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Nvidia earnings prime Road view with file data-center, gaming income, however provide constraints nonetheless a priority

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The shares of Nvidia Corp. rose in Wednesday’s expanded session after the chipmaker’s earnings surpassed Wall Street estimates and the company addressed how supply restrictions amid ongoing global chip shortages were reflected in its outlook.

Nvidia NVDA, -2.15% stocks, which initially fluctuated between slight gains and losses after hours, ended the longer session up more than 2%. This follows a 2.2% drop in the regular session to close at $ 190.40. Shares closed on July 6 at a record split-adjusted high of $ 206.99. All share and per share numbers are shown as split-adjusted.

For the third or current quarter, the chipmaker, based in Santa Clara, California, forecasts sales of $ 6.66 billion to $ 6.94 billion, while analysts surveyed by FactSet forecast sales averaging $ 6.57 billion. During the conference call, it quickly became clear how strongly this outlook was influenced by delivery bottlenecks.

With no cryptocurrency mining processors or CMPs to divert the mining demand from GPUs for gamers, Nvidia expects revenue growth of more than $ 500 million sequentially, Colette Kress, Nvidia’s chief financial officer, said on the conference call. CMPs had revenue of $ 266 million in the second quarter and are expected to generate minimal profits in the third quarter.

“The lion’s share of this sequential revenue increase will come from data centers,” said Kress. “We expect the games to increase slightly on a sequential basis, but keep in mind that we are still facing delivery bottlenecks.”

“So our Q3 results are not seasonally dependent on games and really relate to the offer that we can believe for the third quarter,” said Kress.

“We have enough supplies to meet our growth plans for the second half of the year,” said Jensen Huang, CEO of Nvidia, on the call. “We assume that we can achieve our company’s growth plans for the next year.”

“In the meantime, we are securing pretty significant long-term supply commitments as we expand into all of these different market initiatives that we are set up for,” said Huang. “I am therefore assuming that we will see an environment with supply bottlenecks for the majority of the year, I am currently assuming.”

Nvidia reported net income of $ 2.37 billion, or 94 cents per share, for the second quarter, compared to $ 622 million, or 25 cents per share, for the same period last year. Adjusted earnings, excluding stock-based compensation expense and other items, were $ 1.04 per share, compared to 55 cents per share for the same period last year.

Revenue rose to a record $ 6.51 billion, up 68% from $ 3.87 billion in the year-ago quarter.

Analysts had estimated adjusted earnings of $ 1.02 per share on sales of $ 6.33 billion. In May, Nvidia had forecast sales between 6.17 and 6.43 billion US dollars.

In the second quarter, gaming sales soared 85% to a record $ 3.05 billion, surpassing the previous quarter’s high of $ 2.76 billion, while analysts surveyed by FactSet reported gaming sales from Nvidia of $ 2.98 billion.

On the data center side, revenue rose 35% year over year to a record $ 2.37 billion, while analysts were expecting revenue of $ 2.27 billion.

Nvidia also addressed headwinds in its proposed acquisition of microprocessor design company Arm Ltd. for $ 40 billion from Softbank Group Corp. 9984, + 0.54%..
Rumors circulated earlier this month that the deal could be blocked by UK regulators. Arm is based in Cambridge, England.

“We are working through the regulatory process, although some Arm licensees have raised concerns and objected to the transaction and the discussions with the regulators are taking longer than initially assumed,” said Kress in prepared comments. “We are confident in the transaction and that regulators should recognize the benefits of the acquisition for Arm, its licensees and the industry.”

In the midst of supply bottlenecks, the chip industry continues to generate strong profits and companies like Advanced Micro Devices Inc. AMD, -3.83%, take more market share in the data center space of Intel Corp. INTC, -0.95%.

Over the past 12 months, Nvidia stock is up 58% while the PHLX Semiconductor Index SOX is up -1.47%, up 47%. Meanwhile, both the S&P 500 Index SPX, -1.07% and the Nasdaq Composite Index COMP, -0.89%, are up 31%.

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