ii view: Nvidia guidance way better than Wall Street forecasts

Nvidia CEO Jensen Huang. Photo: Philip FONG/AFP via Getty Images.

Second-quarter results to 26 July

• Revenue up 106% year-over-year to $96.2 billion (£71.2 billion)
• Adjusted earnings up 120% to $2.22 per share
• Cash dividend unchanged from Q1 at $0.25 per share

Guidance:

• Expects current third-quarter sales to late October of around $108 billion, up from last year’s $57 billion
• Expects sales to grow by 70% in the financial year ahead 

Chief executive Jensen Huang said:

“AI has reached its inflection point. It’s doing useful work. Its tokens are productive and profitable. Now, compute is revenue. The AI infrastructure buildout is at full steam.”

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ii round-up:

Fuelled by strong demand for AI computing, semiconductor giant NVIDIA Corp (NASDAQ:NVDA) now predicts sales growth of 70% in the financial year to late January 2028. Wall Street had forecast nearer 40%.

Second-quarter sales to late July more than doubled (+106%) to $96.2 billion (£71.2 billion), driving adjusted earnings up 120% to $2.22 per share. Analysts had predicted $92.2 billion and $2.10 per share respectively.

Shares in the Magnificent Seven company rose almost 5% in after-hours US trading having come into these latest results up by just over a tenth so far in 2026. That’s similar to data centre owner Amazon.com Inc (NASDAQ:AMZN) and the tech-heavy Nasdaq Composite index itself.

As well as hosting powerful AI software in data centres, Nvidia chips are also used in other areas such as gaming consoles and to drive autonomous cars.

Supported by a move to the group’s evermore powerful Vera Rubin computing chip platform, data centre sales for this latest quarter soared 117% from a year ago to $89 billion.

Sales of ‘Edge Computing’, taking in areas such as self-driving cars and robots, rose 27% to $7.2 billion.

A quarterly dividend of $0.25 per share is unchanged from the previous quarter but leaves investor returns for the period including share buybacks at a record $26 billion.

California headquartered Nvidia predicts sales of $108 billion for the current third quarter and a profit margin of around 74%. That’s a potential increase from sales of $57 billion in Q3 a year ago.  

Broker Morgan Stanley reiterated its ‘overweight’ stance on Nvidia shares post the results, raising its price target to $300 from a previous $288 per share, calling it "a very inexpensive stock".

Third-quarter results are likely to be announced late November.  

ii view:

A constituent of the Nasdaq 100 and Dow Jones, Nvidia credits its invention of the graphics processing unit (GPU) in 1999 for fuelling the boom in the PC gaming market. Today, it describes itself as the world leader in accelerated computing, given the wide use of its computer chips and own supporting Cuda software in data centres globally.

For investors, competition for powerful processing computer chips continues to increase with major data centre operators such as Amazon and Google owner Alphabet Inc Class A (NASDAQ:GOOGL) also looking to make and supply their own chips. Sales of Nvidia products to potential military opponents of the US, such as China, are likely to remain closely monitored and even curtailed by the US government. Concerns about power consumption in the data centre industry sit alongside ongoing climate change concerns, while worries of governments globally regarding the potential power of AI and its impact on human society continue to require deep thought.

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More favourably, demand for its data centre products continues to boom, with management predicting sales this financial year comfortably exceeding analyst forecasts. A forecast price/earnings (PE) ratio comfortably below the three- and 10-year averages may suggest the emergence of value. Prospects for AI innovation including expected self-driving vehicles and potentially ground-breaking medicines, cannot be ignored, while experienced founder Jensen Huang continues to run the business.

On balance, valuing Nvidia, given its status as the eminent play on AI, remains extremely difficult and leaves Nvidia shares highly volatile. That said, sales momentum persists and Nvidia continues to deliver outstanding growth. A consensus analyst fair value estimate above $305 per share also gives reason for continued longer-term optimism.

Positives:

• Exposure to growth in data centres and AI
• Ongoing innovation with Vera Rubin platform

Negatives:

• Uncertain economic outlook
• US and China tensions

The average rating of stock market analysts:

Strong buy