Nvidia's highly anticipated earnings report was released yesterday after the market closed. The semiconductor giant exceeded analyst expectations and reported strong revenue growth in the second quarter. However, the stock fell. Why? The company not only exceeded second-quarter expectations but also projected 50% revenue growth going forward. However, data center revenues disappointed investors and analysts, sending the stock lower.
Nvidia reported adjusted earnings of $1.05 per share on revenue of $46.74 billion in the second quarter, a 56% increase year-over-year, beating Wall Street expectations of $46.06 billion in revenue and $1.01 in profit, respectively. Revenue marked nine consecutive quarters of growth above 50% since mid-2023, when Nvidia's AI boom began to take hold. However, the second quarter marked Nvidia's slowest growth since 2023.
Net profit also increased by 59% to $26.42 billion, compared to $16.6 billion in the same period last year. Nvidia's gaming division reached $4.3 billion in sales, a 49% increase compared to the same period last year. This division was Nvidia's largest before increasing data center sales. Nvidia announced in the quarter that its gaming GPUs will be tuned to run certain OpenAI models in personal computers. The robotics division, which management highlighted as a growth opportunity, remains a small part of Nvidia's business, but saw 69% year-over-year growth with $586 million in sales during the quarter.
Nvidia's growth was driven by its data center business, which focuses on graphics processors (GPUs) and complementary products for connecting and using them in large quantities. Revenue from the division increased by 56% year-over-year to $41.1 billion, but this figure fell slightly short of Wall Street's $41.34 billion estimate.
Nvidia CFO Colette Kress stated that $33.8 billion of Nvidia's data center sales were for "computing," or Nvidia's GPU chips, a 1% decrease from the first quarter due to a $4 billion decrease in H20 sales.
The CFO added that $7.3 billion of data center sales came from networking components needed to build Nvidia's more complex systems, nearly doubling the same period the previous year.
The company stated in the previous quarter that major cloud providers accounted for approximately half of Nvidia's data center business. These customers are currently purchasing the company's next-generation Blackwell chips. Nvidia announced that Blackwell sales increased by 17% compared to the first quarter. In May, Nvidia announced that sales of the new product line had reached $27 billion and accounted for approximately 70% of data center revenue.
During the third quarter, Nvidia announced that it expects to secure US licenses to ship its H20 chip to China. The processor, specifically designed for sale in China, cost Nvidia $4.5 billion in impairment charges and, according to the company's previous statement, could have added $8 billion to its second-quarter sales had it been commercially available during this period. Nvidia stated that it did not sell H20 chips to China this quarter, but benefited from selling $180 million worth of H20 inventory to a customer outside China. CFO Kress said that, depending on geopolitical developments, Nvidia could generate H20 revenue in the quarter between $2 billion and $5 billion.
Nvidia announced that its board of directors approved an additional $60 billion in share repurchases, but no deadline has been set. Nvidia repurchased $9.7 billion in shares during the quarter. Nvidia expects revenue of $54 billion for the quarter, but this figure does not include H20 shipments to China. Analysts had expected revenue of $53.1 billion, according to LSEG.
The company's second-quarter 2026 results confirmed that Nvidia's data center business is well-positioned in the global AI landscape. Kress said the company expects $3 trillion to $4 trillion in AI infrastructure spending by the end of the decade. Nvidia's earnings report comes just weeks after the company's largest customers, including Meta, Alphabet, Microsoft, and Amazon, released their results. These four companies are spending tens of billions of dollars each quarter on infrastructure investments as they race to develop AI models and services used by consumers and businesses.
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