NVIDIA (NVDA) Excluded China Data Center Compute Revenue from its $108B Outlook. Can Growth Stay Exceptional Without It?

NVIDIA's fiscal second quarter revealed that China's data center compute revenue is no longer a primary driver of growth. The company reported $96.2 billion in revenue, a 106% increase from the prior year. Data Center revenue rose to $89.0 billion, a 117% year-over-year increase. Gross margins for both GAAP and non-GAAP calculations stood at 75.0%.

For the fiscal third quarter, NVIDIA guided for $108.0 billion in revenue, with or without the China data center revenue, suggesting another 12% sequential growth. The strong performance of NVIDIA's Data Center segments, particularly hyperscale, AI clouds, industrial, and enterprise customers, suggests that growth can persist without China's contribution.

The company's Vera Rubin platform is also ramping up, supporting further infrastructure upgrades. While gross margins are expected to drop to 71% to 72% in the fourth quarter, NVIDIA's commitment to supply and capacity, along with the growth of its customer base, add to the credibility of its $108 billion revenue outlook. However, the durability and quality of customer spending are becoming more significant due to the larger commitments, longer collection periods, and customer concentration.