NVDA NVIDIA Corporation

By Maria Armental 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 20, 2020).

Graphic-chip maker Nvidia Corp. continued its run of strong financial performance during the coronavirus pandemic, posting record sales in the latest quarter propelled by strong demand for online gaming and remote computing services.

The Santa Clara, Calif.-based company said earnings per share for the quarter ended July 31 rose to 99 cents from 90 cents in the year-ago period driven by a 50% jump in sales to $3.87 billion. Wall Street expected earnings of 95 cents a share and $3.65 billion in revenue.

"The pandemic will have a lasting impact on how we work," financial chief Colette Kress told analysts on a call, adding that the company's sales mix would "likely reflect this evolution in enterprise workforce trends with a greater focus on technologies, such as Nvidia laptops and virtual workstations, that enable remote work and virtual collaboration."

Nvidia shares have surged during the health crisis, making it the best performing stock in the S&P 500 index and overtaking Intel Corp. as the largest U.S. semiconductor company by value. While Intel has stumbled with development of its newest chips, punishing the stock, Nvidia has enjoyed investor favor because its chips -- optimized to run the intense calculations for graphics -- are in hot demand as people turn to videogames for distraction while stuck at home. The company is now valued at around $300 billion after its stock more than doubled this year, almost $100 billion more than Intel. Intel, in turn, has seen its stock fall almost 20% in 2020.

Intel on Wednesday said it plans to buy back $10 billion of its stock on an accelerated basis, as part of a $20 billion repurchase program it suspended in March. "Intel shares are currently trading well below our intrinsic valuation," Chief Executive Bob Swann said, adding that data-driven chip demand gives him confidence in the company's product plan.

Nvidia shares, which hit a record level this week, closed down 1% Wednesday and slid 1.7% in after-hours trading. Intel's stock rose 3.9% after hours following its share repurchase disclosure.

Nvidia also has benefited from higher demand for cloud-computing infrastructure as more companies have shifted to working remotely, helping deliver growth for vendors such as Amazon.com Inc. and Microsoft Corp.

Many of Nvidia's chips also are sold to data centers, where they make rapid calculations that power artificial intelligence. The company's supercomputers are being used in the fight against the coronavirus pandemic. Nvidia in May said it shipped the first DGX A100 -- a new line of high-performance computers -- to the U.S. Department of Energy's Argonne National Laboratory for Covid-19 research.

The company said last quarter's data-center business, which includes DGX sales and revenue from recently acquired Mellanox Technologies, more than doubled to a record $1.75 billion. Revenue at its games segment increased 26% to $1.65 billion.

Nvidia, for the current quarter, projects record revenue of about $4.4 billion. Wall Street is expecting $3.97 billion, according to analysts surveyed by FactSet. Gaming and data-center sales are projected to drive the increase, Ms. Kress said.

The recent strength for the data-center and gaming businesses aren't just a temporary, pandemic-effect, Chief Executive Jensen Huang said in the call. "This is the future," he said, "and there's no going back."

The company, though, wasn't immune to effects of the pandemic on the wider economy. Sales for its professional visualization segment fell 30% from a year ago because corporate customers delayed workstation spending, Nvidia said. Sales to the hard-hit car sector, down 47% year-over-year, also weighed on revenue. Company officials said auto production volumes have started to recover but remain well below prepandemic levels.

"Despite the pandemic's impact on our professional visualization and automotive platforms, we are well positioned to grow, as gaming, AI, cloud computing and autonomous machines drive the next industrial revolution around the world," Mr. Huang said.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

August 20, 2020 02:47 ET (06:47 GMT)

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