Overview of $NVDA Earnings..”another miss for the semiconductor space”

NVDA - #s came in light on EPS/GMs for Jul Q while revs in middle of preannounced range (while EPS/GMs “missed” St for Jul, keep in mind some St ests stale and not all updated since the preannouncement); inventories increased; some this morning thinking the worst is out of the way and the stock did tick higher in after hrs; there was some concern that Oct revs would be guided down Q/Q (NVDA guided then up 3-5% Q/Q); the Oct GM outlook was better-than expected.

 

• Revs $811.2MM vs. preannounced $800-820MM = right in middle of range (the St's $830MM was stale and didn’t really update since their warning)
• EPS came in .03 - this is below the St's 0.10 (but like revs may be a stale est) = miss  GMs came in 38.9% vs. the St 45.3% they are guiding for revs to come up 3-5% Q/Q - this implies $835-851MM vs. the St $884MM (although some worried that they may guide revs to fall further Q/Q in Oct) they guided Oct GMs core to come in 46.5-47.5% inventory came in @ $434MM, which is up 11.8%
• Results were impacted by a large inventory write-down and a charge related to a weak die/packaging material set
• Rapidly changing market conditions made Q2 a challenging quarter. We experienced softness in consumer PC demand in Europe and China, our largest GeForce regions. Weak consumer market and the weak euro shifted demand away from the premium experienced PC segment that G4 serves. Because discrete GPU attach rates in Europe and China are among the highest in the world and our share in both these regions is also very high, these factors hit our consumer business particularly hard.
• The inventories at the end of the quarter were $434.2 million, up 11.9% over the priorquarter. Notwithstanding the inventory write-down, inventory was up as a result of lower actual revenue than was planned early in the first quarter, when we made wafer start commitments. Our manufacturing cycle time is approximately four months. We made appropriate adjustments to our build plans over the course of the second quarter, but we don't expect these corrections to have a meaningful impact on our inventory levels until the fourth
  quarter.
• Comments on PCs - We started seeing weaknesses in the end market probably starting in May, and May-June time frame, late May/early June time frame, and that has persisted since, and I think other people are starting to see it across the board now.
• AMD share - We started gaining share back in Q2 and we're going to gain a lot more share back this quarter with our GeForce GTX business, which is targeted at gamers