Nvidia Corp. reported strong fiscal second-quarter results today thanks to record-setting revenue from its data center business and another strong showing in gaming.

The company, which makes graphics processing units for computers, cloud servers and games consoles, reported a profit before certain costs such as stock compensation of $2.18 per share on revenue of $3.87 billion. That was better than expected, with Wall Street having forecast earnings of $1.97 per share on revenue of $3.65 billion.

For the first time, Nvidia’s data center revenue came in ahead of its gaming revenue, at $1.75 billion, up 167%. The business, which involves supplying chips to cloud computing providers such as Amazon Web Services Inc. and Google LLC, was helped by a big contribution from Mellanox, a company it acquired for $6.9 billion that makes ethernet switches and other networking gear. Nvidia closed on that acquisition in the quarter, and it contributed to 14% of its overall revenue.

“This was a historic quarter for Nvidia, where its data center revenue for the first time eclipsed its gaming revenue,” said Constellation Research Inc. analyst Holger Mueller. “Certainly it was largely aided by the Mellanox acquisition, but Nvidia has managed to grow the business organically as well, as the revenue increase is higher than when just adding the 2019 Mellanox revenue runway.”

Indeed, Nvidia has been steadily building out its footprint and reputation as a data center player for well over half a decade, demonstrating an active desire and effort to move beyond its traditional gaming and visualization markets, analyst Charles King of Pund-IT Inc. told SiliconANGLE.

“Nvidia’s purchase of Mellanox was clearly meant to accelerate those efforts and, as can be seen from the earnings announced today, it clearly has,” King said.

Nvidia’s gaming business produced $1.65 billion, up 26% from a year ago as more people spend time playing games thanks to the coronavirus pandemic.

During the quarter, Nvidia said it had begun full production of its new A100 graphics card, its most powerful yet. That chip is currently being sold to cloud providers and will be made available to games console makers soon. Nvidia is hosting a virtual event for its GeForce gaming brand on Sept. 1, when it’s expected to announce a new gaming card based on that chip.

Microsoft Corp. and Sony Corp. are both planning to launch new versions of their games consoles powered by Nvidia hardware in the coming months.

“We’re expecting a really strong second half for gaming,” Nvidia Chief Executive Jensen Huang (pictured) said on a conference call. “I think this may very well be one of the best gaming seasons ever.”

Analyst Patrick Moorhead of Moor Insights & Strategy said he expects gaming revenue to be higher than data center revenue next quarter because of the seasonality of that industry.

“The company is executing well and is very competitive in growing markets,” Moorhead said. “It’s really hitting on all cylinders.”

Nvidia’s smallest two businesses both declined in the quarter from the impact of the pandemic. Professional Visualization revenue came to $203 million, down 30% from a year before, while Automotive revenue was $111 million, down 47%. Nvidia said this was due to corporate customers putting off purchases of workstations and vehicle production being lower than usual.

For the third quarter, Nvidia said it’s eyeing $4.40 billion in revenue, well ahead of Wall Street’s projected $3.97 billion in revenue.

“Given how well this quarter went and the likelihood that the pandemic will continue into 2021, Nvidia’s bullish forecast seems reasonable,” King said.

Huang also talked about Nvidia’s relationship with Arm Holdings Ltd., the chip-architecture design firm that it’s reported to be interested in acquiring.

“We’ve been a long-term partner of Arm, and we use Arm in a whole bunch of applications, and whether it’s autonomous driving or robotics applications, the Nintendo Switch console business that we’re in, and then recently, we brought Cuda to Arm, and to bring accelerated computing to Arm, and so we work with the Arm team very closely,” he said. “They’re really great guys, and one of the special [things] about the Arm architecture that you know very well is that it’s incredibly energy-efficient, and because it’s energy-efficient, it has the headroom to scale into very high performance levels over time.”

Nvidia’s stock was down 2% in after-hours trading.

Photo: Robert Hof/SiliconANGLE