Nvidia revenue doubles, Q3 guidance beats estimates as AI demand powers surge

Nvidia delivered another blowout quarter on Wednesday, with revenue more than doubling and the chipmaker forecasting third-quarter revenue above analyst projections, signaling unabated demand for its AI chips.

The company reported $96.2 billion in revenue for the fiscal second quarter ended July 26, beating the roughly $92 billion analysts had forecast. Adjusted profit came in at $2.22 per share versus estimates of $2.10. Net profit reached $59.7 billion, up 126% from a year earlier, though the figure was boosted by $7.8 billion in gains from Nvidia's portfolio of stakes in AI companies, according to the RTL report.

Nvidia's data center division alone generated $89 billion in the quarter, up 117% from a year ago and exceeding estimates of $85.08 billion.

Guidance and margin outlook

Nvidia forecast third-quarter revenue of $108 billion, plus or minus 2%, compared with analysts' average estimate of $104.19 billion, according to data compiled by LSEG. The company also said it expects revenue to grow by about 70% in fiscal 2028, which begins in January.

The company guided for adjusted gross margin of 74%, plus or minus 50 basis points, for the third quarter. Analysts were expecting 74.77%.

Chief Executive Jensen Huang said in prepared remarks that "AI has reached its inflection point" and that "the AI infrastructure buildout is at full steam," according to the BBC report.

Demand and big tech spending

Results from Nvidia, one of the world's most valuable firms with a market capitalization above $5 trillion, are considered a bellwether for the AI market. Its chips power most major data centers and advanced AI models globally.

The report comes weeks after companies including Microsoft and Meta, two of Nvidia's biggest customers, reinforced expectations that big tech would spend more than $730 billion on AI infrastructure this year, an unprecedented sum marking a big step up from last year's $400 billion outlay, according to multiple sources.

Nvidia announced an expansion of its partnership with Amazon Web Services. The pair will deploy an additional 2 million Nvidia GPUs across Amazon's global infrastructure in 2027 and 2028, finance chief Colette Kress said on an earnings call.

China and competition risks

Nvidia said it did not assume any data center chip sales from China in its outlook. The company's China business remains highly uncertain. In May, Washington cleared roughly 10 Chinese firms, including Alibaba, Tencent and ByteDance, to buy one of Nvidia's most powerful AI chips, the H200, though deliveries stalled for months. A US Commerce Department official said last month that shipments had begun but remained "very few," according to the NY Post report.

As AI moves from training to inference — the process of running queries on already-trained models — Nvidia's graphics processors face growing competition from central processors and custom chips. This has prompted major technology companies to invest in their own silicon.

Meta plans to begin manufacturing its in-house "Iris" AI chip in September, Reuters reported exclusively, part of a four-generation custom silicon project aimed at lowering computing costs. Alphabet has ordered over 3 million chips from Intel for 2028, the Information reported in June, adding that Nvidia is also evaluating Intel's manufacturing technology.

Circular financing debate

Nvidia's financial strength has reshaped its role in the sector, including providing funding to startups that rely on its chips. This has drawn scrutiny over so-called circular deals, where producers of AI goods act as financiers of other firms, potentially inflating demand.

CFO Colette Kress addressed the criticism on the earnings call. "We recognize the scale of this support, and we know some will call this circular financing. We see it differently," she said, according to RTL. "We're going through a major computing platform shift, the creation of one of the most important technologies in human history."

CEO Huang added: "The only regret that I have is that I didn't invest more and sooner," as reported by RTL.

Nvidia said its maximum gross exposure under all land, power and shell guarantee agreements totals $3.5 billion, a fraction of its quarterly revenue.

Market reaction

Nvidia shares reversed course in after-hours trading to jump more than 4%, with some reports citing a gain of 4.2% in heavy trading of more than 50 million shares. The initial after-hours session saw shares dip before the conference call, when executives elaborated on the 70% fiscal 2028 revenue growth forecast.

The US$5.16 trillion company has surpassed Wall Street's sales expectations over the past 15 quarters, but the magnitude of the beats has narrowed. Heading into the report, Nvidia had beaten analyst estimates for eight straight quarters.

"With Nvidia trading within the market's implied move, the options market got it right for now," said Seth Hickle, chief investment officer at Mindset Wealth Management, which owns Nvidia shares and put options. "The challenge for Nvidia isn't delivering good numbers anymore, it's delivering better than the great numbers investors already expect."

Despite Wednesday's jump, Nvidia shares have gained only about 12% year-to-date, trailing the Philadelphia SE Semiconductor index, which has risen more than 60% in the same period.