NVIDIA (NASDAQ: NVDA) posted solid upside to guidance for the October quarter and guided revenue flat Q/Q for January. PC Gaming is driving the 40% Y/Y growth in overall gaming revenue, following 51% Y/Y growth last quarter. Revenue of $1.3 bln was up 13% Q/Q, ahead of consensus of $1.18 bln driven by strength in GPU revenue. Gross margin was in line while opex came in slightly below our estimate. EPS of $0.44 blew away the consensus of $0.25.

GPU revenue grew 16% Q/Q, driven by GeForce GTX GPUs. GeForce is used for gaming and automotive systems but Gaming represented 58% of sales and grew 15% q/q. Gaming was the only segment growing faster than the overall top line.

NVDA is on track for >30% Y/Y growth in gaming for the second year in a row. This is attributed to the increase in the visual quality which requires graphics card upgrades. The growth is also being influenced by the growth of the Sports category.

Susquehana analyst, Chris Caso, noted that revenue guidance was ahead of consensus but late in the call, management mentioned that the January quarter will have an extra week. On a number of weeks comparison, guidance was really just in line with consensus. Despite the upside, due to concerns regarding the sustainability of gaming revenue he is keeping a Neutral rating on the stock while raising the price target to $25 from $21.

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Shares of NVIDIA closed at $27.71 yesterday.