Nvidia Corp. has been through this type of decline before, and this time executives are taking more aggressive tactics to overcome it.
executives Wall Street warned on Wednesday that revenue in the next fiscal quarter will be roughly $1 billion below analysts’ expectations due to supply chain issues and a sudden slowdown in consumer demand for gaming products. This forecast assumes quarterly revenue will decline approximately 14% year-over-year in the current quarter.
The last time Nvidia suffered a glut of gaming chips, during the “crypto hangover” of 2019, revenue has declined year over year for four consecutive quarters. Most importantly, it consumed almost an entire product cycle for Nvidia – the launch of its Turing architecture was marred because gamers delayed their purchases to wait for lower price points and for more games to be designed around the technology.
In an interview with MarketWatch on Wednesday, Nvidia Chief Financial Officer Colette Kress said that executives are trying to be much more forceful and decisive early in the process of this downturn, effectively looking to rip off the Band-Aid before new products arrive . Nvidia took a $1.22 billion inventory write-down so its partners could lower prices and move existing Nvidia products faster before new ones are released.
“We’re taking different actions,” Kress said Wednesday. “This time it’s about very quick work on inventory adjustments. We haven’t even started the new product launch. We adjusted the prices in the channel.”
However, the news did not initially sit well with Wall Street, which was concerned about the future of gaming revenue. Shares fell nearly 5% in after-market trading. Nvidia said gaming revenue will decline sequentially in the upcoming fiscal third quarter from the quarter it just reported. Nvidia’s gaming revenue was $2.04 billion, down 44% sequentially and down 33% year-over-year. In the April quarter, games peaked at $3.6 billion in revenue.
As analysts tried to get a sense of what the growth rate of games would be going forward, Kress remained optimistic.
“While gaming faces significant near-term macroeconomic challenges, we believe gaming’s long-term fundamentals remain strong,” she said.
Nvidia announced its new chip architecturenicknamed Hopper for the famous programmer Grace Hopper, in March, but products incorporating the chips have not reached the market en masse more. Based on previous reports, Nvidia executives are likely to present details of new gaming cards using the Hopper chips at the fall GTC event, scheduled for September 19-22.
“We’ll go through this over the next few months and go into next year with our new architecture,” Nvidia co-founder and CEO Jensen Huang told analysts on a conference call. “I look forward to telling you more about this at GTC next month.”
If Nvidia wants to get out of this slump faster and avoid a prolonged decline, executives will need more than a quick stock move — maintaining 60% growth in the data center category, as reported on Wednesday, would be a good start. But at least executives seem to have learned from their last trip through the semiconductor sales cycle and have hopes for a faster turnaround this time around.