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Nvidia Corporation (NVDA - Free Report) is slated to release fourth-quarter fiscal 2023 results on Feb 22.

For the fiscal fourth quarter, the company expects revenues of $6 billion (+/-2%). The Zacks Consensus Estimate for the same is pegged at $6.01 billion, indicating a 21.3% decline from the year-ago reported figure.

The Zacks Consensus Estimate for quarterly earnings is pegged at 81 cents per share, suggesting a year-over-year decline of 38.6%.

The company’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters while missing the same on two occasions, the average surprise being -3.3%.

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 fourth-quarter performance is likely to have been negatively impacted by the weakening demand for its chips used in the gaming end market. The company’s revenues from the Gaming market platform plunged 51% year over year and 23% sequentially in the last reported quarter.

The decline was primarily due to a lower sell-in of Gaming products. This reflected a reduction in channel partner inventory levels amid weak demand due to macroeconomic headwinds and lockdowns in China, which continue to weigh on consumer demand.

We believe that the trend is likely to have continued in the fourth quarter. The Zacks Consensus Estimate for the Gaming segment’s revenues is pegged at $1.61 billion, indicating a 52.8% decline from the year-ago quarter’s revenues of $3.42 billion.

In the last reported quarter, Nvidia’s Professional Visualization revenues decreased 65% year over year and 60% sequentially to $200 million. The decline was primarily due to a lower sell-in to partners to help align channel inventory levels with the current demand expectations.

We opine that the ongoing macroeconomic headwinds and higher inventory levels with channel partners are likely to have continued to hurt the sales of Nvidia’s desktop workstation GPUs in the fourth quarter. The consensus mark of $197 million for the company’s Professional Visualization division’s revenues suggests a decline of 69.4% year over year.

Disruptions in retail channel sales due to travel restrictions and social-distancing measures implemented across several parts of China might have weighed on the overall financial performance in the fiscal fourth quarter. Also, the ongoing excess inventory levels and the Russia-Ukraine war are likely to have been a concern.

However, the continued strength of its Datacenter business on the growing adoption of cloud-based solutions amid the growing hybrid working trend is expected to have boosted NVDA’s fourth-quarter revenues. An increase in the Hyperscale demand and the growing adoption in the inference market is likely to have been tailwinds in the to-be-reported quarter.

The Zacks Consensus Estimate for the Datacenter segment’s revenues is pegged at $3.87 billion, suggesting an improvement of 18.7% year over year.

The company’s Automotive segment showed an improvement in trends in five of the last six quarters. The positive trend is likely to have continued in the fiscal fourth quarter, mainly due to increasing investments in self-driving and artificial intelligence cockpit solutions.

The consensus mark for the Automotive division’s top line is pegged at $256 million. This indicates a growth of 105% year over year.
 

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Nvidia 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 #4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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