By Kshitiz Goliya
(Reuters) - Nvidia Corp reported a surprise rise in second-quarter revenue and gave a better-than-expected revenue forecast for the current quarter, helped by strong demand for its graphic chips used in gaming and cars.
The company's shares rose nearly 10 percent in extended trading on Thursday.
Nvidia's revenue increased 4.5 percent in the quarter ended July 26, while analysts on average were expecting revenue to decrease about 8 percent.
The company forecast sales would fall in the third quarter, but the decline was again less than analysts' expectations.
Nvidia gets a majority of its revenue from its graphic chips made for personal computers, and there were fears that the fall in PC sales would hurt Nvidia just like it has Intel Corp (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD) Inc.
But, Nvidia said gaming revenue rose 59 percent, helped by strong sales of its popular GeForce series of gaming chips.
"The near term story continues to be PC gaming," said Wedbush Securities analyst Betsy Van Hees. "That is the key driver for them and they continue to dominate in that area."
Nvidia has also been increasing its focus on making chips that allows people to play graphics-heavy games over the internet and chips used in a car's dashboard display and in self-driving cars.
Automotive revenue rose 76 percent in the quarter and accounted for only 6.2 percent of total revenue.
The company said 8 million cars on the road were using its chips and that it was working with more than 50 companies for its DRIVE chip for self-driving cars.
Van Hees said car chips would be a very important long-term story.
However, revenue in Nvidia's enterprise business fell 14 percent. The business, which makes chips used for software such as AutoCAD, accounted for 16.2 percent of total revenue.
The company's total revenue rose 4.5 percent to $1.15 billion in the second quarter. Analysts had expected $1.01 billion, according to Thomson Reuters I/B/E/S.
Net income slumped nearly 80 percent to $26 million in the quarter due to higher costs and a bigger tax bill.
Nvidia forecast revenue to fall to $1.16-$1.20 billion in the current quarter from $1.23 billion a year earlier. Analysts had expected a fall to $1.10 billion.
Nvidia's shares rose 9.7 percent to $22.43 in extended trading. They had risen nearly 2 percent this year through Thursday, compared with a 11.6 percent fall in the Dow Jones US chip index.