Nvidia reported record Q2 revenue of $96.22 billion and projected 70% growth for fiscal year 2028, significantly beating analyst expectations. While AI demand remains strong, the company warned of margin pressure due to high component costs and supply chain limitations.
Nvidia has reported strong financial results for the second quarter of fiscal year 2027, with revenue reaching a record $96.22 billion, a 106% increase compared to the previous year. Following these results, the company provided a bullish outlook, forecasting approximately 70% revenue growth for the fiscal year 2028. This projection significantly exceeds the 44% growth rate previously expected by market analysts, signaling that the global spending boom on artificial intelligence computing infrastructure is continuing.
Following the announcement, Nvidia shares rose approximately 4% in extended trading. The strong revenue figure was driven largely by its data center division, which contributed $89 billion to the quarterly total, representing a 117% increase year-over-year. To support this growth, Nvidia announced an expanded partnership with Amazon Web Services, aiming to deploy 2 million graphics processors across Amazon's global infrastructure by 2028. This partnership highlights the increasing demand for computing power from large cloud service providers.
Despite the positive demand outlook, the company’s management highlighted operational challenges that investors should monitor. Nvidia cautioned that it expects its gross profit margins to face pressure in the coming quarters, likely sliding to between 71% and 72% from the 75% recorded in the second quarter. This margin compression is attributed to rising costs for high-bandwidth memory (HBM) and other essential components required to manufacture its high-performance chips.
Supply chain bottlenecks remain a critical factor for the company. While demand for its AI chips is high, Nvidia noted that shortages in memory and other components are currently limiting its ability to meet the total market demand. These supply constraints may act as a ceiling on how quickly the company can scale its production to match incoming orders.
Furthermore, the geopolitical environment continues to influence the company's business model. Nvidia has excluded data center revenue from the China market in its current forward-looking projections due to ongoing administrative delays and trade-related friction. This cautious approach reflects the complex regulatory environment the company navigates in that region.
For investors, the key monitorables will be the company’s ability to manage its gross margins amidst higher component costs and its success in resolving supply chain limitations. While the shift toward artificial intelligence appears to be a sustained driver of growth, the company's valuation—now exceeding $5 trillion—means that even slight variations in supply capacity or cost structures could influence future market sentiment.