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NVIDIA's guide does not post – The Motley Fool



Revenue fell by 24% in the fourth quarter of graphics chip developer NVIDIA (NASDAQ: NVDA) the result of a series of issues that hit the company at once. An abundance of graphics cards created by cryptocurrency crash turned down game sales, which made weak demand from China and slow recordings for the company's latest RTX 20 series cards. Data center growth also declined as customers grew more cautiously.

First quarter of fiscal 2020 will not be any better. NVIDIA expects to generate sales of $ 2.2 billion, down 31% year-on-year and flat from the fourth quarter. The good news: NVIDIA expects full-year sales to be flat to slightly down, a better than feared view.

A difficult path to flat income

[Kilde: Getty Images]

A difficult road to flat income

To produce close to the same amount of revenue in fiscal 2020 as it did in fiscal 201

9, NVIDIA must do up for the big loss expected in the first quarter. The comparisons will be tough until the fourth quarter, when NVIDIA will have the 24% decline.

Gaming is NVIDIA's largest segment. "src =" https://g.foolcdn.com/image/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F512071%2Fnvidia-revenue-guidance-2020-fixed-again.png&w = 700 & op = resize "/>

Data source: NVIDIA

NVIDIA needs to make about $ 800 million of game revenue in the last three quarters of 2020, assuming first quartet revenue is roughly in order. how it is possible

NVIDIA CFO Colette Kress explained during the earnings call that when the crypto-related seizure overhang is over, normalized game revenue is expected to be about $ 1.4 billion, with $ 900 million from desktop gaming and rest from notebook games and gambling consoles Kress came to that number by calculating NVIDIA's gambling revenues, or expected gambling revenues, from the second quarter of 2019 to the first quarter of 2020.

Let's take that figure as the face value if NVIDIA generates $ 1.4 billion in game revenue in each of them Three quarters of fiscal 2020, its total gaming revenue this year will be around $ 5.1 billion. It is down to more than 17% from fiscal policy 2019.

NVIDIA's other segments may gain some slack, even though there is no guarantee. In the data center, NVIDIA saw hyperscale and cloud purchases decline year on year in the fourth quarter. The company expects this decline to be temporary, but Kress said "our visibility remains low in today's cautious environment, and we don't forecast a meaningful recovery in the data center until later this year."

The Data Center segment cannot provide any fiscal growth in 2020, and may even decline if the downturn continues throughout most of the year. NVIDIA's other segments, which include professional visualization, auto and OEM and IP, are too small to have a big impact.

NVIDIA is beating a strong game recovery in the second half to well above its "normalized" level, to hit its guidance. It seems unlikely. NVIDIA's RTX 20 series graphics card sells poorly because the company pushed prices up too high and gave too little value to consumers. Advanced Micro Devices is expected to launch new graphics cards once a year, and to launch a new wrench into NVIDIA's plans. And there is no one to tell when demand in China will recover.

For NVIDIA to turn its full-year guidance, everything must go straight for the company. The gaming industry not only needs to normalize at the level the company expects, but it must grow well beyond that in the second half. NVIDIA's management couldn't see any of the current issues coming from very far away. Considering that the banners and some basic arithmetic, the year-round guidance should be taken with a grain of salt.

Timothy Green has no position in any of the listed stocks. Motley Fool owns shares and recommends Nvidia. Motley Fool has an information policy.


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