(Reuters) -Nvidia Corp on Monday warned its second-quarter revenue would drop by 19% from the prior quarter on weakness in its gaming business, sending the chip designer’s shares down about 5% in early trading.
The company reported preliminary results for the second-quarter just days after chipmaker Intel Corp and Sony Group Corp slashed their annual forecasts on demand concerns.
The gaming industry, largely considered to be recession proof, is beginning to see some weakness as consumers weigh purchases of discretionary items such as laptops and video game consoles.
“As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our Gaming partners to adjust channel prices and inventory,” Chief Executive Officer Jensen Huang said in a statement.
Chipmakers have been struggling with worsening supply-chain snarls due to the Russia-Ukraine conflict and COVID-19 curbs in China manufacturing hubs.
Nvidia said the gaming unit’s preliminary revenue, which includes sales of high-end graphic cards for desktops and laptops, declined 44% sequentially to $2.04 billion for the quarter ended July 31.
Last month, Xbox-maker Microsoft reported a slump in gaming revenue while PlayStation maker Sony trimmed its forecast on waning consumer interest as a lack of new games and easing of COVID-19 constraints hit gaming demand.
The company, which expects second-quarter revenue of about $6.70 billion compared with $8.10 billion forecast earlier, is scheduled to report results on Aug. 24.
Analysts expect revenue of $8.1 billion, with contribution from gaming at $3.12 billion, according to IBES data from Refinitiv.
Second-quarter results will include charges of $1.32 billion due to excess inventory and future demand, the company said.
(Reporting by Nivedita Balu in Bengaluru;Editing by Vinay Dwivedi)