Nvidia (NVDA) is scheduled to report results of its second fiscal quarter after the market close on Wednesday, August 24, with a conference call scheduled for 5:00 pm ET. What to watch for:

GUIDANCE CUT: On August 8, Craig-Hallum analyst Richard Shannon downgraded Nvidia to Hold from Buy with a price target of $180, down from $210, after the company preannounced results that were much worse than guided and look like a repeat of fiscal fourth quarter 2019 in the Gaming segment.

Also commenting on Nvidia’s preliminary July quarter results that came in well below expectations due to a 44% sequential decline in gaming, Piper Sandler analyst Harsh Kumar said he was not surprised to see the lower gaming revenue, but was surprised by "the size of the miss." Though data center also came in slightly lower than expectations, this was largely due to supply chain issues and he doesn't believe there is a falloff in data center demand, added Kumar. Investors "have been waiting for both the gaming and data center businesses to slip up before getting constructive on the name again," Kumar contended.

Nvidia said earlier this month that second-quarter revenue was now expected to be approximately $6.70 billion, down 19% sequentially and up 3% from the prior year, primarily reflecting weaker than forecasted Gaming revenue. Gaming revenue was $2.04 billion, down 44% sequentially and down 33% from the prior year. Data Center revenue was $3.81 billion, up 1% sequentially and up 61% from the prior year. The shortfall relative to the May revenue outlook of $8.10 billion was primarily attributable to lower sell-in of Gaming products reflecting a reduction in channel partner sales likely due to macroeconomic headwinds. In addition to reducing sell-in, the company implemented pricing programs with channel partners to reflect challenging market conditions that are expected to persist into the third quarter. Data Center revenue, though a record, was somewhat short of the company's expectations, as it was impacted by supply chain disruptions. Second quarter results are expected to include approximately $1.32 billion of charges, primarily for inventory and related reserves, based on revised expectations of future demand.

SOME UNANSWERED QUESTIONS REMAIN: In a research note ahead of quarterly results. Wedbush analyst Matt Bryson acknowledged that Nvidia’s preannouncement “certainly answered the question as to how much weaker demand for client GPUs might weigh on the July quarter.” However, the analyst still sees outstanding queries about forward demand. And while he has some views around each of these topics, Bryson is “reluctant to get more constructive on the stock” until there is more near-term visibility even if he continues to remain positive on Nvidia's longer term trajectory due to its leadership in AI and attractive positioning in future self-driving designs. The analyst has a Neutral rating and a price target of $190 on the shares.

GROWTH TO RESUME AFTER GAMING RESET: KeyBanc analyst John Vinh expects Nvidia’s second quarter results to be in line with the company’s negative preannouncement on August 8 and expects second quarter to mark the bottom. Gaming estimates have been de-risked with channel inventories having come down from fourth months in April to now back to normalized levels at two months, the analyst contended. He also highlighted pull-in of the launch of RTX40 into the fourth quarter and data center demand that remains strong, as seen by recent cloud tracker results, while the repurposing of gaming GPUs for data center and auto should address supply constraints and support the resumption of growth. Vinh has an Overweight rating and a price target of $230 on the shares.

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