Nvidia projected third-quarter revenue slightly ahead of Wall Street expectations, underscoring resilient AI demand even as uncertainty over China weighed on investor sentiment and the company’s outlook.
Guidance, market reaction, and AI demand
The chipmaker forecast revenue of $54 billion, plus or minus 2%, compared with analysts’ average estimate of $53.14 billion, according to LSEG data. Shares fell 3.2% in after-hours trading after the company delivered a softer-than-usual outlook relative to recent quarters that had set a high bar. According to Reuters, the stock dip trimmed about $110 billion from Nvidia’s market capitalization.
Nvidia reported second-quarter revenue of $46.74 billion, topping estimates of $46.06 billion. In data centers, about half of $41 billion in revenue came from large cloud service providers during the latest quarter, slightly below Visible Alpha estimates of $41.42 billion. Nvidia forecast adjusted gross margins of 73.5% for the current quarter, near LSEG’s 73.3% consensus.
Executives highlighted sustained demand for advanced chips used to power generative AI applications. Colette Kress, Nvidia’s CFO, said “sovereign AI” efforts are on track to generate $20 billion in revenue this year. She also said AI efforts are on track to spur $600 billion in spending by cloud and enterprise customers this year and could generate $3 trillion to $4 trillion in infrastructure spending by the end of the decade.
China outlook and H20 chip sales
CEO Jensen Huang expects permission to resume sales to China following a deal to pay commissions to the U.S. government, but Nvidia excluded potential China sales from its current-quarter forecast amid the absence of formal U.S. rules and possible Chinese regulatory discouragement, Reuters reported. Nvidia said it has not assumed any shipments of its H20 chips to China in its outlook, despite receiving some licenses earlier this month to sell them.
Key variables for the next quarter
If geopolitical conditions improve and orders materialize, Nvidia said it could add $2 billion to $5 billion in third-quarter H20 revenue. Ben Bajarin of Creative Strategies called it “a big question mark to watch.”
There are signs of demand for H20 outside China: Kress said a single non-China customer purchased $650 million of the chips during the second quarter. Broader industry dynamics also came into focus as Big Tech companies including Meta Platforms and Microsoft continued heavy AI-related spending. Following the results, shares of Advanced Micro Devices eased 1.4%.
Nvidia authorized an additional $60 billion in share repurchases. Commentary from market watchers captured the tempered reaction: “Nvidia’s biggest bottleneck isn’t silicon, it’s diplomacy,” said Michael Ashley Schulman of Running Point Capital. Jake Behan of Direxion added, “While it may not have been a blowout, it’s not a miss.”
