NVIDIA Lowers Revenue Guidance On Sluggish GeForce RTX Demand And Datacenter Hiccups
It appears that Apple isn't the only company that is issuing revenue warnings for its most recent quarter; NVIDIA has added its name to the list as well. The company announced today that it has revised its revenue guidance for fiscal Q4 2019 from $2.7 billion down to $2.2 billion.
The reason for the downward trajectory in revenue is twofold. For starters, NVIDIA says that its gaming business was impacted due to "macroeconomic conditions" in China. This was also one of the factors that Apple cited as a reason for its revenue shortfall. According to NVIDIA, demand for its gaming GPUs in particular took a hit. More importantly, demand in general was also soft for its brand-new Turing-based gaming GPUs.
To that last point, the high price of entry for the GeForce RTX cards is probably at least part of the reason for the lower-than-expected demand. For example, the GeForce RTX series launched with the GeForce RTX 2070, GeForce RTX 2080 and GeForce RTX 2080 Ti, which were priced from $499, $699, and $999 respectively. It was only recently that NVIDIA added the GeForce RTX 2060 with an MSRP of $349.
NVIDIA acknowledges that the pricing premium likely played a factor, adding, "These products deliver a revolutionary leap in performance and innovation with real-time ray tracing and AI, but some customers may have delayed their purchase while waiting for lower price points and further demonstrations of RTX technology in actual games."
And that statement is quite understandable and incredibly candid from NVIDIA. Real-time ray tracing no doubt looks impressive with GeForce RTX hardware, but games that support it are few and far between at this time. It could be that many gamers might actually skip the first-generation GeForce RTX cards altogether and wait for the second-generation when there will no doubt be more games that support ray tracing along with the usual generational performance improvements.
The other sore point for NVIDIA came from its [usually] booming datacenter business. NVIDIA said that many of its customers "shifted to a more cautious approach" with regards to upgrading and purchasing new hardware. However, the company only sees this a short-term setback rather than a long-term drain on its revenue.
“Q4 was an extraordinary, unusually turbulent, and disappointing quarter,” said NVIDIA CEO Jensen Huang. “Looking forward, we are confident in our strategies and growth drivers.
“The foundation of our business is strong and more evident than ever – the accelerated computing model NVIDIA pioneered is the best path forward to serve the world’s insatiable computing needs."
Practically speaking, a $500 million miss is quite surprising for a company like NVIDIA which more often than not knocks it out of the park with regards to its earnings. And with NVIDIA echoing Apple's sentiments with regards to troubles in China, will be keeping a close eye on AMD's earnings, which will be reported on January 29th.