Nvidia Corp. reported better-than-expected second-quarter earnings and revenue and also delivered bullish guidance for the current quarter and next full year, sending its stock up more than 4% in after-hours trading.
Update: Shares were trading up 7% Thursday morning.
The company reported earnings before certain costs such as stock compensation of $2.22 per share, easily beating Wall Street’s forecast of $2.10 per share. Revenue for the period rose 106% from a year earlier, to $96.22 billion, above the $92.17 billion estimate. Net income for the quarter more than doubled, to $53.95 billion, up from $24.76 billion in the same period one year ago.
For the current quarter, it’s forecasting revenue of $108 billion, higher than the $104.2 billion analyst forecast.
Nvidia said the data center business accounted for the lion’s share of its revenue, generating sales of $89 billion in the quarter, up 117% from a year ago and surpassing the Street’s target of $86.33 billion. The data center unit now accounts for 92% of the company’s total sales.
Nonetheless, Nvidia is still trying to diversify that part of its business. Though hyperscalers, essentially the big public cloud infrastructure giants, still account for an outsized portion of its revenue, sales of AI chips to other customers are picking up steam. During the quarter, Nvidia’s AI clouds, industrial and enterprise or ACIE customers spent $40.3 billion on the company’s chips and data center infrastructure, up 138% on an annual basis. That compares with hyperscaler revenue of $48.7 billion.
The momentum from Nvidia’s ACIE customers likely explains why Nvidia is so confident in its ability to keep growing. In a conference call with analysts, financial chief Colette Kress said the company forecasts fiscal 2028 revenue growth of 70%, far ahead of the Street’s target of 44% growth. She said “customer forecasts point to our growth doubling next year,” adding that the guidance also reflects the “supply constraints” that Nvidia and every other chipmaker has to deal with.
Nvidia sits at the heart of the artificial intelligence boom and has grown tremendously over the last few years. Its chips are widely used to train and serve the world’s most powerful AI models, and increasingly, the company has been providing financial support to many of the companies developing them, helping them to fund the data center infrastructure they need.
It’s a model that has propelled Nvidia’s market capitalization to more than $5 trillion, making it the most valuable publicly traded company in the world. Almost four years after OpenAI Group PBC’s ChatGPT launched, Nvidia is still seeing massive growth, and it doesn’t believe it’s going to slow down anytime soon.
Despite today’s after-hours gain, it’s clear that many investors have cooled on Nvidia’s stock this year. At the market close today, it was up just 13% in the year to date, slightly outperforming the broader Nasdaq index. While the chipmaker’s business continues to grow, it’s also facing increased competition from rivals such as Advanced Micro Devices Inc. and the hyperscalers it serves, such as Google, which is increasingly pushing its own tensor processing units as an alternative to Nvidia’s silicon.
Some investors may be wary of a bubble in the AI industry, which could pop if Nvidia is unable to keep up with its current pace of growth. Increasingly, there have been concerns that Nvidia has only been able to do so because of its investments in other AI firms, providing them with the capital they need to keep spending on its chips.
These fears explain why the market has set such a high bar for Nvidia, said eMarketer analyst Jacob Bourne. “Even extraordinary growth can fail to satisfy investors as scrutiny of AI spending and its financing intensifies,” he explained. “Nvidia still faces a changing competitive landscape, with some of its largest customers developing their own chips while startups target parts of the AI compute market.”
Holger Mueller, an analyst with Constellation Research, said Nvidia still hasn’t shown any real signs of weakness. “It managed to more than double its sales despite already having revenue in the double-digit billions, and that is most likely an unprecedented feat,” the analyst said.
However, the analyst said the scale of Nvidia’s investments means that they’re beginning to show up on its balance sheet despite its enormous revenue growth. “Its net cash used for investing activities is now in the negative, but it also cut back on net cash used in financing,” he said. “So some investors may be questioning how long Nvidia can continue to finance the ecosystem and continue driving growth in its own economy. That will be something to watch in future quarters.”
On the call, Chief Executive Jensen Huang (pictured) did his best to brush off these concerns, telling analysts that he wished he had been even more aggressive with his investments in OpenAI and its rival Anthropic PBC ahead of their initial public offerings, which are expected to launch later this year. “Investing in these companies are a once-in-a-generation opportunity,” Huang said. “The only regret that I have is that I didn’t invest more and sooner.”
Huang added that the AI industry has changed considerably over the past year. He said it has now “reached its inflection point,” noting that the number of companies that need to spin up large clusters of its graphics processing units has increased dramatically.
“This time last year, one lab alone was driving the buildout,” Huang said. “Today, we have a golden age of new AI labs and startups, multiple frontier labs scaling in parallel, a thriving open-model ecosystem and physical AI coming online — with strong momentum across the U.S. and around the world.”