How Nvidia silenced the bears

Nvidia's stock remained stagnant for much of the summer as investors worried about potential AI growth slowdown. To quell concerns, the chip leader unveiled a rare long-term outlook after reporting its second quarter earnings. The tech giant projected a 70% revenue growth for fiscal year 2028, exceeding analysts' expectations of 45%.

Nvidia CEO Jensen Huang attributed this record-setting growth to memory chip shortages, while Stifel analyst Ruben Roy highlighted the longer-term guidance as a means to align customers, shareholders, and suppliers on the same set of information. This move served as both a forecast and a supply-chain coordination device, reassuring suppliers to commit capacity and assuage shareholders of BoM inflation being absorbed via a fiscal year 2028 gross margin guide of 72-73% (down from the previous mid-70%).

Nvidia shares surged nearly 8% in premarket trading on the strong results and optimistic guidance. The company reported adjusted earnings per share of $2.22 on revenue of $96.2 billion, surpassing the $2.09 a share and $92.3 billion revenue expectations set by analysts. Nvidia's Data Center revenue, which includes Hyperscalers and AI Clouds, Industrial, and Enterprise (ACIE), totaled $89 billion versus an estimated $85.8 billion.

Edge Computing, encompassing Nvidia's other businesses like physical AI and gaming, generated $7.2 billion, exceeding the projected $6.6 billion. Analysts were especially impressed with the company's fiscal third quarter revenue projection, which exceeded Wall Street's expectations of $105.1 billion for the first time in Nvidia's history.