Nvidia shares drop on Q3 revenue miss, weak guidance

The graphics chipmaker said results reflect excess channel inventory from the crypto-currency boom.

Nvidia published its third quarter financial results Thursday, beating earnings expectations but falling short on revenue. It also gave a weak outlook for Q4. Shares dropped by more than 15 percent in after-hours trading.

Non-GAAP earnings per diluted share were $1.84, up 38 percent from $1.33 a year earlier. Revenue for the third quarter came to $3.18 billion, up 21 percent from $2.64 billion a year earlier.

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Wall Street was looking for earnings of $1.71 per share on revenue of $3.24 billion.

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"Our near-term results reflect excess channel inventory post the crypto-currency boom, which will be corrected," CEO Jensen Huang said in a statement. "Our market position and growth opportunities are stronger than ever."

While Santa Clara, Calif.-based company missed top line expectations, it posted record revenue from its data center, professional visualization and automotive segments.

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"Our introduction of Turing GPUs is a giant leap for computer graphics and AI, bringing the magic of real-time ray tracing to games and the biggest generational performance improvements we have ever delivered," Huang's statement said.

For the fourth quarter of fiscal 2019, Nvidia expects revenue $2.70 billion, plus or minus 2 percent. Analysts are expecting $3.4 billion in revenue.

Echoing Huang's assertion on the quarterly results, analyst Patrick Moorhead said that Nvidia's lower-than-expected revenues represented "a short-term blip that will be quickly corrected."

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"Nvidia had a decent Q3/18, revenue and profit-wise," he said in a statement. "The big revenue growth was in gaming, pro visualization (workstation), datacenter (ML, VDI), and auto (SD). 'OEM and IP' way down due primarily to crypto-currency declines. Nvidia is saying there was a lot of Pascal inventory, likely due to over-ordering during the crypto-boom where gaming customers were ordering 2-3X of what they needed to assure supply. This makes sense to me as AMD experienced the same phenomenon when they reported."

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