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Nvidia will unveil next-gen GPU architecture in September

But graphics giant foresees revenues falling even further in the next quarter as gamer GPU sales drop

Graphics giant Nvidia plans to unveil the architecture for its next-generation consumer GPU, Lovelace, at its GTC conference in September, CEO Jensen Huang has said.

On an earnings call for the quarter ended July 31, the company saw revenue decline in the quarter, and forecasts a further decline due to weakening demand in the gaming market. However, the company said it is readying new platforms for launch, and sales to hyperscale and cloud customers are holding up.

Claiming "the fundamentals of gaming are strong," Huang added: "We'll get through this over the next few months and go into next year with our new architecture. I look forward to telling you more about it at GTC next month."

Nvidia reported revenue of $6.70 billion for its second quarter of fiscal 2023, up 3 percent compared with the same period last year, but down 19 percent against the previous quarter, as the company hinted in its preliminary results earlier this month. Nvidia had forecast earnings of $8.1 billion in its last earnings call.

The company blamed weaker gaming revenue for the decline, which was down 33 percent year-on-year and 44 percent from the previous quarter, because of "challenging market conditions" driven by a sudden slowdown in consumer demand.

Nvidia EVP and CFO Colette Kress indicated that COVID lockdowns in China and the war in Ukraine have caused economic uncertainty, but said that the decline in gaming GPU revenue has been steeper than anticipated due to both lower unit sales and lower average selling prices.

However, Nvidia believes the long-term outlook for its gaming GPUs remains strong. Kress pointed to a new generation of technology that the company is preparing to launch at its GTC event next month.

Results were better in the GPU maker's Data Center business, which brought in revenue of $3.81 billion, 1 percent up on the previous quarter, but 61 percent higher than the same quarter last year.

"Although a record, this was somewhat short of our expectations as we were impacted by supply chain disruptions," Kress said.

Revenue from hyperscale customers nearly doubled year-on-year, with sales growing to North American and cloud customers, but these were offset by lower sales to Chinese hyperscalers because of domestic economic conditions there, she added.

Kress highlighted a couple of customer examples to illustrate how hyperscalers are driving GPU sales, such as Pinterest managing to operate 100x larger recommender models by switching to GPUs for inferencing, while Tesla has acquired over 7,000 A100 GPUs for its supercomputer used for Autopilot training.

Technology vendors including Dell, HPE, Inspur, Lenovo, and Supermicro are also adopting the company's new Grace Hopper Superchip to build the next generation of high-performance systems, Kress added.

Network products are also doing nicely for Nvidia, with strong demand for high-speed Ethernet adapters and growing interest from cloud service providers for the latest Spectrum-4 400Gbps products, Kress claimed.

There was a mixed picture for the company from its Professional Visualization products, where revenue of $496 million was down 4 percent versus the same quarter last year, but 20 percent down from last quarter. There was actually an increase in mobile revenue, but this was more than offset by lower desktop revenue, particularly at the high end.

"As macroeconomic headwinds intensified, enterprise demand slowed and OEMs worked to reduce inventory. We expect these trends to persist in Q3," Kress said, but added that the longer-term outlook was favorable because "hybrid work is here to stay," and with that there is a "growing need for collaborative 3D design" enabled by professional graphic workstations, both at home and in the office as well as in the cloud.

Nvidia's Automotive segment also did well, with revenue of $220 million representing a 45 percent increase year-on-year, and also growing 59 percent over the previous quarter.

For the third quarter of fiscal 2023, Nvidia forecast revenue to decline further to $5.90 billion, with Gaming and Professional Visualization revenue falling further.

The company said it expects this because OEMs and channel partners will start to reduce inventory levels to align with current levels of demand and to prepare for Nvidia's new products. However, it also expects this decline to be partially offset by growth in the Data Center and Automotive segments.

"We are navigating our supply chain transitions in a challenging macro environment and we will get through this," said Nvidia founder and CEO Jensen Huang. ®

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