Nvidia's data centre biz tops gaming as lead revenue source – and it should enjoy being king while it lasts

Buying Mellanox has paid off, gamers are still the bigger prize

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Nvidia's data centre products have topped its gaming-centric products as a revenue source in 2020's second quarter, thanks to its acquisition of Mellanox.

The chip giant won $3.87bn of revenue for the quarter ended July 26, up 50 per cent from the same period last year. Profit jumped to $622m, compared to $552m for the same period in 2019.

Chief exec Jensen Huang said that the COVID-19 pandemic and ensuing lockdowns “accelerated” computing trends that were already in place and that Nvidia is well-positioned to ride the wave of change. “This is the future and there’s no going back,” he said on the corp's earnings call.

Nvidia's data centre kit accounted for $1.8bn of this figure, up 167 per cent from the same period last year. Huang said that the vast majority of this growth came from the new product cycle of the tech titan's Ampere chips, which were released in May 2020. Mellanox, the Israeli networking chip firm which it acquired for $7bn earlier this year, contributed about a third of data centre sales.

Nv's gaming unit made $1.7bn, up 26 per cent compared to a year earlier. This was helped by the release of a new range of gaming laptops aimed at people stuck at home during lockdowns and continuing strong sales of consoles that use Nvidia GPUs.

The biz forecast revenues of $4.4bn for its next quarter, but warned that data centre growth will slow to “low-to-mid-single digit” range. Chief financial officer Colette Kress, said on the earnings call that although demand from hyperscalers remains solid, it had a “mixed” outlook on customers in other industries.

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Nvidia also expects data centre revenues to dip back below gaming revenues in the next quarter. Huang said he believes the gaming industry is “gearing up for a big leap because how vibrant the gaming market is right now and how many people around the world are depending on gaming at home.”

“I think this is going to be one of the best gaming seasons ever,” he added.

That remains to be seen. Nvidia has benefited from Nintendo as a customer while the Switch and Switch Lite sold like hot cakes. But the big gaming releases of 2020 - the forthcoming PlayStation 5 and Xbox Series X - went with AMD graphics.

Huang did not comment on reports that Nvidia is currently in discussion to buy British chip designer Arm. ®

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