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Nvidia cites limited visibility into crypto mining’s impact on Q2 results

Nvidia’s CFO said falling crypto prices and changes in consensus mechanisms have in the past impacted demand for its products and the company’s ability to estimate it.

Graphics card giant Nvidia CFO Colette Kress says the company has been unable to estimate reduced crypto mining demand impacted its Q2 results, which fell short of analyst expectations on Wednesday.

The chip giant released its financial results for the three months ended July 31, which revealed a 19% quarter-on-quarter drop in revenue to $6.5 billion, while net income fell 59% to $656 million.

Revenue for its gaming division, which includes sales of its high-end GPUs, fell 44% in revenue from the previous quarter to $2.04 billion, which Nvidia attributed to “challenging market conditions.”

Kress, who also serves as executive vice president of the company, said Nvidia has limited visibility on how the crypto market affects the demand for their gaming products:

“Our GPUs are capable of cryptocurrency mining, though we have limited visibility into how much this impacts our overall GPU demand.”

“We are unable to accurately quantify the extent to which reduced cryptocurrency mining contributed to the decline in Gaming demand,” she added.

While the chip giant’s graphic processing units (GPUs) were designed for gaming purposes, high demand for crypto mining activities over the past few years has contributed to a 320% increase in the company’s share price over the last five years.

Kress said, however, that falling crypto prices and changes in consensus mechanism have in the past impacted demand for its products and the ability to estimate it:

“Volatility in the cryptocurrency market – such as declines in cryptocurrency prices or changes in method of verifying transactions, including proof of work or proof of stake — has in the past impacted, and can in the future impact, demand for our products and our ability to accurately estimate it.”

With the Ethereum Merge scheduled for Sept. 15, the network’s consensus change to proof-of-stake could further drive down the demand for crypto mining hardware. This could spell trouble for cryptocurrency mining products such as Nvidia’s CMP170 HX, which currently costs around $4,695.

That being said, cryptocurrencies such as Bitcoin (BTC), Litecoin (LTC), Monero (XMR) and Dogecoin (DOGE) are among the networks still operating on proof-of-work consensus mechanisms with no observable plans to transition in the future.

Nvidia’s share price has also dropped 5.89% over the last five days on the Nasdaq.

‘This is on me’ — Robinhood CEO to lay off 23% of staff after Q2 loss

The online retail broker blamed the economy for a decline in user numbers and net revenue that fell 44% year-on-year, although revenue from crypto rose moderately this quarter.

Online brokerage firm Robinhood will lay off nearly a quarter of its employees, citing a continued deterioration of the macro environment and a broad crypto market crash.

The bad news came in a Tuesday blog post from co-founder and CEO Vlad Tenev, on the same day the firm released tepid Q2 financial results and the New York State Department of Financial Services announced a $30 million fine for the company’s crypto branch due to alleged Anti-Money Laundering, cybersecurity and consumer protection violations.

Tenev wrote that the layoffs would impact all functions in the company, particularly operations, marketing, and program management, with around 23% of the staff let go. The Financial Times estimated the number of employees impacted to be around 780.

“Departing Robinhoodies will be offered the opportunity to remain employed with Robinhood through October 1, 2022 and receive their regular pay and benefits. They will also be offered job search assistance (including an opt in Robinhood Alumni Talent Directory).”

— zerohedge (@zerohedge) August 2, 2022

Robinhood laid off 9% of its staff earlier this year, but Tenev said the cuts “did not go far enough.” He pointed to economic conditions and the collapse of the crypto market as factors in the move, stating:

“This has further reduced customer trading activity and assets under custody.”

In addition, the company had wrongly assumed the heightened engagement seen during the beginning of the COVID-19 pandemic would continue. Tenev wrote:

“As CEO, I approved and took responsibility for our ambitious staffing trajectory — this is on me.”

The company issued its quarterly financial results a day earlier than scheduled. Results were disheartening, with $318 million in net revenue, down 44% year-on-year, although up 6% over the last quarter. Net loss was $295 million, narrowed from a net loss of $502 million in Q2 2021.

Monthly active users were down 1.9 million from last quarter to 14.0 million in June, and assets under custody dropped 31% to $64.2 billion in that time.

Revenue from cryptocurrency rose 7% quarter-on-quarter to $58 million, however.

Robinhood enjoyed a significant spike in share price in May after FTX founder and CEO Sam Bankman-Fried paid $650 million for a 7.6% stake in the company. Share prices fell more than 4% Tuesday in after-hours trading, according to the Financial Time.