Nvidia’s latest quarterly earnings report revealed mixed results that sent shares lower in after-hours trading, with data center revenues falling short of expectations for the second consecutive quarter. The tech giant reported second-quarter adjusted earnings per share of $1.05, exceeding analysts’ estimates of $1.00, while revenue grew 56% year-over-year to $46.74 billion, surpassing projections of $46.23 billion.
However, the crucial data center segment posted revenue of $41.1 billion, missing estimates of $41.29 billion despite showing 56% growth from the previous year. Gaming division performance proved stronger, with revenue of $4.3 billion beating expectations of $3.82 billion, while professional visualization brought in $601 million against estimates of $532 million.
The company’s outlook for the third quarter projects revenue of $54 billion, plus or minus 2%, which exceeded consensus estimates but fell short of some analysts’ more optimistic predictions reaching $60 billion. Adjusted gross margins are expected to hit 73.5%, slightly above the 73.4% median estimate.
Notable in the results was the absence of H20 chip sales to Chinese customers during the quarter, though the company did benefit from a $180 million release of previously reserved H20 inventory through sales to a customer outside China. The ongoing complexities of US-China relations continue to impact Nvidia’s business, with recent policy shifts allowing some shipments to China in exchange for 15% revenue sharing with the US government.
CEO Jensen Huang emphasized the strong momentum behind the company’s Blackwell architecture, noting significant demand for the new Blackwell Ultra platform. “The AI race is on, and Blackwell is the platform at its center,” Huang stated, highlighting a tenfold increase in AI inference token generation over the past year.
In a significant move to return value to shareholders, Nvidia’s board approved an additional $60 billion for share repurchases, adding to the $14.7 billion remaining from previous authorizations. The company returned $24.3 billion to shareholders through repurchases and dividends in the first quarter.
Operating metrics showed some areas of concern, with free cash flow declining slightly to $13.45 billion, while inventory levels and receivables saw notable increases. The company’s guidance excluded potential revenue from China, reflecting ongoing uncertainty in that market as tensions persist between US restrictions and Chinese pressure to reduce dependence on American technology.
The reaction from Wall Street highlighted growing concerns about the sustainability of AI infrastructure investment rates, with Nvidia shares initially dropping about 4% after the announcement before partially recovering. The results also impacted other AI-related stocks, with companies like CoreWeave, Super Micro Computer, and Palantir seeing their shares decline in after-hours trading.
Looking ahead, Nvidia projects full-year fiscal 2026 operating expense growth in the high-30% range, with tax rates expected around 16.5%. While global demand for AI infrastructure remains robust, questions persist about the pace of growth and potential market saturation, particularly as geopolitical factors continue to influence the company’s ability to fully capitalize on international opportunities.