By Dan Gallagher
The only problem with clearing a high bar is when the bar keeps rising.
Nvidia's results for the fiscal first quarter late Thursday definitely accomplished the former. The chipmaker's data center revenue surged 80% from a year earlier to cross the $1 billion mark for the first time. That exceeded Wall Street's already high projections and was especially impressive for a period that included the worst initial impacts of the coronavirus pandemic.
The April-ending quarter opened with chip factories in China shut down and later included Nvidia's largest customers like Amazon.com, Google and Microsoft rushing to send their employees home while trying to keep their own operations running smoothly.
But fortunately for Nvidia, those operations increasingly rely on the artificial intelligence chips the company designs for data centers. And those chips got an important upgrade with the company's new Ampere product line that was announced last week but was already selling during the quarter.
Tim Arcuri of UBS characterized Ampere as the biggest generational leap in "computational horsepower" in the company's history that also expands Nvidia's opportunity in the field of inference -- a segment of artificial intelligence computing that is believed to have a much larger market opportunity than AI training where Nvidia has been historically strong.
Nvidia chief financial officer Colette Kress said Thursday that all major cloud service operators are already deploying its Ampere chips in their systems.
That should give Nvidia legs even if those large customers moderate their capital expenditures later this year. Those tech giants aren't immune to the broader economy, but all have a pressing need to keep their data center networks on the cutting edge, given skyrocketing demand from both corporations and consumers for remote services such as videoconferencing, gaming and streaming.
Google-parent Alphabet Inc. said on its earnings call last month that investments in technical infrastructure would remain "at roughly the same level" as the prior year despite declines in other areas such as real estate spending.
Nvidia will need all the help it can get. The company's strong results inspired analysts to boost their targets, bringing the Street's consensus forecast for data center revenue up 14% overnight to about $5.3 billion for Nvidia's current fiscal year, according to FactSet.
That would represent a 79% jump for the year and put data centers close to overtaking videogaming as the company's largest business segment. With the stock up more than 50% for the year already -- and at nearly 44 times forward earnings -- investors aren't exactly making the company's task easier.
Write to Dan Gallagher at firstname.lastname@example.org
(END) Dow Jones Newswires
May 22, 2020 13:14 ET (17:14 GMT)Copyright (c) 2020 Dow Jones & Company, Inc.