Nvidia earnings: Can AI-powered businesses make up for gaming slowdown?

Nvidia Corp. is expected to report Tuesday that its first-quarter earnings nearly doubled, but sales may show signs of deceleration as its videogame graphics division suffers competition from rivals such as Advanced Micro Devices Inc. and Intel Corp.

While Nvidia NVDA, -1.05%  graced the Consumer Electronics Show keynote stage in January with fresh promises of innovation in the fast-growing industries of driverless cars, virtual reality and artificial intelligence, graphics processing units for videogames continue to be the company’s bread-and-butter and largest source of revenue. While its newer businesses grew fast and attracted a lot of attention as Nvidia became the hottest stock of 2016, the 44% gain for the videogame business is what provided most of the revenue growth for the company last year.

Read: Nvidia pushes for artificial intelligence in more than just self-driving cars

A recent slowdown and fears of tough year-over-year comparisons for the chips that power videogame graphics, however, have analysts warning that Nvidia’s first-quarter and current-quarter outlooks may fall short of expectations.

“It appears that investors are fixated on the Gaming side of the business (most lean negative) and think it will be difficult to see sequential revenue growth from April to July,” RBC Capital Markets analyst Mitch Steves said.

Here’s what to expect:

Earnings: Sell-side analysts surveyed by FactSet expect Nvidia to report GAAP earnings per share of 66 cents, compared with 33 cents in the year-earlier period. Adjusted for one-time items that occurred during the quarter, Nvidia analysts are calling for non-GAAP earnings of 81 cents, versus 46 cents.

Estimize, a software platform that pools together estimates from hedge fund executives, brokerages and buy-side analysts to predict earnings, expects Nvidia to report non-GAAP earnings of 75 cents a share.

See also: Mobileye deal gives Intel the lead in self-driving car race

Nvidia has topped both the FactSet and Estimize consensus estimates by a wide margin in recent quarters. It has surpassed earnings expectations for six-straight quarters, beating the FactSet consensus estimate by nearly 18% last quarter and 48% in the in the quarter before that.

Revenue: Nvidia is expected to report revenue of $1.9 billion, compared with $1.3 billion in the year-earlier period, according to the FactSet consensus estimate. Estimize is also forecasting Nvidia sales of $1.9 billion. Nvidia has surpassed both expectations in each of the past seven quarters.

Stock reaction: Nvidia was the best-performing stock in the S&P 500 last year, though its growth has decelerated this calendar year. While shares of Nvidia remain up 192% from 12 months ago, vastly outperforming the S&P 500 index SPX, +0.00% , up 16.5%, they’ve underperformed more recently. Shares of Nvidia have declined by 13% in the past three months, while the index is up 4.5%.

Also Read: Beastly Nvidia earnings beaten by burden of high expectations

The average rating on the stock is the equivalent to buy, while the average price target is $114.65, implying further upside. Shares of Nvidia traded around $103.29 on Tuesday.

What to watch for: Intel INTC, -0.76%  and AMD AMD, -1.47%  have both made inroads with their professional graphics chips, which Pacific Crest Securities analyst Michael McConnell said is causing Nvidia to lose share in a market it has long dominated.

McConnell is one of the most bearish analysts covering Nvidia stock, with a rating the equivalent to sell and a 12-month price target of $90. He downgraded the stock last month. Instinet analyst Romit Shah and BMO Capital analyst Ambrish Srivastava both also downgraded Nvidia last quarter.

Other analysts—even more bullish ones such as SIG Susquehanna Financial Group analyst Christopher Rolland, who has a $110 target on the stock—have expressed similar sentiment about gaming. The difference between the various points of views is whether or not they think Nvidia can offset those declines in the near-term with faster-growing parts of its business, such as data center chips.

See also: AMD’s stock plunges to biggest loss in more than 12 years

Nvidia’s gaming revenue soared 66% to $1.3 billion last quarter, while data-center sales tripled to $296 million. RBC’s Mitch Steves is among the more bullish analysts on Nvidia’s stock with an outperform rating and 12-month price target of $130, and believes muted expectations for gaming may be offset by ongoing strength in the company’s data center business.

McConnell, on-the-other-hand, said he’s concerned about signs of desktop GPU market saturation, lower margins from Nintendo Switch revenue and a “possible sales pause in the company’s datacenter business this summer.”

Rolland cited widespread adoption of Nvidia’s ADAS platform for driverless cars and demand from original equipment manufacturers for virtual reality systems as positives.