Nvidia Corp's quarterly revenue in its widely watched data centre and automotive businesses missed estimates, dragging down the chipmaker's shares that have nearly tripled in value over the past 12 months.
Nvidia shares were down 6.6 per cent at US$153.87 in extended trading on Thursday. Shares have risen 181 per cent over the past year, the strongest performance across the benchmark S&P 500 index.
Nvidia came to prominence in the gaming industry for designing graphics-processing chips, but in recent years has been expanding into newer technologies, including cloud computing, artificial intelligence, and self-driving cars.
"Nvidia was priced for perfection heading into earnings," said Loop Capital analyst, Betsy Van Hees, adding that the company did not have any room for anything but perfection.
Revenue from Nvidia's data centre business – which counts Amazon.com Inc's Amazon Web Services and Microsoft Corp's Azure cloud business among its customers – more than doubled to US$416 million but missed estimates of US$423.3 million, according to FactSet.
Automotive business revenue surged 19.3 per cent to US$142 million, but also fell short of analyst expectations of US$146.2 million, according to financial and data analytics firm FactSet.
The data centre business is still relatively small and is driven by small number of customers who can change preferences tremendously from quarter to quarter, said Bernstein analyst Stacy Rasgon.
It can be a big opportunity in the long term but is unpredictable in the near term, Rasgon added. "The issue here is that…it's a lumpy business."
However, earnings and revenue easily beat analysts' targets, partly due to strength in its traditional gaming chips, that are also used to process cryptocurrency transactions, said chief executive, Jensen Huang, on a post-earnings call on Thursday.
Read more: NVIDIA sees record third quarter profits
Bitcoin made cryptocurrencies popular in recent years, but newer technologies, including Ethereum, have sparked a wave of mining using high-end gaming graphics cards. Miners use computers to process cryptocurrency transactions, and they are rewarded with additional cryptocurrency.
"Cryptocurrency and blockchain is here to stay. The market need for it is going to grow. And over time, it will become quite large," Hang said.
Net income more than doubled to US$583 million, or 92 cents per share, in the second quarter ended July 30.
Nvidia's total revenue rose 56 per cent to US$2.23 billion, beating estimates of US$1.96 billion.
For the third quarter, Nvidia said it expects revenue to be US$2.35 billion, plus or minus two per cent. Analysts were expecting US$2.13 billion.
(Reporting by Ismail Shakil in Bengaluru; Editing by Diane Craft and Lisa Shumaker)