Summary of Key Highlights
NVIDIA’s second-quarter financial report for the 2027 fiscal year far exceeded expectations: Revenue and net profit doubled, with the data center business becoming the main driver of growth. For the first time, the company provided an aggressive forecast for a 70% increase in revenue for the 2028 fiscal year, significantly exceeding the market’s expected 45%. As a result, the company’s stock price soared by 8.74%, adding approximately 2.97 trillion yuan to its market value (equivalent to the market value of Oracle Corporation). Many institutions have raised their target prices to over $300. However, beneath the bright headlines, there are concerns: supply chain restrictions and soaring memory costs are squeezing profits, and a decline in free cash flow has drawn the attention of analysts.
1. How impressive is the financial report? Double-digit revenue and profit growth, with the data center business becoming a cash generator
The core highlight of this financial report is that all aspects far exceeded expectations:
- Revenue reached $96.2 billion, a year-on-year increase of 106% (from earning $1 last year to over $2 this year).
- Net profit was $59.7 billion, a year-on-year increase of 126% (profit growth outpaced revenue growth).
- The most crucial aspect is the data center business: Revenue from this segment was $89 billion, a year-on-year increase of 117%, accounting for 92% of total revenue. This business mainly involves selling AI chips to cloud service providers such as Google and Amazon, which use them to run large models and train AI systems. In simple terms, the global AI boom has led to a surge in demand for NVIDIA’s chips, making this segment a vital source of revenue.
- These figures far exceed analysts’ previous estimates, indicating that the market’s demand for AI computing power is even stronger than experts anticipated.
2. Why dare to provide a forecast a year in advance? Surging orders and a clear vision for AI demand
NVIDIA has never provided a performance forecast a year in advance. This time, it can afford to do so because it has an overwhelming number of orders and a clear understanding of future demand:
- The unfulfilled orders in the cloud service industry exceed $2 trillion (amounts that customers have placed but have not yet received). The top five cloud service providers (such as Amazon AWS and Microsoft Azure) had orders worth nearly $800 billion in 2026, which increased to $1.3 trillion in 2027—meaning these major customers have already locked in significant chip purchases for the next two years.
- Jensen Huang stated, “Artificial intelligence has reached a turning point; computing power is the key to revenue.” This means that those with access to powerful computing resources will have a competitive advantage, and NVIDIA’s chips are at the heart of this. With such clear demand, the company is confident in predicting a 70% increase in revenue for the 2028 fiscal year.
3. The stock price surge: Institutions are overwhelmingly bullish, raising target prices
After the financial report was released, the market responded positively, with the stock price rising by 8.74%:
- Market value increased by $441.5 billion (approximately 2.97 trillion yuan), roughly equivalent to the market value of Oracle Corporation ($437.7 billion)—equivalent to the sudden addition of a globally renowned tech company’s value in just one day.
- At least 10 institutions have raised their target prices: JPMorgan Chase has increased its target from $280 to $320, Citibank to $315, and Ridge Financial to $515 (the current stock price is only $227). Institutions are so optimistic because they believe NVIDIA’s AI-driven growth will continue for a long time.
4. Hidden concerns beneath the bright outlook: Supply chain challenges and soaring costs
Despite the impressive results, NVIDIA faces challenges:
- Supply chain restrictions: The CFO noted that chip supply will remain insufficient at least until the 2028 fiscal year. This is not due to a lack of production capacity but rather a mismatch between raw material availability and demand, which could limit growth.
- Soaring costs: Memory prices have increased more sharply than expected, directly affecting profits. It is estimated that the gross margin in the fourth quarter of 2027 will drop to 71%-72% (from possibly higher levels previously), and it will only gradually return to 72%-73% in 2028.
- Declining free cash flow: Free cash flow (the company’s available funds for discretionary use) has decreased significantly compared to the previous quarter, suggesting increasing production and operational costs. With a market value of over $5 trillion, NVIDIA’s ability to maintain strong profitability and customer satisfaction in the long term will be crucial to its continued success.
Conclusion
NVIDIA is currently the leader in AI computing power. In the short term, its strong orders and high demand have driven its stock price and performance. However, in the long run, it must address challenges related to the supply chain and rising costs. For individual investors, it is important to recognize both NVIDIA’s potential AI-driven growth and these potential risks. Given its massive market value, every move the company makes must be carefully considered.