NVIDIA Crushes 1Q Earnings On Huge Gains In Data Center And Gaming Revenue

NVIDIA Voyager (exterior)
NVIDIA continues to generate record revenue from its two biggest earners, those being its data center and gaming divisions, and in that order for the first time that we're aware of. They combined to help propel NVIDIA's first quarter earnings for its fiscal 2023 period to $8.29 billion, the most it's ever accumulated in Q1. It's also sizable increase of 46 percent from a year ago, and 8 percent from the previous quarter.

As it stands, the data center is now NVIDIA's largest platform, generating $3.75 billion in Q1. That's a jump of 83 percent from a year ago and 15 percent sequentially. Just as interesting, it was enough to leapfrog the division over gaming, which itself achieved record quarterly earnings of $3.62 billion, up from 31 percent year-over-year and 6 percent sequentially.

NVIDIA revenue chart
NVIDIA hit these record thresholds against the backdrop of what founder and CEO Jensen Huang deemed a "challenging macro environment." He's referring to the lingering shortage in part due to COVID lockdowns in China, and Russia's invasion of Ukraine.

"We are gearing up for the largest wave of new products in our history with new GPU, CPU, DPU and robotics processors ramping in the second half. Our new chips and systems will greatly advance AI, graphics, Omniverse, self-driving cars and robotics, as well as the many industries these technologies impact," Huang said.

Despite the record quarter, shares of NVIDIA dropped more than 9 percent in after hours trading. Investors seemed initially spooked at NVIDIA's Q2 outlook, and specifically the combination of a $500 million impact from Russia and COVID lockdowns, and lower gaming sales as NVIDIA pivots to its upcoming GeForce RTX 40 series.

"As we expect some ongoing impact as we prepare for a new architectural transition later in the year, we are projecting gaming revenue to decline sequentially in Q2," NVIDIA CFO Colette Kress said during an earnings call.

NVIDIA might also be impacted by a weakening cryptocurrency market. That one is "difficult for us to quantify with any reasonable degree of precision" though, as NVIDIA has no way for accurately measuring how much cryptocurrencing mining contributed to the overall demand for GeForce GPUs.

"The reduced pace of increase in Ethereum network hash rate likely reflects lower mining activity on GPUs. We expect a diminishing contribution going forward," Kress added.

That said, the drop in gaming revenue could be short lived. As far as we know, NVIDIA is still on track to launch a new round of graphics cards based on Ada Lovelace later this year, which could spur an uptick in sales. It's also worth noting that while NVIDIA anticipates a decline in Q2, it will be a drop from a record quarter.

In early morning trading today, shares of NVIDIA are up a few bucks, perhaps indicating that the after hours decline was a knee jerk reaction to the earnings report and Q2 outlook.