Nvidia earnings beat expectations, its data center business is bigger than its gaming business for the first time ever

Shares of graphics card maker Nvidia fell slightly in extended trading on Wednesday after the company reported better-than-expected fiscal second-quarter earnings and quarterly revenue guidance.

Here’s how the company did:

• Earnings: $2.18 per share, adjusted, vs. $1.97 per share as expected by analysts, according to Refinitiv. 
• Revenue: $3.87 billion, vs. $3.65 billion as expected by analysts, according to Refinitiv.

Overall revenue rose 50% on an annualized basis in the quarter which ended on July 26, according to a statement. Revenue grew 39% in the prior quarter.

The company’s gaming business produced $1.65 billion in revenue, up 26% year over year and above the $1.41 billion consensus estimate among analysts surveyed by FactSet. Nvidia ended up with more data center revenue than gaming revenue for the first time, at $1.75 billion. The unit’s revenue was up 167% and higher than the FactSet consensus estimate of $1.71 billion.

This follows the milestone of $1 billion in revenue in the fiscal first quarter for the data center business, which includes sales of graphics processing units that power artificial intelligence workloads for business use. The company is growing that business as it decreases its reliance on the video-game market and continues to supply products to cloud providers such as Amazon, and through acquisitions.

The data center business includes a contribution from Mellanox, a company that makes ethernet switches and other networking hardware. Nvidia closed its $7 billion acquisition of Mellanox in the quarter. Mellanox contributed 14% of Nvidia’s overall revenue in the fiscal second quarter. 

Also in the quarter Nvidia said it had begun “full production” of the first graphics card based on its Ampere architecture, the A100 for data center use. Ampere gaming cards will come later.

Two smaller parts of Nvidia, professional visualization and automotive, declined during the quarter as the coronavirus pandemic impacted business.

Nvidia called for $4.40 billion in revenue in the fiscal third quarter, which would work out to 46% growth at the middle of the range. Analysts polled by Refinitiv had expected $3.97 billion in revenue for the quarter.

Nvidia shares are up 106% since the start of the year, while the S&P 500 index is up 4%. 

Executives will discuss the results with analysts on a conference call starting at 5 p.m. Eastern time.

This is breaking news. Please check back for updates.

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