Gaming Segment To Aid NVIDIA's (NVDA) Top Line In Q1 Earnings

For the last two years, NVIDIA Corporation (NASDAQ:NVDA) has impressed investors with its stellar performance, wherein the company’s quarterly revenues have been advancing at a rate more than 50%, earnings have tripled and shares have displayed more than six-fold growth, consequently. Investors are expecting this trend to continue, with the graphic chipmaker putting up another overwhelming performance in first-quarter fiscal 2019. It is scheduled to report its quarterly figures on May 10.

What the Zacks Model Unveils for NVIDIA’s Overall Performance?

Our proven model conclusively shows that NVIDIA is likely to beat earnings estimates this quarter. Per our model, a stock with a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold), has higher chances of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. NVIDIA currently carries a Zacks Rank of 3 and has an ESP of +0.45%.

The Zacks Consensus Estimate for the fiscal first quarter is pegged at $1.65, indicating a whopping rise of 94% from the year-ago reported figure. The Zacks Consensus Estimate has remained unchanged, in a month’s time. Additionally, analysts polled by Zacks project revenues of roughly $2.91 billion, up 50% from the prior-year quarter.

NVIDIA Corporation Price and EPS Surprise

Growth Majorly Stemming from Gaming Segment

The company’s gaming segment, which also happens to be the largest contributor to its revenues, is anticipated to have been spurred majority of growth. Per the Zacks Consensus Estimate, this segment is likely to witness massive year-over-year growth of 61.4% and reach $1.67 billion in the to-be-reported quarter.

The year-over-year growth expectation is mainly driven by the strong adoption of NVIDIA’s Pascal architecture-based graphics processing units (GPUs).

For a thrilling gaming experience, one needs better visualization and speed, and NVIDIA has what gamers want, with its strong portfolio of Pascal architecture-based GPUs, which is considered the best by market experts. As gaming enthusiasts always intend to play games at the best graphic settings, they usually upgrade their PCs with more advanced GPUs.

NVIDIA has been able to tap this opportunity by continuously rolling out more advanced GPUs, including GTX 1080, GTX 1070 and Titan X, over the past year. This move bore fruit as evident from the impressive year-over-year growth in the segment’s revenues, over the last four-five quarters.

The latest monthly report of Steam also depicts strong adoption of NVIDIA’s GPUs. Per the report, NVIDIA’s GPUs have captured a larger market share during the period between December 2017 and April 2018, compared with the preceding quarter.

Thus, this indicates that strong adoption of the company’s graphic cards continued into the first quarter as well, the benefit of which will certainly reflect in its results.

Competition Likely to Have Muted Growth Partially

Increasing competition from Advanced Micro Devices (NASDAQ:AMD) might have hurt the fiscal first-quarter top-line performance, to some extent. Notably, with an insignificant presence in the high-end graphic-chip market til July 2017, Advanced Micro Devices enhanced its footprint by introducing the Vega series of GPUs — Vega 56 and Vega 64 — in August 2017. Therefore, we believe this might have hurt NVIDIA’s market share in the quarter under review, in turn impacting the segment’s top-line performance.

Some Other Stocks With Favorable Combinations

Here are a few companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Asure Software, Inc. (NASDAQ:ASUR) , with an Earnings ESP of +30.09% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Yelp Inc. (NYSE:YELP) , with an Earnings ESP of +9.78% and a Zacks Rank of 3.

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