What stood out in Nvidia's earnings report?

Nvidia reported second-quarter fiscal 2027 results on Aug. 26, with revenue rising 106% from a year earlier to $96.2 billion. The main driver of that growth was the company's $89 billion data center division, which increased 117% year over year and made up most of total sales.

Adjusted earnings per share of $2.22 beat Wall Street expectations of $2.08. Gross margin held at 75%, while the company returned about $26 billion to shareholders through buybacks and dividends. That means Nvidia has now topped analyst estimates for 15 straight quarters.

What do the third-quarter outlook and supply limits say about the market?

Management projected $108 billion in revenue for the third quarter, above analysts' estimates. Chief Financial Officer Colette Kress said the forecast reflects a supply-constrained view and noted that the bottleneck could last through the end of fiscal 2028.

The company did not include China-related data center computing revenue in its forward outlook. Even so, it said Vera Rubin shipments began in August and that orders were coming in from major hyperscale customers, AI cloud providers and systems manufacturers.

  • Gross margin guidance for the third quarter was set at 74%, plus or minus 50 basis points.
  • Operating expenses on a GAAP basis are expected to be $9.2 billion.
  • Total commitments to secure supply and manufacturing capacity rose to $279 billion.

Valuation, analyst targets and a new growth theme

After the latest earnings report, Wall Street firms raised or reaffirmed their price targets. Goldman Sachs kept its $300 target and Bernstein held at $400, while the average target among 48 Wall Street analysts stood at $307.38. Nvidia's stock has returned about 24% over the past year, while the iShares Semiconductor ETF more than doubled over the same period; Nvidia has also lagged year to date.

Even so, some valuation measures suggest the stock is cheaper than it has been historically. Its forward price-to-earnings ratio of 22.56 is below its five-year average of 52.52, while the company held $53.17 billion in cash and $12.81 billion in debt.

The space data center theme has yet to hit the financials

One additional area investors are watching is space-based data centers. Nvidia's investment in Starcloud, which is developing AI computing power in orbit, and SpaceX's pledge to use Nvidia chips in its Starmind satellites are being seen as a new growth area that has not yet shown up in revenue. The company was also reported to hold about $21 billion worth of SPCX shares as of June 30.