Nvidia stock dropped as result of weak guidance, and CFO stated that hiring will be reduced

CFO Nvidia of Colette Kress said after the firm published fiscal first-quarter earnings on Wednesday that the company will decrease its recruiting pace and control spending as it contends with a hard macroeconomic climate.

Nvidia’s revenue and earnings topped analyst estimates, but the stock plunged more than 10% in extended trade when the chipmaker issued a cautious prediction for the upcoming quarter.

For the quarter ended May 1, here’s how Nvidia fared compared to Refinitiv consensus estimates:

EPS: $1.36, adjusted, versus $1.29 expected

Revenue: $8.29 billion versus $8.11 billion expected

Nvidia’s revenue for the current quarter is expected to be around $8.1 billion, compared to $8.54 billion expected by analysts. Investors are avoiding fast-growing equities in favour of safer options amid a period of rising inflation and macroeconomic instability, and Nvidia stock is down almost 43% so far in 2022.

In a statement, Nvidia CEO Jensen Huang stated that the company is confronting a “challenging macro environment.” On a non-GAAP basis, the company’s operational expenses climbed 35% year over year to $1.6 billion.

Nvidia stated its revenue in the current quarter would have been $500 million lower if the Russian war in Ukraine and Covid lockdowns in China had not occurred.

Nvidia, on the other hand, continues to enjoy significant revenue growth and strong demand for its graphics chips, which are widely utilised for advanced gaming and cloud-based artificial intelligence. The company’s total revenues increased by 46% year over year, and its primary businesses of data centre and gaming sales also increased throughout the quarter.

Nvidia’s data centre division, which sells chips to cloud computing businesses and corporations, rose 83 percent annually to $3.75 billion, outpacing the company’s main gaming division, which sells graphics cards for advanced 3D games and gained 31 percent annually to $3.62 billion.

Graphics cards for laptops and chips for game consoles, according to Nvidia, are driving gaming growth. The Nintendo Switch’s processor is made by Nvidia.

The company added that inventory of its gaming graphics chips, which had been hard to come by at retail pricing for the previous year, had “normalised,” indicating that the shortfall is beginning to ease. In the current quarter, Nvidia expects gaming revenue to fall “in the teens” sequentially.

The company’s smaller lines of business had mixed success. Professional visualisation for desktops increased 67 percent year over year to $622 million, but the company’s automotive division fell 10% to $138 million.

Nvidia stated earlier this month that it had reached a settlement with the Securities and Exchange Commission (SEC) over 2017 disclosures about how cryptocurrency mining fueled the company’s development. Nvidia stated its cryptocurrency-specific products, CMP, contributed to a 52 percent drop in other revenue during the quarter, with revenue being “nominal.”

Nvidia said that its board of directors has approved an additional $15 billion in share repurchases through the end of the year. In the first quarter, it spent $2.1 billion on share repurchases and dividends.

Nvidia cancelled a significant purchase of Arm, a microprocessor technology company, earlier this year. On a GAAP basis, Nvidia incurred a $1.35 billion termination penalty, resulting in a negative impact of 52 cents per share.