Nvidia’s 70% Growth Outlook Extends the AI Boom as Supply Struggles to Keep Up

Nvidia Raises the Ceiling on AI Growth Expectations

Nvidia (NVDA) delivered fiscal second-quarter revenue of $96.2 billion, up 106% year over year, while adjusted earnings reached $2.22 per share. Both figures exceeded Wall Street expectations of $92.3 billion in revenue and $2.09 per share in adjusted earnings.

The larger market signal came from the outlook. Nvidia expects approximately 70% revenue growth in fiscal 2028, well above the roughly 45% growth analysts had anticipated. Management said underlying demand is even stronger, with supply constraints limiting how much revenue the company can generate. NVDA stock gained roughly 7% following the report.

Key Points

• Nvidia reported fiscal Q2 revenue of $96.2 billion, up 106% year over year, while Data Center revenue jumped 117% to a record $89 billion.
• Management expects approximately 70% revenue growth in fiscal 2028, compared with analyst expectations of roughly 45%, while describing the outlook as constrained by available supply.
• Nvidia expects gross margins to decline as rising memory costs pressure profitability, while its fiscal Q3 revenue outlook of $105.8 billion to $110.1 billion remained above Wall Street expectations.

Data Center Growth Accelerates as Blackwell Ultra Ramps

Nvidia's Data Center business remained the central engine of the quarter. Revenue reached a record $89 billion, rising 117% from a year earlier and accelerating from 92% growth in the prior quarter.

Hyperscale revenue more than doubled year over year and increased 13% sequentially, while AI Clouds, Industrial and Enterprise revenue climbed 138% from a year ago and 25% sequentially. Nvidia attributed the Data Center performance in part to the ramp of Blackwell Ultra.

The company's other businesses also contributed. Edge Computing revenue reached $7.2 billion, up 27% year over year and 13% sequentially, exceeding the $6.6 billion analysts had expected.

Nvidia's fiscal third-quarter revenue forecast of $105.8 billion to $110.1 billion also surpassed Wall Street's $105.1 billion projection. At the midpoint, the outlook would take quarterly revenue above $100 billion for the first time.

Why Did Nvidia Stock Jump After Earnings?

The earnings beat provided an immediate catalyst, but Nvidia's longer-range outlook substantially changed the growth picture presented to investors.

Management expects revenue to grow approximately 70% in fiscal 2028. That compares with analyst expectations of roughly 45%. CEO Jensen Huang said underlying demand is greater than 70%, but the company remains limited by the amount of product it can supply.

Nvidia Compute is fully utilized across every cloud it serves, according to management. Meanwhile, the cloud industry's backlog exceeds $2 trillion, and capital spending by the five largest hyperscalers is expected to approach $800 billion in 2026 and $1.3 trillion in 2027.

Amazon.com (AMZN) also expanded its relationship with Nvidia and plans to deploy another two million Nvidia GPUs from the current quarter through the second quarter of fiscal 2029. Amazon Web Services will additionally offer Nvidia's Nemotron open models through Amazon Bedrock and SageMaker.

The combination of accelerating Data Center revenue, stronger-than-expected near-term guidance and the fiscal 2028 outlook helped send NVDA stock roughly 7% higher following the results.

Supply, Margins and China Shape What Comes Next

Nvidia's growth outlook also comes with constraints.

The company expects non-GAAP gross margin of 73.5% to 74.5% in fiscal Q3, down from 75% in Q2 and Q1, as higher memory costs weigh on profitability. Management expects gross margin to bottom between 71% and 72% in Q4 before recovering to between 72% and 73% in fiscal 2028 as price increases take effect.

Supply limitations extend beyond memory. Management characterized its fiscal 2028 outlook as supply constrained, while Taiwan Semiconductor Manufacturing (TSM) remains under capacity pressure.

Nvidia is simultaneously moving its product roadmap forward. Production shipments of its next-generation Vera Rubin platform began earlier this month, and management expects it to have the fastest product ramp in company history. Nvidia said its Vera CPU is expected to be deployed by every major hyperscaler, neocloud, AI lab and system manufacturer, with early shipments already underway.

China remains another variable. Nvidia shipped less than 1% of its Q2 Data Center revenue in H200 products to Chinese customers under U.S. government licenses. The company's forward outlook assumes no China Data Center compute revenue because of geopolitical uncertainty.

Total China revenue across Nvidia's businesses was $7.9 billion in Q2, representing 8.2% of total revenue. Nvidia also recorded a $400 million charge related to excess H200 inventory as restrictions limited its ability to sell licensed products to Chinese buyers.

What It Means for Investors

The latest Nvidia earnings reaction reflects more than another quarterly earnings beat. The company reported accelerating Data Center growth while simultaneously raising expectations for how long rapid AI infrastructure expansion could continue.

The fiscal 2028 outlook is particularly important because it extends the growth picture beyond the current Blackwell cycle. Nvidia is already shipping its next-generation Vera CPU, expanding its relationship with AWS and operating with compute capacity fully utilized across the clouds it serves.

At the same time, the report identifies the constraints accompanying that demand. Memory costs are expected to push gross margins lower, production remains supply constrained, and Nvidia is excluding China Data Center compute revenue from its forward outlook.

Nvidia is also returning more cash to shareholders. The company returned a record $26 billion during fiscal Q2, including $20 billion through share repurchases and $6 billion through dividends. Nvidia has returned 60% of free cash flow to shareholders year to date and said it intends to increase capital returns going forward.

Conclusion

Nvidia's fiscal Q2 results reinforced the scale of current AI infrastructure spending, with revenue doubling from a year earlier and Data Center sales accelerating to a record $89 billion.

More consequential for the market was management's approximately 70% fiscal 2028 revenue growth outlook. Nvidia says demand is running above the level it can currently supply, while hyperscaler spending, the Vera Rubin rollout and expanded cloud partnerships point to continued infrastructure investment.

The next phase will also bring pressure points. Memory costs are weighing on gross margins, production capacity remains tight, and China is absent from Nvidia's Data Center compute outlook. Those factors now sit alongside an unusually strong growth forecast as investors assess the next stage of Nvidia's AI expansion.

FAQs

Why did Nvidia stock rise after earnings?

Nvidia stock rose roughly 7% after the company reported fiscal Q2 revenue and adjusted earnings above Wall Street expectations, issued stronger-than-expected fiscal Q3 revenue guidance and said it expects approximately 70% revenue growth in fiscal 2028.

How fast is Nvidia's Data Center business growing?

Nvidia's Data Center revenue increased 117% year over year to a record $89 billion in fiscal Q2, accelerating from 92% growth in the previous quarter.

What does Nvidia expect for fiscal 2028?

Nvidia expects approximately 70% revenue growth in fiscal 2028, compared with analyst expectations of roughly 45%. Management said underlying demand is even stronger but the outlook is constrained by available supply.

Why are Nvidia's gross margins expected to decline?

Nvidia expects higher memory costs to pressure gross margins. Non-GAAP gross margin is expected at 73.5% to 74.5% in fiscal Q3 and between 71% and 72% in Q4 before recovering to between 72% and 73% in fiscal 2028.

Does Nvidia's outlook include China Data Center revenue?

No. Nvidia's forward outlook assumes no China Data Center compute revenue because of ongoing geopolitical uncertainty. H200 shipments to Chinese customers represented less than 1% of Data Center revenue in fiscal Q2.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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