be stronger, given strong revised demand for Ampere.”
Cowen analyst Matthew Ramsay, who has an outperforming rating and a price target of $ 475, said he expects Ampere to ride Nvidia’s dominance in gaming and data center for a while.
“We see this continuing not only through F’21 / 22, but in the long term as Nvidia capitalizes on its accelerated computing hardware strengths, the broad / mature programming environment, and vertical-specific software ecosystems,” Ramsay said.
Of the 40 analysts who cover Nvidia, 32 have bought or overweight ratings, six have held ratings and two have underweight ratings, with an average price target of $ 419.23, according to FactSet data.
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