Nvidia Cuts Q4 Revenue Forecast by $500 Million, Shares Plunge

The Chief Executive Officer (CEO) of Nvidia warned investors on Monday that its last financial quarter was another difficult period for the company. As a result, the firm has lowered its revenue guidance for the fourth quarter of the 2019 fiscal year down to $2.2 billion, plus or minus two percent.

The revised revenue guidance is $500 million lower than the previous revenue forecast for the fourth quarter, which was $2.7 billion. However, as the CEO Jensen Huang pointed out in a letter to shareholders yesterday, the previous figure was already down significantly.

Nvidia shares drop 13% in early trading after cutting Q4 revenue guidance. CEO Jensen Huang cited an "extraordinary, unusually turbulent, and disappointing quarter.” https://t.co/DB0sGbQgAf pic.twitter.com/Va2VuYLr0g

— Bloomberg (@business) January 28, 2019

Following the announcement, shares of Nvidia plunged as much as 17 percent on Monday. According to Huang, there were several extraordinary dynamics which contributed to this tough quarter. However, it can mainly be attributed to the cryptocurrency bear market and the deceleration of the global economy, particularly in China.

Nvidia continues to feel the crypto bear’s bite

In November, the company initially provided guidance for the fourth quarter of the 2019 fiscal year. Earlier in 2018, following the cryptocurrency boom, Nvidia stocked up on excess inventory, expecting a lot of demand from consumers. However, as the crypto bear market set in demand declined, leaving the firm with an excess channel inventory of Pascal mid-range GPUs.

As a result, the company delayed the planned production of several new products to allow the excess inventory to sell. It was this delay in product launches that contributed to the initial significantly lowered Q4 guidance.

Global downturn hurt customer demand

The most recent thorn in Nvidia’s side was the global downturn, which hurt consumer demand for Nvidia gaming GPUs. Due to economic uncertainties, customers around the world became increasingly cautious as the quarter progressed, the statement said.

Nvidia warns of weakness in China. Stock plunges 16% https://t.co/tAoXh11tAr pic.twitter.com/tUYLYf8ek4

— CNN Business (@CNNBusiness) January 28, 2019

In the letter to Nvidia shareholders, Huang said: “Q4 was an extraordinary, unusually turbulent, and disappointing quarter. Looking forward, we are confident in our strategies and growth drivers.”

“The foundation of our business is strong and more evident than ever – the accelerated computing model NVIDIA pioneered is the best path forward to serve the world’s insatiable computing needs. The markets we are creating – gaming, design, HPC, AI, and autonomous vehicles – are important, growing, and will be very large. We have excellent strategic positions in all of them,” he added.

The fourth quarter was not the only quarter to be hurt by the cryptocurrency bear industry in 2018. As Finance Magnates reported, Nvidia reported a “substantial” decline in revenue as the cryptocurrency mining industry slowed during its second quarter.