Similar to other PC companies, NVIDIA has been worst hit by the inflationary wave this year, with sales to gamers and other customers suffering sharp declines and making up the company’s largest segment. In the most recent quarter, NVIDIA reported $5.9 billion in revenue and $680 million in earnings per share, both of which represented large annual declines. The company projects $6 billion in revenue for its fourth fiscal quarter, reversing this quarter’s sequential decline to signify a tiny rise. However, the revenue will continue to decline yearly. Wall Street experts had predicted that NVIDIA’s revenue would be $5.8 billion and its earnings per share would be 70 cents going into today’s earnings announcement. However, while narrowly beating revenue projections, the company’s earnings per share came in at a staggering 27 cents per share. This represented a startling 50-cent decline compared to the same quarter last year, but a rise of one cent over the prior quarter. The company’s operating expenses are to blame for the decline in earnings per share, according to a quick glance at NVIDIA’s income statement. Overall, NVIDIA’s profitability, net income, and earnings per share have all decreased by an astonishing 77%, 72%, and 72%, respectively. This isn’t a good news for the company. These are the GAAP figures, while the non-GAAP results reveal a 50% decline in EPS, which is still not a good sign. The adjusted EPS, which was 58 cents, is the figure that is compared to analyst projections. Importantly, though, and one of the reasons NVIDIA’s shares are rising in aftermarket trade, is the fact that its gaming and data centre revenue above expectations. Datacenter was NVIDIA’s saviour throughout the quarter as it emphasised the importance of revenue diversification for all businesses. The official numbers indicate that this segment’s sales was $3.9 billion, demonstrating for a fourth consecutive quarter that NVIDIA is no longer a gaming firm but a data centre corporation instead. The company’s declining cash flow is another distressing aspect of NVIDIA’s most recent earnings report. Its free cash flow was a net outflow of $156 million compared to the prior quarter’s $824 million and the quarter before, when it was a staggering $1.28 billion. Colette Kress, the chief financial officer of NVIDIA, attributed the poor free cash flow performance on supplier and inventory issues. NVIDIA expects its current quarter sales to total $6 billion. At the time of publication, aftermarket trading on the company’s shares were up 2%. The third quarter financial disclosures for NVIDIA make it quite clear that the company was severely impacted by both inventory issues and inflation. The corporation will have to put some effort into cleaning up this mess.
