Nvidia gains in premarket after mixed earnings

Nvidia (NVDA.US) trades slightly higher in the premarket trading, following the release of an earnings report for fiscal Q3 (August-October period). Report was not a disaster but it was not really cheerful either. Company reported a drop in sales but smaller-than-expected by the analysts. On the other hand, profit measures missed expectations significantly. Let's take a look at Nvidia's fiscal Q3 2023 report!

Nvidia's results come in mixed

- Revenue: $5.93 billion vs $5.79 billion expected (-17% YoY)

• Data center: $3.83 billion vs $3.79 billion expected (+30% YoY)

• Gaming: $1.57 billion vs $1.32 billion expected (-51% YoY)

• Professional Visualization: $200 million vs $349 million expected (-65% YoY)

• Automotive: $251 million vs $242 million (+86% YoY)

- Adjusted operating income: $1.54 billion vs $1.95 billion expected (-55% YoY)

- Adjusted operating expenses: $1.79 billion vs $1.81 billion expected (+30% YoY)

- Adjusted EPS: $0.58 vs $0.70 expected (-50.5% YoY)

- R&D expenses: $1.95 billion vs $1.90 billion expected (+39% YoY)

- Free Cash Flow: -$0.16 billion vs +$2.63 billion expected ($1.28 billion in year-ago quarter)

As one can see in a summary above, Nvidia managed to beat revenue expectations, thanks to a strong growth in data center division. Solid performance of data center business helped offset significant deterioration in other business divisions, especially in gaming. However, the company missed heavily on profit expectations with operating income and EPS coming in much below market expectations. Lower profit is a result of both - drop in revenue and increase in costs. This lower profit also caused the company to report negative free cash flow for the first time since 2013.

Q4 guidance in-line with expectations

- Q4 Revenue: $6.0 billion +- 2% vs $6.1 billion expected

- Adjusted operating expense: $1.78 billion vs $1.83 billion expected

- Adjusted gross margin: 65.5-66.5% range vs 65.3% expected

Nvidia provided guidance that was more or less in-line with market expectations. Top end of the company's revenue guidance matched market estimates while the company sees costs at slightly lower levels than the market. Jensen Huang, company's CEO and founder, said that Nvidia is quickly adapting to changing macroeconomic conditions. Company is correcting inventory levels and preparing for the launch of new products. Nvidia hopes that solid demand for machines for AI software will help it weather the current deterioration in the global economy, especially in China.

A look at the chart

Earnings release from Nvidia (NVDA.US) can be best described as mixed. While the company managed to beat sales expectations and provided a rather positive commentary to the coming quarters, it has missed profit expectations and burned through cash. Company's shares trade around 1.5% higher in the premarket at press time. Taking a look at the chart at the H1 interval, we can see that the stock attempted to break below the support zone marked with a 61.8% retracement of the downward move launched in early-August yesterday. Improved sentiment towards the company following earnings release may help bears defend this zone and launch a recovery move. If such a move is launched, a near-term resistance zone can be found ranging below $170.00 area.

Source: xStation5