Nvidia reported earnings and revenues that beat analysts’ expectations as demand for graphics and artificial intelligence chips picked up in the second fiscal quarter.

Nvidia reported revenues of $2.58 billion, down from $3.12 billion a year ago, for the second fiscal quarter, which ended July 31. Non-GAAP earnings per share were $1.24, compared with $1.94 a share a year ago. In after-hours trading, Nvidia’s stock was up 5% to $159 a share.

Analysts expected Nvidia to post revenues of $2.55 billion in the second quarter. The company was expected to report non-GAAP earnings per share of $1.15, down 40% from a year ago.

“We achieved sequential growth across our platforms,” said Jensen Huang, Nvidia CEO, in a statement. “Real-time ray tracing is the most important graphics innovation in a decade. Adoption has reached a tipping point, with Nvidia RTX leading the way. Nvidia accelerated computing momentum continues to build as the industry races to enable the next frontier in artificial intelligence, conversational AI, as well as autonomous systems like self-driving vehicles and delivery robots.”

Image Credit: Nvidia

For the past few quarters, Nvidia has had some lumpy results. Last quarter, Huang said that a slowdown in datacenter chip sales hurt revenues. Before that, it was slow adoption of its RTX architecture for graphics processing units (GPUs). RTX enables real-time ray tracing, but it has taken some time for game developers to implement it and for gamers to appreciate it. Nvidia also had some bumps related to a positive benefit from the growth of GPU use for cryptocurrency mining and then a negative impact when that bubble collapsed.

Nvidia said it expects its acquisition of Mellanox Technologies to close later this year, and the regulatory process is progressing as expected. For the third fiscal quarter, Nvidia expects $2.9 billion in revenues, plus or minus 2%, and non-GAAP gross profit margins of 62.5%.

During the quarter, Nvidia beefed up its GPU lineup with GeForce RTX 2060 Super, GeForce RTX 2070 Super, and GeForce RTX 2080 Super products. New support for real-time ray tracing is coming in with support announced for Call of Duty: Modern Warfare, Cyberpunk 2077, Watch Dogs: Legion, and Wolfenstein: Youngblood.

Meanwhile, laptop makers announced 27 new RTX Studio laptops during the quarter.

Image Credit: Nvidia

The results were weaker than the second fiscal quarter a year ago, but they bounced back from a weak first fiscal quarter.

GPU business revenue was $2.10 billion, down 21% from a year earlier and up 4% sequentially. Tegra processor business revenue — which includes automotive, SOC modules for gaming platforms, and embedded edge AI platforms — was $475 million, up 2% from a year ago and up 140% sequentially.

From a market-platforms perspective, Gaming revenue was $1.31 billion, down 27% from a year ago and up 24% sequentially. The year-on-year decrease reflects a decline in shipments of gaming desktop GPUs and SOC modules for gaming platforms, partially offset by growth in gaming notebook GPUs.

The sequential increase reflects growth from SOC modules for gaming platforms, gaming notebook GPUs, and GeForce RTX Super gaming GPUs.

Professional visualization revenue was $291 million, up 4% from a year earlier and up 9% sequentially. The year-on-year and sequential growth reflects strength across mobile workstation products.

Data Center revenue was $655 million, down 14% from a year ago and up 3% sequentially. The year-on-year decline reflects lower hyperscale revenue. The sequential increase was due to enterprise revenue growth driven by expanding AI workloads.

Automotive revenue was a record $209 million, up 30% from a year earlier and up 26% sequentially. The year-on-year and sequential growth was primarily driven by a development services agreement in the second quarter of fiscal 2020. The growth in revenue also reflected AI cockpit solutions and other autonomous vehicle development agreements.

OEM and other revenue was $111 million, down 4% from a year ago and up 12% sequentially. The sequential increase was primarily due to growth in shipments of embedded edge AI products.