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Nvidia Corporation (NVDA - Free Report) is scheduled to release second-quarter fiscal 2023 results on Aug 24.

The graphic chip maker slashed its revenue guidance last week to $6.70 billion for the fiscal second quarter from the previous forecast of $8.10 billion (+/- 2%). The Zacks Consensus Estimate for the same is pegged at $7.12 billion, indicating a 9.5% increase from the year-ago reported figure.

The Zacks Consensus Estimate for quarterly earnings is pegged at 59 cents per share, suggesting a significant year-over-year decline of 43.3%.

The company’s earnings beat the consensus estimate in all the preceding four quarters, the average surprise being 5.3%.

Let’s see how things have shaped up before the announcement.
 

Nvidia Corporation Price and EPS Surprise

Nvidia Corporation price-eps-surprise | Nvidia Corporation Quote
 

Factors to Consider

Nvidia’s second-quarter performance is likely to have been negatively impacted by weakening demand for its chips used in the gaming end market.

In its fiscal second-quarter preliminary results reported on Aug 8, the company stated that weak top-line performance expectation is primarily attributable to lower sell-in of gaming products, reflecting a reduction in channel partner sales due to macroeconomic headwinds. The company anticipates reporting Gaming segment revenues of $2.04 billion, down 33% year over year and 44% sequentially.

Nonetheless, the continued strength in its data-center business on the growing adoption of cloud-based solutions amid the pandemic-induced work-from-home wave is expected to have boosted NVDA’s second-quarter revenues. An increase in the Hyperscale demand and the growing adoption in the inference market is likely to have been tailwinds during the to-be-reported quarter.

However, the company stated that data-center revenues might fall short of management’s expectations due to the ongoing supply-chain disruptions. Nvidia projects to report revenues of $3.81 billion from the segment, reflecting an increase of 61% on a year-over-year basis and 1% sequentially.

The company’s Automotive and Professional Visualization divisions have shown an improvement in trends in three of the last four quarters. The positive trend is likely to have continued in the fiscal second quarter as Nvidia expects the Automotive segment’s revenues to increase 45% year over year and 59% sequentially to $220 million.

However, disruptions in retail channel sales due to travel restrictions and social-distancing measures implemented across several parts of China, along with ongoing supply-chain constraints and the Russia-Ukraine war, might have weighed on overall financial performance in the fiscal second quarter.
 

What Our Model Says

Our proven model does not conclusively predict an earnings beat for NVDA this season. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here.

Nvidia currently carries a Zacks Rank of #5 (Strong Sell) and has an Earnings ESP of -13.18%. 

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