NVIDIA has released its earnings report for Q4 FY19 with $2.21 billion revenue in total, beating expectations and raising their share price in the after-hours trading. At the same time, NVIDIA posted that their Gaming revenue has seen a drop of 45% from the previous year which means their GeForce sales has taken a major hit.

NVIDIA Reports 45% Revenue Drop in Gaming Sales, Cites Lower Than Expected Sales of GeForce RTX 2080 and GeForce RTX 2070 Graphics Cards

In the details shared by NVIDIA, the market to market revenue chart shows that Gaming was able to make $954 million in Q4 FY19 compared to $1764 million in the previous quarter. Not only does that make it a 46% decline from the previous quarter, but looking at Year-To-Year results, NVIDIA also saw a 45% decline.

2018 was a record year but it was a disappointing finish. This quarter, we expect to put the channel inventory issue behind us and get back on track. As the pioneer of accelerated computing, our position is unique and strong. And the opportunities ahead in graphic, high performance computing, AI and autonomous machines remain enormous. We are as enthusiastic about these growth opportunities as ever.

- Jensen Huang, CEO of NVIDIA

Other markets such as Datacenter, Automotive, and Professional Visualization were up from the previous year as can be seen in the chart above. NVIDIA stated in the previous reports that OEM and IP sales are attributed to their crypto business and here, we can see a 22% decline from the previous quarter and 36% decline from the previous year with a now standing revenue of $116 million. Do note that OEM and IP are direct sales to crypto businesses and there's no telling how many GeForce tier (Gaming) cards amounted to the Gaming revenue as users who buy them can end up using the cards for crypto mining.

Deteriorating macro economic conditions, particularly in China, impacted consumer demand for our GPUs; and third, sales of certain high-end GPUs using our new Turing architecture, including the GeForce RTX 2080 and 2070 were lower than we expected for the launch of a new architecture.

On a full year basis, we expect our gaming business to be down slightly given the tough first half compares with growth in Turing and notebook gaming.

When it comes to crypto, it is partially to blame but still a significant factor which led to decline in NVIDIA's revenue. NVIDIA had delayed their GeForce RTX Turing cards to get rid of excess GeForce GTX 10 series inventory which they had produced by overestimating the crypto market. As soon as cryptocurrency fell across the globe, so did the sales of crypto targeted graphics cards and that hit NVIDIA as they had overproduced Pascal chips. Even at the moment, NVIDIA still isn't clear of their GeForce 1060 (GP106 GPU) inventory.

There are also other factors and much of that has to do with the GeForce RTX cards and their main highlight, the RTX feature. First of all, we should look at the prices of GeForce RTX 20 series cards which are highest in their graphics segment. The other thing is the performance increase per gen which is also lower than what previous generations had to offer. If we look at Pascal, the GeForce GTX 1070 and GeForce GTX 1080 gave users a lot of reason to upgrade and weren't priced out of range of the mainstream audience. The GTX 1080 Ti was the king of the hill for a full 2 years and had a price of just $699 US.

The current situation is completely different. NVIDIA is offering the GTX 1080 successor for the price of a GTX 1080 Ti which offers around the same performance of the previous flagship at $699 US. Same can be said for the RTX 2070 which exceeds the performance of a GTX 1080 but costs the same at $499 US. The GeForce RTX 2060 costs $349 US and that's about the same as the GTX 1070 but here, it does offer somewhat better performance.

The GeForce RTX 2080 TI remains the king of the hill just like every other NVIDIA flagship part but costs twice as much as the GTX 1080 Ti if you are going for a custom flavored card. Overall, the price margin has gone really out of place with the GeForce RTX lineup and following is a generational breakdown of graphics segments from NVIDIA over the last couple of years.

NVIDIA GeForce GPU Segment/Tier Prices