Nvidia reported a 48% YoY revenue growth in Q1 2022 at $8 billion. The company’s data center segment surpassed the gaming segment for the first time to become the largest revenue contributor. The GeForce RTX 30 Series’ product cycle enabled the gaming segment to grow 33% YoY to achieve $3.6 billion in revenues. The A100 GPU, with large-volume deployments by hyperscale customers, proved to be a key factor in the data center segment’s revenue growth of 79.4% YoY to $3.6 billion.
Gaming revenue to decline in Q2 due to architectural transition, mixed global demand
Gaming revenue stood at $3.6 billion with 33% YoY growth. The demand was primarily fuelled by the GeForce RTX 30 series. Nvidia estimates that about one-third of the GeForce Gaming GPU installed base is now on RTX.
The geopolitical situation in Europe caused a demand softness along with COVID-19 lockdowns in China but was cushioned by the growing American demand. Uncertainties faced by the cryptomarket globally also added to the headwinds in the gaming segment. The company also expects a sequential revenue decrease due to architectural transitions.
We believe due to the inflationary environment and tumultuous consumer demand and price cuts, the segment may face a revenue decline in the coming quarters. However, the GeForce Cloud Gaming will continue to grow as more and more players move towards cloud gaming, which presents itself as an inexpensive alternative to premium device gaming.
Pro visualization grows 79.5% YoY to achieve $629 million in revenues
The professional visualization segment’s growth was driven by mobile workstation GPUs enabled by remote office infrastructure against the backdrop of hybrid work environments.
Omniverse enterprise software also proved to be a support for the revenues. The software is being currently used for digital content creation by major enterprises like Sony and Medtronics. Amazon, Kroger and Pepsico are using the software’s digital twin capabilities to optimize their business processes.
As enterprises adopt more Omniverse technologies in their processes, premium GPU configuration systems will become a necessity than an option, and services revenue will continue to contribute to this segment’s growth.
Automotive declines 11.5% YoY at $134 million with uplifting short-term outlook due to Drive Orin SoC
The automotive market declined due to new product cycle ramping in later quarters. Additionally, deals are in pipeline that will take a couple of quarters to materialize. At the time of earnings, the win pipeline was at $11 billion over the course of the next six years.
The segment will be a major growth driver in the coming years due to consumer AV and commercial robotaxis. But as of now, as this market is in its nascent stage, the revenue growth will remain muted in the next quarter.
Data center is the crown jewel with 79.4% YoY growth at $3.6-billion revenue
The A100 GPU drove the data center segment’s revenue past the gaming revenues. Large-volume deployments by hyperscalers and consumer internet companies, financial services, and telecom expansion of IT Infrastructure remained the key growth drivers. From a workload perspective, recommender systems, conversational AI, large language models and cloud graphics were the top workloads that warranted the sale of GPUs and DPUs along with networking to achieve the system architecture required for building systems that can sustain the unique requirements emerging from these workloads.
Outlook for Q2 2022
We expect the data center demand to remain strong for the next quarter due to the H100 systems’ ramp-up, I/O upgrades in servers and large installations – deep recommender systems, large language models and AI models. The almost full-stack solution from Nvidia provides the platform for enterprises to deploy these models in a cost-effective manner.
COVID-19 lockdowns in China and Russia-Ukraine war will impact the gaming market by about $400 million in revenues, with a muted growth in Q2.