Nvidia revises FY2019 Q4 forecast downward

Chipmaker Nvidia Corporation has lowered its projected revenue for the fourth quarter of the fiscal year 2019, two weeks ahead of the announcement of its financial results.

Shares dipped 15% upon the announcement of an expected revenue of $2.2 billion for the fourth quarter, down from the previous projection of $2.7 billion, and 30.8% lower than the previous quarter.

Cited for the lowered figures were “weaker than forecasted sales” of the company’s Gaming and Datacenter platforms. Nvidia, in its earlier fourth-quarter guidance, had already accounted for excess mid-range channel inventory in connection with a decline in demand from cryptocurrency miners.

“The reduction in that inventory and its impact on the business have proceeded largely inline with management’s expectations. However, deteriorating macroeconomic conditions, particularly in China, impacted consumer demand for NVIDIA gaming GPUs [graphics processing units],” the firm said.

It added that sales of its high-end GPUs that use its trademarked Turing architecture, did not meet expectations. “These products deliver a revolutionary leap in performance and innovation with real-time ray tracing and AI, but some customers may have delayed their purchase while waiting for lower price points and further demonstrations of RTX technology in actual games,” Nvidia said.

CEO Jensen Huang characterized the fourth quarter as “extraordinary, unusually turbulent, and disappointing,” but that “[l]ooking forward, we are confident in our strategies and growth drivers.”

The company also revised its gross margin projection, from 62.3% plus or minus 0.5%, to 55% plus or minus 1%.

Operating expenses remained the same, at $915 million, while “other income and expense” increased from $21 million to $25 million. The projected tax rate was also lowered from 8% plus or minus 1%, to 6% plus or minus 1%.

Huang said that in spite of the downward revisions, “[t]he foundation of our business is strong and more evident than ever – the accelerated computing model NVIDIA pioneered is the best path forward to serve the world’s insatiable computing needs.”

The fourth-quarter results will be released during the company’s earnings call on February 14, along with guidance for the first quarter of fiscal year 2020.

Last August, Nvidia CFO Colette Kress had said that their GPU business would no longer target cryptocurrency miners, and that the company was going to focus on AI instead. But the company is still reeling from its cryptocurrency venture. Not only does it have to deal with inventory concerns, but a class-action lawsuit against it has been filed, alleging that the company had misled investors on its ability to handle lower demand in the cryptocurrency market.