Nvidia Withdraws Full-Year Guidance

After two straight quarters of disappointments with inventory build up problems, Nvidia (NASDAQ:NVDA) added another worry for investors. This time, the company withdrew its full-year 2019 guidance. The outlook is cloudier and is unclear for the full year. Guidance on the upcoming quarter is the best Nvidia may offer for markets.

Nvidia reported first-quarter revenue falling 31% as markets expected. Revenue from gaming ($1.05 billion) and auto ($166 million) both beat consensus. Data center ($634 million in revenue), ponal visualization and OEM/other all missed consensus. Still, overall non-GAAP gross margin topped 59%. The mixed results highlight the tough quarter Nvidia faced and sets up uncertain expectations for the rest of the year.

Nvidia is being cautious with the yearly performance of its gaming division. Working capital is increasing and R&D spending is high as the company prefers to invest in its future at the expense of short-term profits. Though inventory is at levels that let the company turn to new products for revenue growth, it is still up from last quarter. The combination of inventories still in the system and a lack of visibility for the full year could lead to disappointments for investors. If mainstream RTX graphics cards do not sell as well as expected and if high-end card sales slow, revenue growth will slow.

Your Takeaway
Nvidia’s second-quarter revenue estimate of $2.5-$2.6 billion is inline with estimates with gross margin still ~60%. These are strong numbers that does not suggest investors should sell the stock yet.