No recommendation on trades.
1. It reported a 75.7% gross margin, vs. 75.8% consensus;---disappointed
2. it expects adjusted gross margin of 75%, plus or minus 50 basis points, in the third quarter. That is 74.5%-75.5%. Yet, the consensus is 75.5%. --disappointed.
3. The whole year is roughly mid 70%. Q1 was 78%. therefore, there could be another GM reduction in fisical Q4.
4. The GM reduction in Q4 could be bigger than Q2 and Q3, because Q1's GM was 78%.
5. We see a trajectory of persistent GM reduction from fisical Q1-Q4. And the downward slope is becomeing steeper.
Of course, mid 75% GM still a great margin, and NVDA is still an exellent company.
The key is what mulpitle investors are willing to pay for a great business with declining GM.
what does GM reduction means. it means for one dollar of marginal sales, the GM is lower. Or in layman's words, the more you sale, the lower the GM.
If this is just a short term issue, it is not a problem. If this is a long term issue, it is a problem from economics perspective.
Therefore, investors have to judge.
