AI demand is accelerating! NVIDIA Corporation (NVDA.US) reported a Q2 revenue that doubled year-over-year, and its revenue growth guidance of 70% for the next fiscal year far exceeds expectations. The company has reached an agreement with Amazon.com, Inc. for 2 million GPUs.

Global AI chip leader NVIDIA Corporation (NVDA.US) released a quarterly report after the market closed on Wednesday that is historic in its magnituderevenue of $96.22 billion, a year-over-year increase of 106%; net profit of $59.69 billion; and adjusted earnings per share of $2.22, with all three key metrics significantly surpassing Wall Street expectations. Even more exhilarating for the market was the companys first-ever long-term guidance for fiscal year 2028, projecting revenue growth of approximately 70%, well above analysts' prior expectation of around 45%. However, this "textbook-level" financial report saw a volatile reaction, initially dropping nearly 3% in after-hours trading before rapidly reversing to gain over 4% following the conference call. Given that the stock had dropped the day after five out of the last six earnings reports, the market had already taken "surpassing expectations" as a default scriptonly guidance strong enough to warrant an upward revision of future earnings forecasts could reignite valuation expansion. Data Overview: The "Momentum of Surpassing Expectations" at $96 Billion For the second fiscal quarter ending July 26, 2026, NVIDIA Corporation's core metrics overwhelmingly beat market expectations: Revenue exceeded the company's previous guidance of $91 billion by approximately 5.7%, marking the largest deviation from expectations in nearly two years. Free cash flow reached $21.3 billion, and adjusted net profit soared by 118% year-over-year. Third Quarter Guidance: The "Whisper Expectation" of $108 Billion Realized For the third quarter, NVIDIA Corporation anticipates revenue of $108 billion (2%), surpassing market expectations of $104.2 billion. This guidance also assumes no contributions from data center revenue in China. Procurement commitments surged from $119 billion in the previous quarter to $279 billion, primarily related to memory purchasesboth a manifestation of demand and a source of cost pressure. The CFO specifically noted that shipments of Hopper data center products to China accounted for less than 1% of data center revenue for the current quarter. Analysts expect NVIDIA Corporation's margins to come under pressure due to increased memory prices as production capacity ramps up for the Rubin chip and across the silicon supply chain, making the company's profit margins a focus of keen interest. Regarding gross margin, NVIDIA Corporation projects an adjusted gross margin of 74% (50 basis points) for the third quarter, down from 75% this quarter. The CFO warned that due to rising memory costs, gross margins are expected to bottom out in the fourth fiscal quarter (ending in January next year), falling to between 71% and 72%, with stability projected between 72% and 73% in fiscal year 2028. Data Centers: The "Absolute Engine" at $89 Billion The data center business remains the core pillar of NVIDIA Corporation's growth, with quarterly revenue reaching $89 billion, a year-over-year increase of 117%, accounting for 92.7% of total revenue. In terms of customer segmentation, NVIDIA Corporation adjusted its data center disclosure last quarter, categorizing customers into two segments: Hyperscale and ACIE (AI Cloud, Industrial, and Enterprise customers). For this quarter: Hyperscale Customers: Revenue of $48.71 billion, a year-over-year increase of 102%, and a sequential increase of 13%; ACIE Customers: Revenue of $40.31 billion, a year-over-year increase of 138%, and a sequential increase of 25%. The growth rate of the ACIE business already surpasses that of hyperscale customers, indicating that demand for AI computing power is spreading from major cloud providers to sovereign AI, regional cloud service providers, and a wider range of enterprise customers. NVIDIA Corporation has consistently aimed to broaden its customer base, signaling that its sales are no longer as reliant on a small number of tech giants as they once were. CEO Jensen Huang stated in the earnings release: "A year ago, we built on a single laboratory; today, we are in a golden age of new AI laboratories and startups, with multiple cutting-edge labs expanding in parallel, a flourishing open model ecosystem, and physical AI beginning to come online." Fiscal Year 2028 Guidance: 70% Growth Defying Expectations with Supply as a Bottleneck NVIDIA Corporation provided its first revenue growth outlook for fiscal year 2028approximately 70%. This figure significantly exceeds the market's previous estimate of around 45%. Huang stated in the conference call that they had never before provided performance guidance a year in advance. CFO Kress made it clear that supply will remain a bottleneck constraining growth at least until fiscal year 2028. Huang further indicated that without supply constraints, the companys performance outlook for fiscal year 2028 would be "much higher." Surge in Spending by Large Tech Companies in AI NVIDIA Corporation is one of the highest-valued companies globally, with its performance viewed as a barometer for the AI market as its chips power most of the worlds major data centers and advanced AI models. Weeks before this report was released, several companies, including Microsoft Corporation and Metatwo major clients of NVIDIA Corporationreaffirmed expectations that large tech firms would invest over $730 billion in AI infrastructure this year, a significant increase from last years unprecedented spending of $400 billion. NVIDIA Corporations optimistic sales outlook for fiscal year 2028 alleviated concerns that AI spending might lose momentum. As a leading supplier of AI acceleratorskey components for training and running AI modelsNVIDIA Corporations quarterly earnings serve as a bellwether for the entire industry. The company's CFO also stated that if NVIDIA Corporation could secure more supply, its growth rate would be even faster. Its incredible that even at our current scale, demand is accelerating, she said. Customer forecasts indicate our growth will double next year. Major Partnership with AWS: Additional Deployment of 2 Million GPUs The earnings report also announced that NVIDIA Corporation has expanded its partnership with Amazon.com, Inc. AWS. Kress revealed that both companies will deploy an additional 2 million NVIDIA Corporation GPUs in Amazon.com, Inc.s global infrastructure in 2027 and 2028. This partnership further solidifies NVIDIA Corporation's dominance among hyperscale cloud service providers. Huang pointed out that market demand is accelerating, and AWS's additional orders are the latest testament to this trend. Vera Rubin Fully Onboarded: A New Engine for 20% of Data Center Revenue In NVIDIA Corporations second-quarter earnings, Huang noted that market demand is accelerating. He also emphasized the launch of the company's latest chip series, Vera Rubin. AI infrastructure development is moving at full speed, he said. Vera Rubin is now fully in production, and it was designed specifically to support this moment. While Blackwell is still shipping in large volumes, NVIDIA Corporation's next-generation AI system, Vera Rubin, has fully entered mass production. CFO Colette Kress revealed in the conference call that Vera Rubin began shipping earlier this month. Each deployed gigawatt of Vera Rubin computing power corresponds to approximately $40 billion in revenue opportunities. Vera Rubin is expected to contribute around 20% of data center business revenue in the third quarter. Vera Rubin is no longer a single chip but an entire POD-level systemcomposed of Vera CPU, Rubin GPU, Groq 3 LPX, BlueField-4 storage, and Spectrum-6 networking. NVIDIA Corporation's supply chain spans over 350 factories and 30 countries, with system manufacturers such as Dell, HPE, Lenovo, and Supermicro already in mass production. Companies like CoreWeave, Google Cloud, Microsoft Azure, Oracle, and Nebius are also deploying related systems. Huang stated, Vera Rubin has fully entered mass production, created for this moment. Circular Financing Controversy: The "Gray Area" of Hundreds of Billions Beyond the impressive figures, the market is most concerned about NVIDIA Corporation's increasingly complex circular financing arrangements. On one hand, NVIDIA Corporation is part of a $500 billion AI infrastructure financing platformjoining forces with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs Group, Inc., and KKR to mobilize over $500 billion in third-party capital in the long term. On the other hand, the company could provide up to $105 billion in credit support for data center projects rented from OpenAI. Goldman Sachs Group, Inc. has also sounded the alarmconcerns about "circular financing" are mounting, and NVIDIA Corporation must provide detailed explanations during the conference call. The core controversy surrounding these arrangements lies in whether they are genuinely releasing real and financing-constrained computing power demand or if they are bringing some future demand forward through credit support from NVIDIA Corporation itself and its partnering financial institutions. NVIDIA Corporation's logic carries a dual consideration of being offensive (providing funding to disruptors to accelerate global AI deployment) and defensive (funding the non-hyperscale ecosystem to diversify its customer base). However, the critical question remainsif revenue data from AI inference cannot cover the high costs of computing power, these financing arrangements may shift from being boosters to sources of risk. To this end, this earnings report marks NVIDIA Corporation's first time listing debt as a separate risk factor, warning that increasing external financing commitments could have an "adverse impact" on financial condition and cash flow. As of July 26, the company had $33.5 billion in outstanding senior notes, with a commercial paper program of $25 billion. The company plans to repay $15 billion in debt over the next one to five years, up from just $2.75 billion last quarter. NVIDIA Corporation warned: "Maintaining our debt, contractual limitations, and additional debt issuance may force us to use a significant portion of our operating cash flow to repay debt and principal." The company stated that while such financing transactions could accelerate AI adoption and create greater product demand, critics worry that circular financing could foster artificially inflated demand. Shareholder Returns: $26 Billion Returned, $99 Billion Available In terms of capital returns, NVIDIA Corporation returned approximately $26 billion to shareholders this quarter through stock buybacks and dividends. As of the end of the quarter, the remaining stock buyback authorization was approximately $99 billion. The cash dividend for the next quarter is set at $0.25 per share. The company also issued $25 billion in senior unsecured notes for general corporate purposes this quarter. Intensifying Competitive Threats However, an increasing portion of planned spending by tech companies is shifting toward autonomous chip development, aimed at reducing reliance on NVIDIA Corporations high-cost and supply-constrained processors. Meanwhile, a host of potential competitors are eyeing NVIDIA Corporation's lucrative market. Additionally, NVIDIA Corporations clients are increasingly developing their own chips, which could reduce their dependency on NVIDIA Corporation in the long term. As AI is increasingly utilized to automate tasks and respond to queries, NVIDIA Corporations graphics processors are facing rising competition from central processing units and customized chips that are better suited for a process known as inference. This shift is prompting major tech companies to invest in developing their own chips. Just this week, OpenAI, the maker of ChatGPT, announced that its new Jalapeno processor outperformed NVIDIA Corporation's current processor lineup in testing. Reports indicate that Meta plans to begin producing its custom "Iris" AI chip in September, part of its fourth-generation customized chip project aimed at reducing computing costs. According to reports in June, Alphabet has ordered over 3 million chips from Intel Corporation, expected to be delivered by 2028. The reports also noted that NVIDIA Corporation is evaluating the manufacturing technology of this U.S. chipmaker to produce a processor that integrates four GPUs into a single unit. Competitors Intel Corporation and AMD are also targeting the inference market, with several Chinese firms, including Baidu Inc Sponsored ADR Class A, already producing chips for such tasks. NVIDIA Corporation has taken note of this trend. In March of this year, NVIDIA Corporation unveiled a new type of central processing unit and AI system based on licensed technology from the inference-focused startup Groq. This deal, worth $17 billion, combines Groq's chips with its upcoming Vera Rubin platform. Earlier this month, SpaceX CEO Elon Musk announced that the company would exclusively use NVIDIA Corporation's hardware, further solidifying NVIDIA Corporation's leading position in the AI market. NVIDIA Corporation stated that by 2027, its AI chip revenue potential could exceed $1 trillion, doubling the $500 billion forecast for its Blackwell and Rubin chips before 2026.