Nvidia reports Q1 earnings showing revenue decline with data center and gaming business temporarily stalling amid cryptocurrency market turbulence.

Nvidia reported first fiscal quarter 2020 results with revenue of $2.22 billion, down 31 percent from $3.21 billion in the first fiscal quarter of 2019, and GAAP income of $394 million, or 64 cents per share, down 68 percent from last year. On a non-GAAP basis, income was $543 million, or 88 cents per share, down nearly 60 percent year-over-year. Despite the declines, Nvidia beat revenue expectations by $20 million and beat both GAAP and non-GAAP earnings per share by 7 cents, driving the company's share price up approximately 2 percent in after-market trading.

Revenue across Nvidia's major business segments was mixed. GPU business revenue reached $2.02 billion, down 27 percent over last year, while Tegra processor business fell 55 percent to $198 million. By platform, gaming revenue fell 39 percent to $1.06 billion, data center revenue fell 10 percent to $634 million, professional visualization revenue rose 6 percent to $266 million, automotive revenue rose 14 percent to $166 million, and OEM and other revenue fell 74 percent to $99 million.

Nvidia founder and CEO Jensen Huang outlined three core growth strategies during the company's earnings call. First is RTX ray-tracing technology, which Huang described as "the future of gaming and digital design." He noted that "Nvidia RTX is leading the way. With the support of Microsoft DXR, Epic, Unity, Adobe and Autodesk and movie studios like Pixar, industry support has been fantastic." Second is accelerated computing and artificial intelligence, with Huang stating, "The pause in hyper-scale spending will pass. Accelerated computing and AI are the greatest forces in computing today, and Nvidia is leading these movements. Whether cloud or enterprise or AI at the edge, for 5G or industries, Nvidia's one scalable architecture from cloud to edge is a focal point platform for the industry to build AI upon." Third is robotics and embedded AI, where "the same computing architecture is used for self-driving cars, pick-and-place robotic arms, delivery drones and smart retail stores."

Regarding the data center market, Huang explained that the slowdown in hyper-scale company spending stems from capacity digestion. "At this point, I think it's brutally clear that in the second half of last year they took on a little too much capacity," he said. However, Nvidia's deep learning inference business is performing strongly, particularly driven by conversational AI breakthroughs. Huang also reported that Nvidia is "on track to close its pending acquisition of high-performance connectivity technology developer Mellanox by year-end," stating that "together, we can advance cloud and edge architectures for HPC and AI computing." Nvidia is seeing strong AI adoption across industries because companies have "a vast amount of data that they're collecting. Some 90 percent of today's data was created just two years ago."

Looking ahead, Nvidia expects second fiscal quarter 2020 revenue of approximately $2.55 billion, plus or minus 2 percent, down considerably from $3.12 billion in the second fiscal quarter of 2019. Second quarter 2020 GAAP and non-GAAP gross margins are both expected to be above 59 percent, declining from the prior year's comparable figures, which were both above 63 percent.