And note that during the past quarter, gross margin plunged to only 45.9%.

To put the margin pressure under perspective, the lower end of the guidance range (62.4%) is below its FY2021 level of 65.6% by 320 basis points, and below its peak level in Q1 FY23 by almost a whopping 500 basis points (470 to be exact). GAAP and non-GAAP gross margins are expected to be 62.4% and 65%. Revenue is expected to be $5.9 billion plus or minus 2%. We expect that decline to be partially offset by sequential growth in data center and automotive. …we expect Gaming and ProViz revenue to decline sequentially as OEMs and channel partners reduce inventory levels to align with current levels of demand and prepare for our new product generation. These factors are mentioned in comments provided by its CFO Colette Kress during the ER (abridged and emphases added by me): Looking forward, the business expects muted growth, margin contraction, and inventory renormalization, all typical signs for the beginning of the contracting phase. Where are we in the cycle now?Īs aforementioned, NVDA’s past quarter and record FY2022 represented the peak of the last cycle. Then I will also point out a few signs that investors to monitor to tell the contracting phase is ending. And in the remainder of this article, I will make a bold prediction that the current contraction will bottom near the end of 2022 and early 2023. To me, it is clear that we are in the early phase of the contracting stage. And we will just need to understand its current stage in the cycle so that we can be prepared. As a cyclical business, what NVDA is going through is the normal stages of the cycle. And therefore, it is the goal of this article to provide a calmer analysis of the business. Its stock fell by almost 10% that day.īy this time, investors have already had time to fully digest the ER and reflect on the market reactions. And on Friday, the hawkish comments from Fed Chairman Jerome Powell added further fuel to the fire. The market responded with a price correction of almost 5% in after-hours trading after ER. Indeed, the earnings release (“ER”) provided guidance that implied either severely muted growth or even contraction ahead. However, as a highly cyclical business, a contraction is expected to follow the peak. Operating income and EPS grew by 87% and 78%, respectively. Combined with a gross margin expansion of a whopping 120 basis points (from 65.6% in FY2021 to 66.8%), bottom-line growth was even more impressive.

Overall, the business delivered a record FY 2022. NVIDIA ( NASDAQ: NVDA) reported its FY2023 Q2 results last Wednesday.

Nvda earning report seeking alpha