Nvidia updated its financial guidance to reflect a $500 million drop for Q4 2019 after reviewing weaker than expected sales in gaming and datacenter divisions, according to a news release Monday.
Previous guidance projected revenue of $2.7 billion for the fourth quarter, which has now been updated to $2.2 billion to stay in line with forecasted sales.
For gaming, the excessive inventory of mid-range GPUs leftover from the crypto-currency mania is partly to blame for weal revenue, something that the company had accounted a “sequential decline” for in its projections. Basically, back when Bitcoin and other digital currency mining was all the rage, Nvidia attempted to keep up with the demand for graphics cards. Now, the company has excess inventory left unsold.
What was not expected was the Chinese gaming market’s decline. Lower than expected sales due to “deteriorating macroeconomic conditions,” which was keenly experienced in China, impacted the demand for Nvidia GPUs. Perhaps also of note is the increased gaming regulations in China in the past year, and the freeze on approval for new online games which may have impacted demand for new graphics cards— although this is not noted in the news release.
Nvidia’s gaming sales are also getting a decrease in projected sales due to a lower than expected demand for high-end GPUs which use Nvidia’s Turing architecture, which the company speculates may be due to customers delaying their purchase waiting for a price drop and “further demonstrations of RTX technology in actual games.”
Datacenter revenue was also a disappointment for Nvidia. A “number” of deals Nvidia had in the works didn’t pan out in the last month of Q4, as “customers shifted to a more cautious approach,” according to the news release. Still, the company remains hopeful that expanding market opportunity in artificial intelligence (AI) and high performance computing still leave it in competitive standing in the market.
Jensen Huang, founder and CEO of Nvidia, called Q4 an “extraordinary, unusually turbulent, and disappointing quarter.”
“Looking forward, we are confident in our strategies and growth drivers,” Huang said. “The 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 markets we are creating – gaming, design, HPC, AI and autonomous vehicles – are important, growing and will be very large. We have excellent strategic positions in all of them.”
An earnings call for Nvidia is scheduled for Feb. 14.
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