Nvidia Lowers Revenue Guidance on China Impact

January 28, 2019

Fourth quarter revenue expected to be $2.20 billion versus previous guidance of $2.70 billion

Gaming and Datacenter revenue below company’s expectations

NVIDIA updated its financial guidance for the fourth quarter of fiscal year 2019, reflecting weaker than forecasted sales of its Gaming and Datacenter platforms.

In Gaming, NVIDIA’s previous fourth-quarter guidance had embedded a sequential decline due to excess mid-range channel inventory following the crypto-currency boom. 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. In addition, sales of certain high-end GPUs using NVIDIA’s new Turing™ architecture were lower than expected. 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.

In Datacenter, revenue also came in short of expectations. A number of deals in the company’s forecast did not close in the last month of the quarter as customers shifted to a more cautious approach. Despite these near-term headwinds, NVIDIA has a large and expanding addressable market opportunity in AI and high performance computing, and the company believes its competitive position is intact.

“Q4 was an extraordinary, unusually turbulent, and disappointing quarter,” said Jensen Huang, founder and CEO of NVIDIA. “Looking forward, we are confident in our strategies and growth drivers.

“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,” he said.

NVIDIA expects its GAAP and non-GAAP gross margin to be impacted by approximately $120 million in charges for excess DRAM and other components associated with the updated revenue guidance and current market conditions.

The company will provide Q4 fiscal 2019 financial results and Q1 fiscal 2020 guidance on its earnings call scheduled for Feb. 14.

	Previous Q4 Fiscal 2019 Guidance	Updated Q4 Fiscal 2019 Guidance
Revenue	$2.70 billion, plus or minus 2%	$2.20 billion, plus or minus 2%
Gross margin – GAAP Gross margin – non-GAAP	62.3%, plus or minus 50 bps 62.5%, plus or minus 50 bps	55.0%, plus or minus 100 bps 56.0%, plus or minus 100 bps
Operating expenses – GAAP Operating expenses – non-GAAP	$915 million $755 million	$915 million $755 million
GAAP and non-GAAP other income and expense	$21 million	$25 million
GAAP and non-GAAP tax rate, excluding discrete items	8%, plus or minus 1%	6%, plus or minus 1%

This update is an estimate, based on information available to management as of the date of this release, and is subject to further changes upon completion of the company’s standard quarter and year-end closing procedures. This update does not present all necessary information for an understanding of NVIDIA’s financial condition as of Jan. 27, 2019, or its results of operations for the quarter and fiscal year ended Jan. 27, 2019. As NVIDIA completes its year-end financials close process and finalizes its financial statements for the quarter and year ended Jan. 27, 2019, it will be required to make significant judgments in a number of areas. It is possible that NVIDIA may identify items that require it to make adjustments to the financial information set forth above and those changes could be material. NVIDIA does not intend to update such financial information prior to release of its fourth quarter and year-end financial statement information, which is currently scheduled for Feb. 14, 2019.

Shareholder Letter
A shareholder letter from NVIDIA founder and CEO Jensen Huang is available here.