The ailing IT behemoth is making great strides in a very lucrative field

The fiscal 2023 second-quarter earnings for NVIDIA Corporation (NVDA) (for the three months ending July 31, 2022) show that the graphics card specialist is faltering after years of phenomenal growth.
 
WAN CHAI, Hong Kong - Oct. 3, 2022 - PRLog -- The chipmaker had already warned that its earnings would fall far short of forecasts due to difficulties in the gaming market. On August 24, the corporation reported $6.7 billion in revenue, a 3% increase over the previous year. Non-GAAP earnings plummeted 51% year on year to $0.51 per share, owing to a substantial contraction in the company's margins due to inventory adjustments and lower graphics card average selling prices (ASPs).

The forecast was likewise underwhelming. This quarter, NVDA expects $5.9 billion in revenue and an adjusted gross margin of 65%. Revenue projections from the business fell $1 billion shy of Wall Street's expectations. Furthermore, NVDA's revenue prediction for the current quarter indicates a 17% year-over-year decline. According to the company's projection, the adjusted gross margin will fall by two points.

There's little question that NVDA investors will be dissatisfied with how the once-promising chipmaker is faring. However, astute investors should keep an eye on the larger picture, since the current slump should not continue long. Simultaneously, NVDA's most recent earnings conference call revealed that the company is making tremendous progress in an area that could push it forward in the long run.

On the conference call, NVDA CFO Colette Kress stated that the GeForce Now cloud gaming service had more than 20 million members. This was Kress's sole mention of the cloud gaming company during the call, but investors should not overlook its significance.

In April 2021, NVDA had 10 million GeForce Now members. The quick expansion of their cloud gaming service is unsurprising, as it allows players to play resource-intensive games without spending money on pricey hardware.

According to Newzoo, there will be 21.7 million paying cloud gaming subscribers in 2021. By 2024, the number of paying customers is predicted to nearly treble to 58.6 million. That means NVDA has already established a strong foothold in the cloud gaming arena, with an estimated market share of more than 60% last year.

NVDA is taking precautions to retain its supremacy in this market. One method is to continually extend its cloud gaming collection. Last quarter, the business introduced 80 new titles to the GeForce Now collection, including popular games like Genshin Impact and Mass Effect Legendary Edition. The service currently contains over 1,350 titles, demonstrating that NVDA is rapidly expanding its collection (the service had 1,000 titles a year ago).

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