Nvidia Hits Record $81.6B Revenue — So Why Is the Stock Down?
Nvidia's Earnings Beat Was Big. The Real Story Is Even Bigger
$NVIDIA (NVDA.US)$ delivered another record quarter, but the first market reaction was not a victory lap. The stock fell 1.6% in extended trading even after the company beat revenue expectations, guided Q2 above consensus, raised its quarterly dividend to $0.25 per share, and announced an additional $80 billion buyback authorization. Let us take a closer look.
FY27Q1 Key Financial Highlights
– Revenue of $81.6 billion, up 85% YoY, up 20% QoQ, above Street consensus of $78.7 billion; prior guidance was $78.0 billion.
– GAAP gross margin of 74.9%, up 14.4 ppts YoY, down 0.1 ppt QoQ; prior guidance was 74.9%. Non-GAAP gross margin of 75.0%, up 14.2 ppts YoY, down 0.1 ppt QoQ; prior guidance was 75.0%.
– GAAP net income of $58.3 billion, up 211% YoY, up 36% QoQ, above Street consensus of $43.1 billion. Non-GAAP net income of $45.5 billion, up 139% YoY, up 17% QoQ, above Street consensus of $43.1 billion.
FY27Q1 Revenue Breakdown by Platform
– Data Center remained the core engine. Under the previous sub-market view, Data Center compute revenue was $60.4 billion, up 77% year over year and 18% sequentially. Data Center networking revenue was $14.8 billion, up 199% year over year and 35% sequentially.
– The new reporting structure is strategically important. Nvidia will now report two market platforms, Data Center and Edge Computing. Within Data Center, it will report Hyperscale and ACIE, which includes AI Clouds, Industrial and Enterprise. On the call, management said Hyperscale revenue was about $38 billion, roughly 50% of Data Center revenue and up 12% sequentially, while ACIE revenue was $37 billion and up 31% sequentially. AI cloud revenue more than tripled year over year.
– Edge Computing generated $6.4 billion, up 10% sequentially and 29% year over year. Nvidia said robust Blackwell workstation demand supported growth, while consumer demand declined modestly due to higher memory and system prices. Management also said physical AI exceeded $9 billion in revenue over the last 12 months.
Three Things to Watch
Vera CPU adds a new $20 billion story
The biggest new call highlight was Vera CPU. Management said Vera opens a new $200 billion TAM and that Nvidia has visibility to nearly $20 billion of total CPU revenue this year.
Jensen Huang later clarified that the $20 billion figure refers to standalone Vera CPU revenue, not Vera bundled inside Vera Rubin systems.
The logic is clear: agentic AI needs CPUs for orchestration, memory management, tool use, browsers, compilers, storage, security and confidential computing, while GPUs handle the thinking and inference. If Nvidia can attach CPUs to the AI factory stack, it adds a new revenue layer beyond GPUs.
Networking becomes Nvidia’s second engine
Networking is now too large to treat as a side business. Quarterly Data Center networking revenue reached $14.8 billion, nearly tripling year over year and rising 35% sequentially. Annualized, that is close to a $60 billion revenue run rate.
On the call, management said Spectrum-X, its AI-focused Ethernet platform, is now larger than all Ethernet network peers combined, while InfiniBand grew more than 4x year over year.
The strategic point is simple: larger AI factories need more NVLink, Ethernet, InfiniBand, DPUs, switches and optics. Nvidia is no longer only selling the engine. It is selling more of the AI data center nervous system.
Rubin keeps the $1 trillion cycle alive
Rubin is the bridge from today's Blackwell cycle into the next AI factory cycle. Management said Vera Rubin production shipments remain on track to begin in the second half of this year, starting in Q3, with the ramp continuing into Q4 and a very large Q1 next year.
Nvidia also reiterated confidence in the $1 trillion Blackwell and Rubin revenue opportunity from 2025 through calendar 2027. The risk is not demand. Management said it already has demand planned, purchase orders, and almost all major customers ready. The bottleneck is execution across complex systems, memory, advanced packaging, networking, power, cooling and data center deployment.
FY27Q2 Guidance
– Q2 revenue expected at $91.0 billion (excluding China data center), up 95% YoY, up 11% QoQ.
– GAAP gross margin of 74.9%, up 3.1 ppts YoY, flat QoQ. Non-GAAP gross margin of 75.0%, up 2.5 ppts YoY, flat QoQ.
– Non-GAAP net income of $49.2 billion, up 91% YoY, up 8% QoQ.
Summary
Nvidia's Q1 was fundamentally strong, with a clear revenue beat, a stronger-than-expected Q2 guide, mid-70s gross margins and record Data Center scale. The more important message is that Nvidia is widening its AI platform from GPUs into CPUs, networking, storage, security, optics and full AI factory systems.
If Vera CPU can approach $20 billion this year and networking continues compounding from a nearly $60 billion annualized run rate, the bull case shifts from "Nvidia sells the best GPU" to "Nvidia owns the AI factory stack."
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