Nvidia books $1.32 billion inventory charges as gaming demand plummets
Nvidia's preliminary financial results showcase poor gaming sales
Published: 8th August 2022 | Source: Nvidia |
Nvidia's Gaming revenue has dropped 44% Quarter-Over-Quarter - The Crypto Bust has slumped Nvidia's earnings
Q2 2022 hasn't been kind to Nvidia. The company's gaming revenue has dropped a staggering 44% since Q1 and Nvidia now expects $1.32 billion in charges that are related to inventory and other economic factors.
Nvidia's gaming demand during Q2 was much lower than expected, pushing the company's expected earnings down from $8.10 billion to $6.70 billion. To put things another way, Nvidia expected $1.4 billion in additional revenue, most of which should have came from the company's "Gaming" product category. Now Nvidia has inventory problems, and Nvidia expects poor market conditions to persist in Q3.
In recent months, we have seen dramatic price decreases within the GPU market. These price decreases came as consumer demand for graphics cards had plummeted. Simply put, the value of cryptocurrencies plummeted and electricity costs have risen in most regions of the globe. These two factors have pushed demand for graphics cards to a low point, as demand from profit-focused cryptocurrency miners had dropped to effectively nothing. Now Nvidia has huge stocks of graphics cards that they cannot sell.
Nvidia's CEO, Jensen Huang, expects the macroeconomic factors that resulted in Nvidia's poor Q2 performance to continue in Q3, and has taken action with gaming partners to adjust channel prices and inventory levels. Below is what Jensen had to say.
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 has excellent products and position driving large and growing markets. As we navigate these challenges, we remain focused on the once-in-a-generation opportunity to reinvent computing for the era of AI,
While Nvidia has pinned their declining gaming revenues on macroeconomic pressures, the same factors did not impact AMD's gaming revenues to the same extent. While AMD has confirmed that their Q2 2022 GPU sales had decreased, AMD's gaming revenues actually increased in Q2 2022, mostly thanks to strong console sales.
Let's be clear here, Nvidia's declining gaming revenues are due to the demand from cryptocurrency miners coming to an end. Yes, economic factors are affecting the gaming market, but not to the extent that Nvidia's preliminary earning report has implied. Nvidia's "gaming" products were being used by cryptocurrency miners, not gamers. That said, when gamers and crypto miners use the same products, it is hard to Nvidia to accurately difference the two on their spreadsheets.
Nvidia has revised their expectations of future demand and have taken actions to ensure that the company's long term margins profile remains intact.