Nvidia expects strong 2Q23 performance thanks to surging AI demand

Despite the sharp fall in consumer-related business, thanks to the AI hype, Nvidia reported strong sequential growth in its data center business and is highly optimistic about the second-quarter performance.

Nvidia reported its latest earnings for the first quarter of fiscal 2024 (April 2023 to March 2024) on May 24. Its sales declined 13.22% annually but rose 19% quarterly to US$7.19 billion, while its operating income and net income kept growth momentum, reaching US$2.14 billion and US$2.23 billion, respectively.

In the press release, Nvidia CEO Jensen Huang said that the computer industry is going through two transitions, including accelerated computing and generative AI. He said a trillion dollars of installed global data center infrastructure would transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service, and business process, adding that the company is significantly increasing the supply to meet surging demand.

Nvidia provides optimistic guidance, in which the company expects revenue for the fiscal second quarter to be US$11 billion, plus or minus 2%, which means a more than 60% annual growth in sales. Besides, GAAP gross margin is expected to be 68.6%, with GAAP operating expenses expected to be about US$2.71 billion.

Nvidia's data center business has been growing rapidly and become the major revenue generator and growth engine for the company. According to its earnings report, sales generated by the data center business rose by 14.13%, reaching US$4.28 billion. Meanwhile, revenue from gaming, the company's second-largest business, fell by 38.12% year-on-year. It is also worth noting that the automotive business grew by 114.49% in the fiscal first quarter despite being from a relatively small base.

Huang said during the earnings call that generative AI is driving exponential growth in compute requirements, and cloud service providers (CSPs) worldwide are racing to deploy Nvidia's flagship Hopper and Ampere architecture GPUs. He added that multiple CSPs announced the availability of H100 on their platforms, including private previews at Azure, Google Cloud, Oracle Cloud, and AWS.

Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hermandez Tejada said in a research note that Nvidia's far better-than-expected guidance for the second quarter is unheard of in the sector and shows the strength of its data center products. Besides, the analysts further said that Nvidia's total addressable market opportunity is expanding, driven by a multitude of secular tailwinds, including AI, the shift to cloud, and increasing chip content across industries.

Source: Company, compiled by DIGITIMES, May 2023

Source: Company, compiled by DIGITIMES, May 2023