NVIDIA’s record earnings may foreshadow a significant drop in GPU shipments

Last week NVIDIA announced their earnings for their Q4 2018 and Q1 2019 financial year, and the company recorded massive profits for their key markets. They killed it in the GPU market, shipping more graphics cards than ever before, and their association with Nintendo on the Switch platform showed big gains as well. But the record profits NVIDIA posted may hint at a big drop-off in the coming months, as GPU mining slows down and becomes less profitable.

In their earnings call last week, NVIDIA higlighted some key improvements. They had record earnings for the Q4 2018 and Q1 2019 financial quarters, homing in on over $3 billion in revenue. It’s the most money the company has ever made, and it’s easily the biggest jump they’ve ever had year-on-year.

Source: Ryan Shrout

Comparing Q1 2018 to Q1 2019, there’s a 65.5% increase in overall revenue, from $1.9 billion to $3.2 billion. There were big improvements in professional GPUs ($205 million to $251 million), datacentre ($409 million to $701 million), and in OEM and IP licensing, going from $156 million to a whopping $387 million. NVIDIA attributes that last increase officially to cryptocurrency sales, but this is more likely boosted by sales of the Nintendo Switch. There’s a big jump in Q2 2018, which is the financial quarter that matches up with the Switch’s launch in March 2017.

The biggest growth point, however, is in gaming. Gaming covers NVIDIA’s GPU sales to their board partners as well as from their own commerce website at geforce.com. NVIDIA has been selling direct to consumers for some time now, but that’s not where the growth is coming from. Rather, it comes from the mining boom and pent-up demand from gamers who have no high-end options at a fair price. As AMD was unable to deliver cards with the success of Monero mining on Vega, gamers turned to NVIDIA to try find an alternative. The increases for Q3 and Q4 2018 are abnormal compared to the same quarters in the previous year, and it hasn’t showed signs of letting up.

Some analysts have looked at NVIDIA’s financials and suggested that the company’s stock price will trend lower as their success from the mining boom tapers off and declines. Wells Fargo said that NVIDIA’s success was likely short-lived as ASIC miners for cryptocurrencies like Ethereum and Monero arrived on the scene, and that making bets on NVIDIA’s stock was a risk. The stock dipped 4% after Wells Fargo’s report was released.

NVIDIA is also set to make more money this year as CEO Jen-Hsun Huang commented a few months ago that GPU prices were still likely to increase in 2018. NVIDIA still has to launch their next GPU family codenamed Turing, and they still have to integrate it with GDDR6 memory and move to a refined 7 nanometer production process from TSMC. It’s going to be a bumpy ride yet for gamers, and we’re only just halfway through May.

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