NVDA Q2 Earnings Quick Review: Strong Beat, Nvidia Sees 70% FY28 Growth

Chancy

$NVIDIA (NVDA.US)$ reported FY2027 second-quarter results, with revenue, earnings, and Data Center sales all beating market expectations. Q3 revenue guidance also came in above Wall Street consensus.

Nvidia shares initially fell about 2% after the report, but quickly reversed higher during the earnings call, rising more than 4% in after-hours trading as management provided a stronger long-term growth outlook.

Key Financial Results

– Revenue: $96.22B, vs. $92.29B expected, up 106% YoY

– Non-GAAP EPS: $2.22, vs. $2.09 expected

– Data Center revenue: $89.0B, vs. $85.83B expected, up 117% YoY

– Edge Computing revenue: $7.2B, vs. $6.61B expected, up 27% YoY

– Gross margin: 75.0%, in line with expectations

Data Center Stays Strong, FY28 Growth Outlook Stands Out

Data Center revenue reached $89.0B, up 117% YoY and 18% QoQ, remaining Nvidia's primary growth engine.

During the earnings call, CFO Colette Kress said Nvidia expects FY2028 total revenue to grow roughly 70% YoY, well above the market's previous expectation of around 45%. The outlook comes even as supply constraints continue to limit growth.

Customer demand also remains strong. Hyperscaler revenue reached $49B, up 13% QoQ, while AWS plans to deploy an additional 2 million Nvidia GPUs starting this quarter.

These figures further ease concerns that AI CapEx may be approaching an early peak.

Vera Rubin Starts Shipping

Progress on next-generation Vera Rubin was another major positive.

Nvidia said Vera Rubin began shipping this month and is expected to see the fastest product ramp in the company's history. Nvidia estimates that every 1 GW of Vera Rubin compute deployed represents roughly $40B in revenue opportunity.

Blackwell demand remains strong, while Rubin is already entering its next ramp cycle, reducing concerns about a potential growth gap during the product transition.

Margins Remain High as Supply Stays Tight

Gross margin came in at 75.0%, while Nvidia expects Q3 gross margin of 74.0% ± 50 bps. Although that represents a roughly one-percentage-point sequential decline, it remains within the 73%-75% range seen over recent quarters.

Meanwhile, Nvidia's supply and capacity commitments surged from $119B last quarter to $279B, largely to secure memory and manufacturing capacity. The CFO said supply is expected to remain a bottleneck at least through FY2028.

For now, the modest margin decline appears manageable, though memory costs and tight supply remain key variables to watch.

Q3 Guidance Beats Expectations

Nvidia expects Q3 revenue of $108B ± 2%, above Wall Street consensus of roughly $104.2B.

While the guidance falls within the $107B-$110B range anticipated by some of the more bullish analysts ahead of earnings, it still points to robust AI infrastructure demand.

Notably, Nvidia's Q3 outlook assumes no Data Center compute revenue from China.

Bottom Line

Overall, the earnings report and conference call further strengthened the bullish case for Nvidia. Q2 revenue and EPS beat expectations, Data Center revenue surged 117%, Rubin has started shipping, and Q3 guidance came in above consensus.

The biggest incremental takeaway from the call was the longer-term growth outlook: management expects FY2028 revenue to grow roughly 70%, well above the market's previous expectation of around 45%, even as supply remains constrained. This was also a key factor behind Nvidia shares reversing from a roughly 2% post-earnings decline to a gain of more than 4% during the call.

Valuation remains elevated, but the stronger long-term growth outlook could support further earnings estimate revisions. UBS has remained bullish on earnings growth driven by Blackwell and Rubin, while BofA maintains a Buy rating and $350 price target.

Fundamentals remain bullish. Beyond the Q2 beat, the more important signal from the call is that Nvidia's high-growth trajectory could extend into FY2028, with Rubin already beginning to take over as the next major product cycle.

77K Views