ad hoc announcement: Nvidia's gaming revenues and margins are falling sharply

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Two weeks before the planned date, Nvidia gave a preliminary look at the results in the 2nd quarter and it's quite something: Instead of the forecast 8.1 billion US dollars, it was Sales only at $6.1 billion, gross margin expected to fall from 65 to 44 percent. The cause is said to be the “Gaming” segment.

Problems with “gaming products”

Compared to the forecast for the second quarter made in May, sales were therefore 17 percent lower and thus 19 percent below sales in the second quarter. The gaming division is said to have been the main driver of this development. Sales of “gaming products” at the end of the quarter on July 31 ultimately fell 44 percent from the previous quarter and 33 percent from the same quarter last year.

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Not only the Gaming segment, but also in the Professional Visualization (-20 percent) and OEM/Other (-12 percent) divisions, sales fell compared to the 1st quarter in the 2023 fiscal year. It has risen again at Data Center (+1 percent) and Automotive (+59 percent).

Price adjustments to support gaming partners< /h2>

Previously forecast sales fell significantly during the quarter, according to Nvidia CEO Jensen Huang. The group primarily cites “the macroeconomic conditions” on the market as the cause. Because Nvidia does not assume that the problem will be solved in the short term, the group has taken measures to help its partners sell the goods that have already been produced – including price reductions, which have recently had a significant impact on retailers.

Our gaming product sell-through projections declined significantly as the quarter progressed. As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our gaming partners to adjust channel prices and inventory.

Nvidia CEO Jensen Huang

Gross margin falls by 22.6 percentage points

However, fewer sales at lower prices have not only reduced sales, they are also depressing the gross margin – i.e. the contribution margin after deducting variable costs. Group-wide, it will no longer have been at the forecast 65.1 percent in the second quarter, but only at 43.7 percent.

Nvidia's CFO Colette Kress sees the gross margin planned for the long term against the background of the current development, this is not yet in jeopardy, but in order to secure the net result the group has already put the brakes on its current expenses and investments in long-term growth. However, the group will continue to buy back shares from the market in the near future. Nvidia had already significantly reduced the number of publicly advertised positions.