Nvidia books $1.32b inventory charge as PC market slows

Gaming product sell-through projection declines but datacenter division sales soar

The slowdown in retail spending is taking a toll on Nvidia, which is reporting hefty double digit declines in its Gaming unit, and charges of $1.32 billion, primarily related to inventory and the wider economy.

The GPU giant today reported prelims showing a 3 percent rise in turnover to $6.7 billion for Q2 of its fiscal 2023 ended 31 July [PDF] and the direction of travel is clear for the group as this revenue figure was down 19 percent on the prior quarter.

The gaming division was the main anchor dragging growth, plunging by a third year-on-year to $2.04 billion, and 44 percent lighter sequentially.

"Our gaming product sell-through projections declined significantly as the quarter progressed," said Jensen Huang, CEO of Nvidia. “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," he added.

PC shipments have declined in the first two quarters of this year, mostly on the back of consumers and the education sector slowing purchases of Chromebook and laptops for personal use. Work machines are continuing to grow in Europe and North America.

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Yet the other major part of Nvidia's business continues to head in the right direction for company executives: the Data Center division was up 1 percent quarter-on-quarter to $3.81 billion, or up 61 percent year-on-year.

Nvidia said this was a "record" for the unit but was "somewhat short of the company’s expectations, as it was impacted by supply chain disruptions."

Professional Visualization was down 20 percent on the prior quarter and down 4 percent year-on-year to $500 million; the Automotive division was up 59 percent on Q1 and up 45 percent year-on-year to $220 million; and OEM & Other was down 66 percent annually and down 12 percent sequentially to $130 million.

Nvidia said the full and final audited Q2 results are expected to show a $1.32 billion of charges, mostly for inventory and related reserve, “based on the revised expectations for future demand.”

"The significant charges incurred in the quarter reflect previous long-term purchase commitments we made during a time of severe component shortages and our current expectation of ongoing macroeconomic uncertainty,” said Colette Kress, EVP and CFO of Nvidia.

"We believe our long-term gross margin profile is intact. We have slowed operating expense growth, balancing investments for long-term growth while managing near-term profitability. We plan to continue stock buybacks as we foresee strong cash generation and future growth," she said.

The Q2 results will be released on 24 August. ®

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