NVIDIA GeForce RTX 2080 and GeForce RTX 2070 Sales Lower Than Expected, Gaming Revenue Down 45% - Crypto and Excess Channel Inventory Also To Blame

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NVIDIA has released its earnings report for Q4 FY19 with $ 2.21 billion in revenue in total, booming expectations and raising their share price in after-hours trading. At the same time, NVIDIA posted that their Gaming revenue has seen a drop of 45% from the previous year, which means their GeForce sales have taken a major hit.

NVIDIA Reports 45% Revenue Drop in Gaming Sales, Cites Lower Than Expected Sales of GeForce RTX 2080 and GeForce RTX 2070 Graphics Cards
In the details shared by NVIDIA, the market to market revenue shows that Gaming was able to make $ 954 million in Q4 FY19 compared to $ 1764 million in the previous quarter. Not only does that make it a 46% drop from the previous quarter, but looking at Year-to-Year results, NVIDIA also saw a 45% decline. 2018 was a record year but it was a disappointing finish. This quarter, we expect to put the channel inventory issue behind us and get back on track. As the pioneer of accelerated computing, our position is unique and strong. And the opportunities ahead in graphics, high performance computing, AI and autonomous machines remain enormous. We are as enthusiastic about these growth opportunities as ever.

Other markets such as Datacenter, Automotive, and Professional Visualization have been up from the previous year, as can be seen in the chart above. NVIDIA said in previous reports that OEM and IP sales are attributed to their crypto business and here we can see a 22% decline from the previous quarter and a 36% decline from the previous year with a current revenue of $ 116 million. Note that OEM and IP are direct sales to crypto businesses, and there is no telling how many GeForce tier (Gaming) cards have amounted to Gaming revenue as users who buy them can end up using the cards for crypto mining.

Deteriorating macroeconomic conditions, particularly in China, has impacted consumer demand for our GPUs; and third, sales of certain high-end GPUs using our new Turing architecture, including the GeForce RTX 2080 and 2070, were lower than we expected to launch a new architecture.

On a full year basis, we expect our gaming business to be down slightly given the tough first half compared with growth in Turing and notebook gaming.

When it comes to crypto, it is partly to blame but still a significant factor that has led to a decline in NVIDIA's revenue. NVIDIA had delayed their GeForce RTX Turing cards to get rid of the excess GeForce GTX 10 series inventory that they had produced by overestimating the crypto market. As soon as cryptocurrency fell across the globe, so did the sales of crypto targeted graphics cards and that hit NVIDIA as they had overproduced Pascal chips. Even at the moment, NVIDIA still is not clear of their GeForce 1060 (GP106 GPU) inventory. There are also other factors that are related to GeForce RTX cards and their main highlight, the RTX feature. First of all, we should look at the prices of GeForce RTX 20 series cards that are the highest in their graphics segment. The other thing is the performance increase per gen which is also lower than what previous generations had to offer. If we look at Pascal, the GeForce GTX 1070 and GeForce GTX 1080 gave users a lot of reason to upgrade and were not priced out of the mainstream audience. The GTX 1080 Ti was the king of the hill for a full 2 years and had a price of just $ 699 US. The current situation is completely different. NVIDIA is offering the GTX 1080 successor for the price of a GTX 1080 Ti which offers around the same performance of the previous flagship at $ 699 US. Same can be said for the RTX 2070 which exceeds the performance of a GTX 1080 but costs the same at $ 499 US. The GeForce RTX 2060 costs $ 349 US and that's about the same as the GTX 1070 but here, it does offer somewhat better performance.vNVIDIA also states that the reason for poor sales was due to them introducing high-end cards first. But I should remind you that with Pascal and Maxwell, NVIDIA also launched their high-end cards first. The GeForce GTX 1080 and GeForce GTX 1070 were introduced around the same time while the GeForce GTX 980 and GeForce GTX 970 were also announced and launched close to each other. The GeForce GTX 960 and GTX 1060 always launched later than the higher end cards but this time NVIDIA had the edge by offering the RTX 2080 Ti from the start which is a crucial flagship product in the Turing lineup.

When we launched the 2070 and 2080, it was the first time we've ever launched a new generation where the only available SKUs were very high end. And in addition to that, the early boards that came out on the market were the special edition and the over clocked versions. And the MSRP versions did not show up for some short time after, couple of months after. And so the conditions were not ideal, if you will.

We were not able to launch into the mainstream segment with 2060 for all the reasons that I think everyone understands now. And so I think that the situation was not an idea