Tech Stock Under Pressure: NVIDIA Corporation (NASDAQ: NVDA)

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NVIDIA Corporation (NASDAQ: NVDA) stock fell over 1.9% in the pre-market session of November 19th, 2020 (Source: Google finance) after the company posted mixed earnings estimates for the third quarter of FY 20. For automotive, Q3 revenue was $125 million, which is down 23% year-on-year and up 13% sequentially. For data center, the revenue was at record $1.9 billion, up 162% year-over-year and up 8% sequentially, on the back of a strong ramp of our A100-based platforms, continued growth with Mellanox and record T4 shipments for inference.

NVDA in the third quarter of FY 20 has reported the adjusted earnings per share of $2.91, while reported the adjusted revenue growth of 57.1 percent to $4.73 billion in the third quarter of FY 20.

For the fourth quarter of fiscal 2021, the company expects the revenue to be $4.80 billion, plus or minus 2 percent. The Q4 non-GAAP gross margins are expected to range between 62.8 percent and 65.5 percent, respectively, plus or minus 50 basis points. The non-GAAP operating expenses are expected to be approximately $1.64 billion and $1.18 billion, respectively. The non-GAAP other income and expense are expected to be an expense of approximately $55 million. The non-GAAP tax rates are expected to be 8 percent, plus or minus 1 percent, excluding any discrete items.

For the fourth quarter of fiscal 2021, the company expects the gaming to be up sequentially and data center to be down slightly versus Q3.

Meanwhile, during the third quarter, the company has signed a definitive agreement to acquire Arm Limited from SoftBank Capital Limited and SVF Holdco (UK) Limited in a transaction valued at $40 billion. The deal will combine NVIDIA’s leading AI computing platform with Arm’s vast ecosystem for the creation of the premier computing company for the age of AI. The transaction is expected to be immediately accretive to NVIDIA’s non-GAAP gross margin and non-GAAP earnings per share and is expected to close in the first quarter of calendar 2022.

In addition, the company has also announced its plans to build a world-class AI lab in Cambridge, England, the will include a powerful AI supercomputer based on NVIDIA and Arm technology and will offer research fellowships and partnerships with local institutions and AI training courses. Separately, the company plans to build Cambridge-1, the U.K.’s most powerful AI supercomputer, based on an NVIDIA DGX SuperPOD system and designed for AI research in healthcare and drug discovery.

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