(Reuters) – Nvidia Corp on Wednesday forecast fourth-quarter revenue above analysts’ expectations, betting on growth in its data center business as more Internet companies look to invest in artificial intelligence and the metaverse.
The online domain that uses augmented and virtual reality to help users communicate has gained more attention after Facebook, now renamed Meta, said it would increase capital spending and shift the focus of its social media activities.
The move will be a big boost for Nvidia, the world’s largest maker of graphics and AI chips, as metaverse applications require more computing power and drive demand for chips.
The company released Omniverse Enterprise last month, a set of software tools that allow companies to collaborate in building virtual worlds, whose computing power comes from Nvidia’s chips.
Nvidia Chief Executive Jensen Huang said he believes Nvidia could eventually raise up to $1,000 a year from up to 40 million virtual world creators and designers. The company believes that about half of its Omniverse revenues will come from chips and half from software.
“There will probably be more virtual worlds than there are websites today. And the reason for that is that they are easier to build,” Huang told Reuters in an interview.
Nvidia expects revenue for the current quarter of $7.40 billion, plus or minus 2%, above analysts’ average estimate of $6.86 billion, according to IBES data from Refinitiv.
Shares of the company rose nearly 4% in extended trading, after more than doubling this year.
The company has so far avoided major supply chain problems despite a global chip crisis, but supply chain costs are rising. It said on Wednesday that outstanding inventory purchases and long-term delivery commitments were $6.90 billion, up from $2.57 billion a year earlier. In the third quarter alone, the company made a $1.6 billion payment to secure supplies.
“When it came up, I grabbed that opportunity. Nvidia has a lot of money and we generate a lot of money,” Huang told Reuters. “I was more than excited to secure our future growth with cash.”
For the reported third quarter, revenue in Nvidia’s gaming unit increased 42% to $3.22 billion and data centers increased 55% to $2.94 billion.
Analysts had expected $3.13 billion and $2.75 billion for gaming and data centers, respectively, according to FactSet.
Overall, revenue increased about 50% to $7.10 billion for the three months ended Oct. 31, above the average estimate of $6.83 billion, according to IBES data from Refinitiv. Earnings were $1.17 per share on an adjusted basis, 6 cents more than expected, according to data from Refinitiv.
Reporting by Nivedita Balu in Bengaluru and Stephen Nellis in San Francisco; Editing by Sriraj Kalluvila, Leslie Adler and Richard Pullin