Nvidia expects strong sales of its mobile chips heading into the holiday season

Nvidia, a producer of video cards and graphic processing units (GPUs), expects its graphics processor sales to remain strong throughout the holiday shopping season as it expands further into the mobile market, according to its quarterly earnings report released today.

The Santa Clara, Calif.-based company produces the Nvidia Tegra — a system on a chip much like Apple’s A4 processor in its iPhone and iPod Touch devices — for use in mobile devices like phones. The Tegra is a combination of Nvidia’s graphics processing technology and other ARM-based chips. It’s competing for marketshare in a somewhat crowded space, as Advanced Micro Devices and Intel also produce low-power system-on-a-chip products for use in mobile devices.

The Tegra will be included in a number of smartphones run on Google’s Android operating system, according to a report by Reuters. That should give Nvidia a nice boost to its primary market, which is mainly video processors for gamers. Nvidia recently announced a new lineup of video processors, the GTX 580 GPU, that once again broke the record for the fastest graphics processor.

Its most recent quarterly performance wasn’t quite as stellar as its outlook. Nvidia reported a 21 percent drop in profit, from $108 million in the third quarter a year ago to $85 million in the third quarter this year. Nvidia’s revenue also fell 6.5 percent to $844 million in the third quarter this year, down from $903 in the same quarter a year earlier. Nvidia said it expects 3 to 5 percent growth in revenue for the upcoming quarter.

That’s likely a result of the recent slowing growth in chip sales. Chip sales grew 26.2 percent in September compared to the same month a year earlier but were only up 2.9 percent from the month before. Chip sales are usually an indicator of demand for the devices they power, such as computers, phones and other mobile devices. The chip sales likely indicate weakening demand for gadgets and computers heading into the holiday shopping season — which makes Nvidia’s outlook all the more surprising.

Its earnings reports today were in line with the expectations of a number of Wall Street analysts, so there wasn’t much of a downside for investors. They were instead satisfied with the upbeat outlook from the GPU manufacturer. Shares of Nvidia were up 4.5 percent to $13.18 in extended trading today.