Nvidia hit with double whammy in Q4 as data center and gaming demand slows

Nvidia said enterprises turned cautious and slowed spending amid the macroeconomic slowdown in China. Bottom line: Multiple developments hurt sales of its graphics processors.

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Nvidia, a data center darling for years due to its graphics processors, said its fourth quarter revenue will fall short of expectations due to lower demand.

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The company said its fourth quarter revenue will be $2.2 billion, well below Nvidia's guidance of $2.7 billion. CEO Jensen Huang in a shareholder letter said the fourth quarter was "an extraordinary, unusually turbulent, and disappointing quarter."

Here's a look at Nvidia's revised view.

nvidia-q4-outlook.png

And the real kicker is that Nvidia said gaming and data center revenue will be lower than expected.

Challenges with gaming demand was largely expected due the fall of the crypto currency boom, but analysts didn't account for a slowdown in Chinese game demand. Nvidia's data center outlook was also a bit of a shocker given that GPUs are prominent when it comes to artificial intelligence workloads and high performance computing.


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Nvidia said the gaming issues were largely due to demand in China for its processors. In a statement, Nvidia said its outlook accounted for an inventory correction, but "deteriorating macroeconomic conditions, particularly in China" hurt demand. Nvidia said sales for its high-end GPUs based on the Turing architecture were weaker as consumers waited for lower price points.

As for the data center, Nvidia said "a number of deals in the company's forecast did not close in the last month of the quarter as customers shifted to a more cautious approach." Nvidia added that it was upbeat about AI and high performance computing workloads.

Nvidia said that its gross margins will be hit by $120 million due to excess memory and components.

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