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(Reuters) -Chip designer and computing firm Nvidia (NASDAQ:NVDA) Corp beat expectations for third-quarter revenue on Wednesday, thanks to strong demand in its data center business on the back of rising cloud adoption.
Shares of the company rose 3% in extended trading. They have declined roughly 43% so far this year, underperforming the Philadelphia SE Semiconductor index amid an industry downturn and a broader sell-off in the technology sector.
“We are quickly adapting to the macro environment, correcting inventory levels and paving the way for new products,” said Chief Executive Jensen Huang in a press release.
Nvidia’s A100 data center chip and ramp-up in its latest “Hopper” series H100 chip will help the company maintain momentum in the data center space, analysts said.
Data center revenue in the third quarter rose 31% from a year ago, while gaming revenue was down 51% from a year ago.
Cloud companies are increasingly using Nvidia chips in their systems. Microsoft Corp (NASDAQ:MSFT) is working with the company to build a “massive” computer to handle intense artificial intelligence computing work in the cloud.
As of August, Nvidia’s market share of so-called accelerator chips inside the world’s six biggest clouds’ infrastructure grew to 85%, brokerage Jefferies said in a note in October.
While U.S. export restrictions have been a cause for worry, Nvidia’s production of a downgraded iteration of the A100, called A800, which complies with recent export control rules, has been a bright spot as it could help lessen the financial blow.
And Nvidia Chief Financial Officer Colette Kress said in a statement that while the export restrictions impacted third-quarter revenue, the decline was “largely offset by sales of alternative products into China.”
“The export restriction put on by the U.S. Department of Commerce was a blessing for Nvidia as Chinese customers started to hoard its Datacenter GPUs,” Summit Insights Group analyst Kinngai Chan said.
The company forecast current-quarter revenue at $6 billion, plus or minus 2%. Analysts on average expect revenue of $6.09 billion, according to Refinitiv data.
The company’s adjusted revenue for the quarter ended Oct. 30 was $5.93 billion. Analysts on average had expected revenue of $5.77 billion, according to Refinitiv data.
