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Nvidia's guide adds $11.8 billion after a quarter that added $14.7 billion
Nvidia reported $96.2 billion of revenue at 75% gross margins and guided the next quarter to $108.0 billion while assuming nothing from China Data Center compute, with gross margin slipping to 74%.
The Investor · Invest desk
What happened
- Nvidia reported revenue of $96.2 billion for the quarter ended July 26, up 106% from a year earlier and 18% from the previous quarter.
- Gross margin was 75.0% on both GAAP and non-GAAP bases in the quarter and is guided to 74.0%, plus or minus 50 basis points.
- Nvidia named Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR as partners in compute financing platforms meant to mobilize over $500 billion, subject to definitive agreements.
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Why it matters
- constraint Anyone sizing capacity off last quarter's 18% sequential slope has to use a shallower one, because the company's own guide puts the next dollar gain at $11.8 billion against about $14.7 billion just delivered.
- cost The point of gross margin being guided away is about $1.08 billion of gross profit at the $108.0 billion midpoint, and shareholders absorb it in a quarter when volumes rise.
- exposure The over $500 billion of outside capital is still subject to definitive agreements, so the financing for the buildout Nvidia describes depends on six lenders signing paper they have not yet signed.
- decision Forecasters who keep a China Data Center compute line in the next quarter are now modelling revenue management itself excluded, and they own that difference.
Second-quarter revenue of $96.2 billion was 18% above the prior quarter [1], which places that prior quarter near $81.5 billion and the sequential gain at roughly $14.7 billion [1]. The third-quarter forecast of $108.0 billion adds $11.8 billion [2]. Revenue doubled against a year ago [1] and the dollar step-up shrank by about $2.9 billion [3], both in the same release, and at the midpoint the sequential rate comes down to 12.3% [4].
One cause is stated in the outlook itself: Nvidia assumes no Data Center compute revenue from China [5]. The press release does not say what China contributed to the $96.2 billion [14], so the two quarters are not measured on the same footing.
Everything outside Data Center is small and slower. Data Center at $89.0 billion is 92.5% of the total [5], leaving $7.2 billion for the rest, which grew about 27% year over year against the company's 106% [12].
The margin guide costs money. Gross margin of 75.0% [3] is guided to 74.0%, plus or minus 50 basis points [6], and one point at the $108.0 billion midpoint is about $1.08 billion of gross profit [6]. Subtract the guided $9.2 billion of GAAP operating expense [7] from the implied $79.9 billion of gross profit and third-quarter operating income lands near $70.7 billion, a 65.5% operating margin [7]. GAAP earnings of $2.46 a diluted share came in above the non-GAAP $2.22 [4].
Nvidia returned about $26.0 billion to shareholders in the quarter through repurchases and dividends and had about $99.0 billion left on the authorization [8], about 3.8 quarters at that pace [8]. The dividend stays at 25 cents a share, payable October 1 [9], roughly a tenth of the quarter's GAAP earnings per share [9].
Then the financing. Nvidia said it announced partnerships with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to establish independent compute financing platforms and mobilize over $500 billion of third-party capital for the AI infrastructure buildout over time, subject to definitive agreements [10]. Annualise the guide and the company is running at $432 billion a year, so the capital being organised is about 1.16 times a year of sales at that rate [10]. Vera Rubin is in full production, with racks running at CoreWeave, Google Cloud, Microsoft Azure, Oracle Cloud Infrastructure and Nebius [11].
Jensen Huang, the founder and chief executive, said "Now, compute is revenue" and that demand "is accelerating" [12]. The guided band tests the second half of that. At the top of the plus-or-minus 2%, $110.2 billion, the sequential gain is about $14.0 billion and matches the quarter just reported; at the bottom, $105.8 billion, it is $9.6 billion [11]. In my view the increment, not the year-over-year rate, is what the next print should be judged on. An export licence is what would break that judgement: China Data Center compute sits at zero in the guide [5], and anything from it lands on top of the $108.0 billion.
What to watch
- How much of the over $500 billion converts into signed facilities, and on what terms the six named partners lend.
- Whether the PORTS-Pike campus in Ohio, where Nvidia secured land, power and shell capacity with SB Energy, signals more hosting done on its own account.
- Whether Groq 3 LPX, now in full production as an inference accelerator, starts splitting Data Center revenue away from training racks.