Chip maker Nvidia (NASDAQ: NVDA) announced that it was back in the game on Thursday, with stronger than expected earnings for the second quarter of the 2020 fiscal year.
The company reported that its revenue grew 17% sequentially to $2.58 billion, primarily driven by a 24% growth in its gaming business and 3% for data center.
In July, Nvidia launched an updated version of its RTX video cards, which support real-time ray tracing technology for higher graphical fidelity. But at the same time, the company was still recovering from two major blows. The first was a decline in its gaming revenues, caused by a huge drop in cryptocurrency mining. The second is a slowdown in its data center business, which may be exacerbated by the ongoing trade war between the US and China.
During the earnings conference call, Nvidia’s chief financial officer Colette Kress stated, “Essentially our business is normalized. We’ve reached normalized levels through the last couple quarters and this quarter, just very similar to what we will see going forward.”
However, Nvidia’s revenue is still down 17% year-over-year. Specifically, it’s gaming business is down 27% while its data center business is down 14%. The company is forecasting a single-digit revenue decline in the third quarter with a guidance revenue of $2.90 billion, plus or minus 2%. That’s a $3.18 billion, or 8.8%, drop from last year’s fiscal third quarter.
Nvidia’s transition to its new ray tracing graphics began with a slow start late last year, with only a handful of developers adopting the technology. But that’s quickly changing.
In a statement, Nvidia founder and CEO Jensen Huang said, “Real-time ray tracing is the most important graphics innovation in a decade. Adoption has reached a tipping point, with Nvidia RTX leading the way.”
In June, Nvidia announced a host of new and upcoming titles that support real-time ray tracing at E3. They include Call of Duty: Modern Warfare, Cyberpunk 2077, Watch Dogs: Legion, and Wolfenstein: Youngblood. These titles, alongside previously announced games such as Control, may help convince more gamers to upgrade their gaming computers.
Although gaming continues to be the company’s largest revenue generator, Nvidia continues to invest in emerging technologies such as artificial intelligence and self-driving cars. Both are seeing steady growth with demand expected to substantially increase in the near future.
The earnings report caused Nvidia’s stock to rally in late trading on Thursday, and it was up over 6% on Friday morning. It appears that the news also lifted shares of rival chip maker Advanced Micro Devices (NASDAQ: AMD), which was up 4.75% on Friday morning.