<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "In recent years, specialist graphic processing NVIDIA (NASDAQ: NVDA) seemed invincible. A perfect storm of strong player demand, a growing data center business, and a booming cryptocurrency market propelled the stock to nearly 1,300% earnings in less than four years. "Data-reactid =" 11 "> In recent years, graphic transformation specialist NVIDIA (NASDAQ: NVDA) seemed invincible. A perfect storm of strong player demand, a growing data center business, and a booming cryptocurrency market propelled the stock to nearly 1,300% earnings in less than four years.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Then the unthinkable is Past: Several trends that pushed the company to record heights began to collapse simultaneously. cryptocurrency bubble burst, leaving an overabundance of graphics processing units (GPUs), which were used to perform cryptocurrency mining, on the market. To make matters worse, the data center industry has begun to slow down and players have been slow to adopt the latest NVIDIA processors. This prompted NVIDIA to issue an unusual warning that depressed the stock. "Data-reactid =" 12 "> Then, the unthinkable happened: many of the trends that pushed the company to record peaks began to collapse simultaneously. currency The data processing machines have started to slow down and players have been slow to adopt the latest NVIDIA processors.NVIDIA has to issue an unusual guidance warning, which has caused the stock to fall.

An NVIDIA Quadro RTX 8000 processor.

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NVIDIA Quadro RTX 8000. Image Source: NVIDIA.

NVIDIA is expected to release financial results for the fourth quarter of its 2019 fiscal year after market close on Thursday, February 14. Let's review the third quarter results and changes to its forecasts to determine whether it provides a snapshot of investor expectations. NVIDIA reports its results.

A mixed bag

For the third quarter of fiscal year 2019 (closed Oct. 28, 2018), NVIDIA recorded a business turnover of $ 3.18 billion, up 21% from year-to-date previous year, missing both the lowest management forecasts and the consensus estimates of analysts. The company reported earnings per share of $ 1.97, up 48% from the same quarter of the previous year, exceeding expectations of $ 1.71.

NVIDIA said that a large part of the revenue loss was the result of excess inventory in the sales channel, resulting from the recent cryptocurrency crisis. Unfortunately, growth has slowed down on a wide range of company activities. Segmented revenue data tells the story:

Segment

Q3 2019

Q3 2018

YOY Change

Thu

$ 1.76 billion

$ 1.56 billion

13%

Professional visualization

$ 305 million

$ 239 million

28%

Data center

$ 792 million

$ 501 million

58%

car

$ 172 million

$ 144 million

19%

OEM and IP

148 million dollars

191 million dollars

(23%)

Total

$ 3.18 billion

$ 2.64 billion

21%

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Data source: NVIDIA Third Quarter Results Report. YOY = from one year to the next. & Nbsp; "data-reactid =" 31 "> Data Source: NVIDIA Third Quarter Results Report YOY = from one year to the next.

While revenue growth of 21% may not seem daunting at first glance, consider this: In the previous four quarters, NVIDIA experienced year-over-year revenue growth of 32%, 34%, 66% and 40%, respectively. In fact, we should go back to the first quarter of fiscal 2017 to find a slower growth rate. This makes this quarter the worst quarter of revenue growth for more than two years.

When releasing its third quarter report, NVIDIA had announced a $ 2.7 billion (+/- 2%) business turnover, which would represent a 7% drop from the previous year. ;last year. This figure was well below analysts' consensus estimates of $ 3.4 billion, resulting in a loss of more than 18% of NVIDIA shares the day after its results were released.

The other shoe fell

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The background shattered on January 28, when NVIDIA released revised guidelines for the quarter. The company said it is now expecting a turnover of $ 2.2 billion, a decrease of 24% over the previous year. NVIDIA has attributed the revised guidance to a number of factors. The company cited the deteriorating macroeconomic situation in China that impacted consumer demand for its GPUs. Closer to home, players chose not to switch to Turing's new high-end processors, as game publishers did not have the opportunity to incorporate the revolutionary new ray tracing technology& nbsp; in their current catalog of video games. NVIDIA also stated that a number of data center transactions had not been concluded and had subsequently been transferred to the next quarter. "Data-reactid =" 35 "> The fund collapsed on January 28, when NVIDIA released revised forecasts for the quarter.NVIDIA has imputed several factors to the revision of its forecasts, citing the deterioration of the situation China's macroeconomic and its impact on consumer demand for its GPUs.Do not switch to the new high-end processors Turing, because game publishers have not had the opportunity to incorporate the new breakthrough ray tracing technology to their current range of video games, close and then transferred to the next quarter.

Revised forecasts include gross margins of 55%, down from previous estimates of 62.3%. The operating expense forecast remained the same at $ 915 million, while other income and expenses increased from $ 21 million to $ 25 million. On an adjusted basis, the company is calling for gross margins of 56%, down from 62.5%, and non-GAAP operating expenses of $ 755 million, also unchanged.

The story continues

The trio of bad news – the slowdown in sales in each of its most promising growth segments – has pushed shareholders to run towards exits, losing almost half of its value since the end of September. Investors will look for significant improvements in several segments so that the stock resumes its growth trajectory. With the recent slump in forecasts, do not expect any good news when NVIDIA will release its results after market close on Thursday, February 14th.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 42 "> More from The Motley Fool

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Danny Vena holds shares in Nvidia. The Motley Fool owns shares and recommends Nvidia. The Motley Fool has a disclosure policy."data-reactid =" 50 ">Danny Vena owns shares of Nvidia. The Motley Fool owns shares and recommends Nvidia. Motley Fool has a disclosure policy.