Nvidia Delivers Big, But the Market Isn’t Buying It
A straight forward breakdown on the latest Nvidia earnings and what it means going forward.
I’m sure that you’re going to see these results covered across several different news outlets but I wouldn’t consider myself a tech investor if I didn’t cover the latest Nvidia earnings. To my great satisfaction, Nvidia has once again delivered a blockbuster earnings report, reinforcing its dominance in AI and data center computing. I’m a big fan of Nvidia for many reasons. From a technological standpoint, they have advanced computing in unimaginable ways, and they continue to do so. The reason why Nvidia earnings are so important is firstly because it’s at the forefront of the ‘AI Revolution’, and its performance directly informs the market on the strength of demand for AI. Secondly, it has a lot of weight within US stock indexes, and therefore, its performance directly impacts the US stock market. However, the market wasn’t very excited by these results, and before I dive into the negatives, I’ll start with the positives.
Once again, Nvidia posted strong earnings, reporting a record-breaking quarterly revenue of $39.3 billion, representing a 12% sequential increase and an impressive 78% YoY growth. This exceeded analyst expectations of $38.9 billion, highlighting the company’s ability to outperform even the most optimistic projections. The Data Center segment remains the primary growth driver, generating $35.6 billion in revenue, an increase of 16% from the previous quarter and a remarkable 93% surge compared to the same period last year. For the full fiscal year, Data Center revenue reached $115.2 billion, reflecting a substantial 142% increase. Nvidia’s dominance in the Data Center market remains unchallenged, reinforcing confidence that demand for AI adoption is not slowing down. To add to this point, demand for Nvidia’s AI accelerators remains exceptionally strong, with Blackwell AI supercomputers generating $11 billion in sales within their first quarter. This surge in adoption extends beyond AI, with Nvidia’s technology now deeply embedded in the cloud computing ecosystem. Major providers like AWS, Google Cloud, Microsoft Azure, and Oracle are rapidly expanding their infrastructure to support the growing demand for AI-driven capabilities through Nvidia GB200 systems.
An under-the-radar part of the release that caught my attention was Nvidia’s networking business. Despite the 3% sequential decline, it remains strong with networking attached to GPU compute systems exceeding 75% adoption. The big shift here is Nvidia’s transition from InfiniBand to Spectrum-X, essentially moving from an old but fast networking motorway to a brand-new AI-optimised express lane. NVLink, the tech that connects Nvidia GPUs, is getting a massive upgrade from NVLink 8 to NVLink 72, making AI training smoother and faster than ever. Meanwhile, Spectrum-X and NVLink switch revenue is already growing, and Cisco just announced that it is integrating Spectrum-X into its networking portfolio. This move should supercharge AI adoption across industries. One of the most exciting developments is that Project Stargate will be built using Spectrum-X networking. This reinforces Nvidia’s vision and dominance in scaling AI infrastructure to meet the surging demand. With hyperscalers like Microsoft Azure, Oracle, and CoreWeave building AI factories on Spectrum-X and Cisco expanding its reach, Nvidia’s networking segment is becoming a key pillar of its AI moat.
Arguably, the only bad news from the release was Nvidia’s shrinking gross margins and rising operating expenses. Although still strong at 73.0%, the gross margin declined slightly from 74.6% last quarter due to increased costs and investments. Operating expenses rose by 11%, reflecting higher engineering development costs and increased spending on compute and infrastructure for new product launches. However, management addressed this in the earnings call, stating that it was due to the rollout of new products and should normalise throughout the year. This is pretty standard; operational costs rise and margins shrink when manufacturing and rolling out a new product, so in my opinion, this is nothing of great concern. Operating income for the quarter was $24.0 billion, a 77% increase YoY. Net income experienced an 80% rise, reaching $22.1 billion. Non-GAAP earnings per share stood at $0.89, reflecting a 71% increase YoY and surpassing analyst projections of $0.86, further demonstrating Nvidia’s exceptional profitability.
While Data Center revenue remains the dominant force, Nvidia continues to see mixed results across its other segments. Gaming revenue amounted to $2.5 billion for the quarter, reflecting a 22% sequential decline and an 11% YoY drop due to a slowdown in gaming-specific GPU sales. However, the Automotive segment, one I’m most excited about, experienced exceptional growth, surging 103% YoY to $570 million, fueled by partnerships with Toyota and Hyundai. Professional Visualization also showed strength, with revenue increasing 10% YoY to $511 million as demand for AI-driven creative tools continued to grow. Nvidia is further expanding its AI PC and Omniverse initiatives, launching the GeForce RTX 5090 and 5080 GPUs and introducing new AI tools for developers aimed at integrating generative AI into gaming and creative workflows.
I’m most excited about Nvidia’s Cosmos platform, which provides a simulated environment to train robots. Launched in March 2024, Cosmos is designed to accelerate robotics development by allowing AI models to learn and refine their capabilities in a virtual space before deployment in the real world. By leveraging physics-based simulations and Nvidia’s AI models, Cosmos enables robots to practice tasks like manipulation, navigation, and autonomous decision-making without the risks and costs of physical testing. This platform is a game-changer for industries such as manufacturing, logistics, and autonomous vehicles. As AI-driven robotics continue to evolve, Cosmos is helping bridge the gap between simulation and real-world deployment, making intelligent automation more scalable and accessible than ever before. I believe the next major shift in tech beyond AI will be the mass adoption of robotics across industries, and Nvidia is already positioning itself to lead that market.
Outlook
Looking ahead, Nvidia projects $43 billion in revenue for the first quarter of fiscal year 2026, with continued gross margin expansion. Demand for AI accelerators remains strong as enterprises, cloud providers, and research institutions continue integrating AI-driven computing at scale. The rapid adoption of Nvidia’s GB200 systems across major cloud providers suggests that AI workloads are still in an early growth phase. Beyond data centers, Nvidia is expanding its presence in automotive AI and robotics, with advancements in self-driving technology and AI-powered manufacturing broadening its market reach. While the gaming segment faces challenges, upcoming AI-enhanced gaming experiences and next-generation GPUs, announced at CES, could drive a recovery. With its dominance in AI infrastructure and accelerating revenue growth, Nvidia remains at the forefront of next-generation computing. Nvidia is not just selling AI chips. It is building the foundation of AI infrastructure. Operations are rapidly scaling to meet surging demand, reflected in rising capital expenditures. CEO Jensen Huang emphasised that AI is evolving at an extraordinary pace, with agentic AI and physical AI driving the next wave of computing innovation. With a firm position as the most critical player in AI hardware, demand for products and services remains strong, with no signs of slowing down. Dominance in both training and inference continues to strengthen while the AI ecosystem expands across cloud computing, robotics, and autonomous systems.
Conclusion
Valuation concerns have followed Nvidia throughout its rise, but at current levels, it appears more reasonable. Trading at just under 50x earnings, it is a far more digestible figure compared to the ~122x multiple seen in 2023. Given sustained growth, market positioning, and the increasing reliance on AI infrastructure, the valuation now looks more aligned with long-term potential. Despite a strong report, it wasn’t a blowout one, which doesn’t sit well with the market. Nvidia closed ~10% lower in the session following the results. The market is used to blowout earnings beats, but as expectations rise and gross profit margins tighten, this is almost impossible to realise. As a result, investors perceive this as a lack of demand. I wouldn’t view it as a lack of demand, I would just see it as there being less demand in comparison to the start of the AI rollout, which is completely understandable. It does slightly concern me that the chart has closed below the 200-day moving average as this hasn’t happened since the start of 2023, but in the long run, it doesn’t have the utmost importance. I can sit here all day long and write about how the earnings were strong but at the end of the day, the market decides and clearly, the markets weren’t happy this time around. Despite this, I maintain a positive outlook on Nvidia throughout the rest of this year.
I hope you enjoyed my breakdown of Nvidia’s earnings release. If you did, feel free to share it with colleagues, friends, or anyone else who might find it interesting. Stay tuned for a deep dive into an exciting company on the weekend!
Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. The views expressed are my own and based on publicly available information, market trends, and personal analysis. I own Nvidia stock which may change at any time. Readers should conduct their own research and consult a financial professional before making any investment decisions.