Nvidia Rises to Highest Ever With Top-End Gaming Forecast

  • Gaming-related revenue jumped 17% from a year earlier
  • Data center sales outpaced all other market gains in quarter

Nvidia Corp., the biggest maker of graphics chips used in high-end gaming computers, predicted sales that may top analysts’ estimates, signaling that game players continue enthusiastically to seek the latest technology. 

The shares gained as much as 13 percent to $40.30, their highest intraday point ever. They were trading at $39.93 at 10:46 a.m. Friday in New York. The stock was up 7.9 percent this year through Thursday, before the results were released.

While personal computers are no longer upgraded as often as smartphones, the corner of the PC market that only cares about the latest games and performance is still growing. Spending on components that can cost as much as a standard laptop is buoying Nvidia’s earnings and funding Chief Executive Officer Jen-Hsun Huang’s push to get graphics processors into new areas such as data centers and cars.

“That’s really the driver. Am I excited about the next game?” said Craig Ellis, an analyst at B Riley & Co. in San Francisco. Ellis said there’s plenty of room to improve graphics processing and continue to fuel sales to those who want more performance.

Revenue in the second fiscal quarter will be $1.35 billion, plus or minus 2 percent, the company said Thursday in a statement. That compares with analysts’ average estimate of $1.28 billion, according to data compiled by Bloomberg.

Nvidia expects the interest in high-end gaming gear to grow. As games become more lifelike the demands on hardware are only increasing, said Huang.

“They pay for it because they need it,” he said in a telephone interview. “Gaming is not a niche -- gaming is what hundreds of millions of people do.”

Nvidia’s gaming-related revenue surged 17 percent from a year earlier to $687 million in the quarter. Sales of chips for use in data centers outpaced those gains, growing 63 percent to $143 million. Huang said he expects that division to continue to grow at a fast rate and anticipates it possibly becoming the company’s largest end market.

Net income in the fiscal first quarter, which ended May 1, was $196 million, or 33 cents a share, compared with $134 million, or 24 cents, a year earlier. Profit, excluding certain costs, was 46 cents a share, compared with analysts’ estimates of 41 cents. Sales rose 13 percent to $1.31 billion, against estimates of $1.26 billion.

Global PC shipments dropped 9.6 percent in the first three months of the year, the sixth consecutive quarterly decline, according to market researcher IDC. The drop took unit sales to their lowest level since 2007.

Under Huang, Nvidia has branched out into new markets, including servers, auto and new applications such as virtual reality and artificial intelligence, though the company still gets a portion of its revenue from the shrinking notebook business.

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