Nvidia Records $1.32 Billion Inventory Fee as PC Market Slows

Slowing retail spending is weighing on Nvidia, which is reporting steep double-digit declines in its gaming unit and charges of $1.32 billion, mostly related to inventory and the broader economy.

The GPU giant today announced preliminary showing a 3% increase in revenue to $6.7 billion for the second quarter of its fiscal 2023 ended July 31 [PDF] and the direction of travel is clear for the group, as this revenue was down 19% from the previous quarter.

The games division was the main anchor of growth, plunging a third year year-over-year to $2.04 billion and 44% lower sequentially.

“Our gaming product sales projections declined significantly during the quarter,” said Jensen Huang, CEO of Nvidia. “As we expect macroeconomic conditions affecting sales to continue, we have taken action with our gaming partners to adjust pricing and channel inventory.”

“Nvidia offers great products and a leadership position in large and growing markets. As we address these challenges, we remain focused on the unique opportunity to reinvent computing for the age of AI,” he added.

PC shipments declined in the first two quarters of this year, driven primarily by consumers and the education sector slowing purchases of Chromebooks and laptops for personal use. Work machines continue to expand in Europe and North America.


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Yet the other big chunk of Nvidia’s business continues to move in the right direction for company executives: the Data Center division grew 1% quarter-on-quarter to $3.81 billion, an increase of 61% year-on-year.

Nvidia said this was a “record” for the unit but was “somewhat below company expectations as it was impacted by supply chain disruptions “.

Professional visualization was down 20% from the prior quarter and 4% year-on-year to $500 million; the automotive division grew 59% from the first quarter and 45% year-on-year to $220 million; and OEM and others were down 66% year-over-year and 12% sequentially to $130 million.

Nvidia said full and final audited second-quarter results are expected to show charges of $1.32 billion, primarily for inventory and the associated reserve, “based on revised expectations for future demand.”

“The significant charges incurred during the quarter reflect previous long-term purchase commitments we made during a period of severe component shortages and our current expectations of continued macroeconomic uncertainty,” said Colette Kress, Vice President executive and chief financial officer of Nvidia.

“We believe our long-term gross margin profile is intact. We have slowed operating expense growth, balancing investments for long-term growth while managing near-term profitability. We plan to continue buyouts equity as we anticipate strong cash generation and future growth,” she said.

Second quarter results will be released on August 24. ®

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