Analysts were impressed, but investors have a high bar for the AI leader.
The world’s largest company, has set extremely high expectations among investors due to its incredible growth over the last handful of years.
The AI leader had another strong quarter in Q2, beating analysts earnings and revenue estimates. But did it meet investors’ expectations?
Judging by the initial response to the earnings, not entirely. Here are the key results:
Revenue came in at $46.7 billion, up 6% from Q1 and 56% year-over-year, topping analysts’ estimates of $46.1 billion.
Net income was $26.4 billion, or $1.08 per share, up 41% from Q1 and about 59% year-over-year. It beat estimates of $1.01 per share.
Once again, the company delivered staggering growth numbers, despite having no sales of its H20 chips in China, due to U.S. restrictions, which have now been lifted. However, Nvidia did benefit from the release of $180 million worth of H20 chip inventory to sell outside of China.
It is the ninth quarter in a row with higher than 50% year-over-year revenue growth for Nvidia, but it is slower than Q1 and the same quarter a year ago.
Why Were Investors Disappointed?
Nvidia stock was heading lower on Thursday morning, but it was only down about 1% shortly after the opening bell. The reaction was greater in after-hours trading on Wednesday as the stock fell about 3%.
Why were investors down on the earnings report? It was likely because of a miss on data center revenue. Data centers are the source of most of Nvidia’s revenue, accounting for $41.1 billion of the $46.7 billion in total revenue.
The $41.1 billion in data center revenue was up 5% from Q1 and 56% year-over-year. The new Blackwell AI chips saw 17% growth over the previous quarter.
“Blackwell is the AI platform the world has been waiting for, delivering an exceptional generational leap — production of Blackwell Ultra is ramping at full speed, and demand is extraordinary,” Jensen Huang, founder and CEO of Nvidia. said.
However, overall data center revenue fell slightly short of estimates of $41.3 billion. This is likely due to the lack of sales in China.
“Earnings from bellwethers like Nvidia reinforce the extraordinary demand driving AI infrastructure, but they also highlight how quickly momentum can be tested when geopolitical or capital market conditions shift,” said Natalie Hwang, founding managing partner at Apeira Capital.
“In the private markets, we see this translating into sharper focus on durability — companies that can move beyond raw access to GPUs toward structural advantages in efficiency, integration, and energy strategy will attract sustained investor interest.”
Robust Growth Anticipated in Q3
The selloff is more puzzling when you consider Nvidia’s guidance for Q3. The company is anticipating $54 billion in revenue in Q3, which would be 15% higher than Q2. It was also better than the $53.1 billion that analysts projected. And this is not including any revenue from China.
Even though restrictions on selling chips in China were lifted by the Trump Administration, for a 15% licensing fee, there are issues in China. The Chinese government has warned companies not to use Nvidia’s chips because of its ties to the U.S. government. But if the issues are resolved, the company could see $2 billion to $5 billion in H20 revenue in Q3. It is also trying to get its Blackwell chips approved for China.
In Q3, Nvidia is also calling for:
Gross margins of 73.3%, up from 72.4% in Q2. It expects to end the fiscal year with a non-GAAP gross margin in the mid-70% range.
Operating expenses of approximately $5.9 billion, up from $5.4 billion in Q2. It is targeting expense growth for the full year in the high-30% range.
Overall, it was a strong report and outlook, given the circumstances. The selloff on Thursday may have been primarily driven by investors taking some profits due to concerns about the high valuation of Nvidia and the market in general.