Nvidia (NVDA) is scheduled to report results of its third fiscal quarter after the market close on Thursday, November 14, with a conference call scheduled for 5:30 pm ET. What to watch for:
1. OUTLOOK: In August, Nvidia forecast third quarter revenue of $2.9B, plus or minus 2%, and GAAP and non-GAAP gross margins of 62% and 62.5%, respectively, plus or minus 50 basis points. The company also said it expects GAAP and non-GAAP operating expenses of approximately $980M and $765M, respectively, as well as a tax rate of 9%-11%. While difficult to make a clear call on the quarter, this is the first time in many quarters that expectations are generally in-check with typical seasonality, Susquehanna analyst Christopher Rolland said.
2. GROWTH DRIVERS 'BACK': Piper Jaffray analyst Harsh Kumar said he believes Nvidia's two biggest growth drivers, namely gaming and data center, are back. Following a round of channel checks, the analyst said Nvidia is one of the best positioned semiconductor companies from a "company-specific catalyst perspective." Gaming, which represents around half of the company's revenue, appears to have settled following the GPU inventory correction. In addition, the analyst is convinced Nvidia's data center business appears to have stabilized, and he sees growth in the segment moving forward.
3. GAMING: Craig-Hallum analyst Richard Shannon said he believes Nvidia's Gaming unit is likely to report upside to consensus estimates based on stronger low-end/mid-range GPU sales and lower channel inventory. Evercore ISI analyst C.J. Muse said he thinks it is understandable that investors have taken a cautious view on the future growth of Nvidia's Gaming franchise, though he sees a potential recovery coming in the second half and momentum continuing into 2020 and beyond in that part of the company's business.
4. DATA CENTER: RBC Capital analyst Mitch Steves raised his price target on Nvidia to $251 in late October after the results from Intel (INTC) indicated that data center demand was higher than expected. The analyst contended that Nvidia is also likely to experience a higher growth rate relative to CPU server demand, adding that he is also comfortable with his projections for its gaming business. Raymond James analyst Chris Caso said last week that his quarter-end checks didn't turn up anything he would consider substantially different from Q3/Q4 expectations, and that his checks "surprisingly" didn't turn up the channel activity that would typically precede an imminent launch of the anticipated 7nm datacenter product, and thinks a launch is more likely to be in Q1 or Q2 of 2020 as opposed to this quarter.
5. PARTNERSHIPS: In August, Nvidia and VMWare (VMW) announced their intent to deliver accelerated GPU services for VMware Cloud on AWS (AMZN) to power modern enterprise applications, including AI, machine learning and data analytics workflows.