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NVIDIA (NVDA +7.3%) delivered another exceptionally strong quarter, but the bigger takeaway from last night's earnings call was that the AI buildout shows little sign of slowing. NVIDIA posted its typical large beat for Q2 (Jul) and issued strong upside revenue guidance for Q3 (Oct), while management's commentary was even more bullish than usual. Most notably, NVIDIA said it expects FY28 revenue growth of approximately 70%. With NVIDIA Compute fully utilized across every cloud it serves and hyperscaler CapEx expected to reach nearly $800 bln in 2026 and $1.3 tln in 2027, the key debate is increasingly shifting from whether AI demand is sustainable to how quickly NVIDIA can supply it.

• Data Center: Data Center revenue jumped 117% yr/yr to a record $89 bln, accelerating from 92% growth in Q1 (Apr), driven by the ramp of Blackwell Ultra. Hyperscale revenue more than doubled yr/yr and increased 13% sequentially, while ACIE revenue rose 138% yr/yr and 25% sequentially. Edge Computing revenue increased 27% yr/yr and 13% sequentially to $7.2 bln.
• FY28 outlook: NVIDIA shocked investors by saying it expects approximately 70% revenue growth in FY28, well above the roughly 45% analyst expectation. Management emphasized that this is a supply-constrained outlook, with NVIDIA Compute fully utilized across every cloud it serves. The cloud industry backlog now exceeds $2 tln, while CapEx from the top-five hyperscalers is expected to reach nearly $800 bln in 2026 and $1.3 tln in 2027, providing significant visibility into continued AI infrastructure demand.
• AWS partnership: NVIDIA expanded its partnership with AWS, which will deploy an additional 2 mln NVIDIA GPUs from this quarter through Q2 FY29, alongside Vera CPUs. AWS will also offer NVIDIA's Nemotron family of open models through Amazon Bedrock and SageMaker, while adopting NVIDIA's broader physical AI stack. The expanded relationship reinforces NVIDIA's position across both AI compute and physical AI applications.
• Vera Rubin: NVIDIA said it commenced production shipments of Vera Rubin earlier this month and expects the platform to have the fastest product ramp in company history. The company is already in full production of its next-generation Vera CPU and expects the product to be deployed by every major hyperscaler, neocloud, AI lab, and system OEM. Shipments are already underway to lead partners, including OCI, SpaceXAI, and AWS.
• China: NVIDIA shipped less than 1% of total Data Center revenue in Hopper 200 products to customers in China during Q2 under US government licenses. NVIDIA's forward outlook assumes no China Data Center compute revenue. This creates a potential upside opportunity if restrictions ease, but investors should not rely on China returning to the model in the near term.
• Margins: NVIDIA expects non-GAAP gross margin of 73.5-74.5% in Q3 (Oct), down from 75% in both Q2 and Q1, as memory costs have risen sharply and are expected to increase further into next year. Management expects gross margins to bottom at 71-72% in Q4 (Jan) before recovering to 72-73% in FY28 as price increases take effect. Importantly, NVIDIA characterized tighter memory supply as a consequence of the same AI demand surge driving its revenue growth, rather than a sign of weakening demand.

Briefing.com Analyst Insight

NVIDIA delivered the type of earnings report investors have been waiting for: a large beat, strong upside guidance, accelerating Data Center growth, and unusually bullish commentary about the trajectory of AI infrastructure spending. The most important development was arguably the FY28 outlook, with management effectively telling investors that demand is running well ahead of current expectations. A roughly 70% revenue growth outlook is a remarkable statement for a company already operating at enormous scale, and the fact that management described the outlook as supply constrained suggests the limiting factor is increasingly NVIDIA's ability to produce enough systems rather than customer willingness to spend. The expanded AWS relationship and early Vera Rubin shipments provide additional evidence that NVIDIA's roadmap is extending well beyond the current Blackwell cycle. The main blemish is gross margin, which is expected to decline through Q4 due to extreme memory pricing conditions. However, management was unusually direct about the issue and expects margins to recover as price increases take effect.