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Nvidia Shares Soar Despite Revenue Drop

Nvidia Q2 earnings and revenues beat Wall Street estimates, despite dropping from a year before, driven by better-than-expected gaming and automotive chip business.

Sending shares up 6% in after-hours trading to $159, Nvidia reported Q2 revenues of $2.58 billion, down from $3.12 billion in 2018.

Revenue in video games fell 27% to $1.31 billion, however, it still managed to beat estimates of $1.28 billion. Sales in automotive units rose 30% to $209 million in the quarter.

The company benefited from the addition of more of its chips in new laptops, as well as additions to popular gaming franchises like Call of Duty, Watch Dogs, Cyberpunk and Wolfenstein.

According to Jensen Huang, Nvidia chief executive, gaming laptops able to handle sophisticated game and AI models able to handle real-time chat bots were driving demand.

“We achieved sequential growth across our platforms,” Huang said.

“Real-time ray tracing is the most important graphics innovation in a decade and adoption has reached a tipping point, with Nvidia RTX leading the way.”

The company forecast profit margins ahead of expectations for the quarter and said it would “resume share buybacks after completing the acquisition of networking products maker Mellanox this year”.

Nvidia’s positive results comes just as recent market research from Gartner forecast a slowdown for the chip industry, expecting a 9.6% drop in global semiconductor revenue in 2019.

Chipmakers are also feeling added pressure due to the ongoing US-China trade dispute.

Nvidia said it expects Q3 revenue of $2.0 billion, give or take 2%, while analysts on average were expecting revenue of $2.97 billion, according to Refinitiv’s IBES data.

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