NVIDIA Shares Surge 8.74% as Q2 Revenue Doubles and FY2028 Outlook Revives AI Rally

Key Takeaways

• NVIDIA shares closed 8.74% higher at $227.98 after fiscal Q2 2027 revenue more than doubled to $96.2 billion.
• Management projected approximately 70% revenue growth for fiscal 2028, well above prevailing Wall Street expectations.
• Rising memory costs are expected to pressure gross margins, while China restrictions and AI-infrastructure financing remain key risks.

NVIDIA Stock Records Its Biggest Post-Earnings Rally Since 2024

source: googlefinance

NVIDIA shares surged 8.74% on Thursday, August 27, closing at $227.98 as investors responded to stronger-than-expected fiscal second-quarter results and an unusually bullish long-term growth forecast.

The advance added roughly $440 billion to NVIDIA’s market value and produced the stock’s second-highest closing price, behind only its May 14 record close of $235.74. It was also NVIDIA’s strongest post-earnings percentage gain since May 2024.

The reaction marked a sharp reversal from Wednesday evening, when the shares initially traded lower as investors focused on gross-margin pressure. Sentiment changed during the earnings call after Chief Financial Officer Colette Kress projected revenue growth of approximately 70% for fiscal 2028, far above consensus expectations in the mid-40% range.

That guidance gave investors greater confidence that spending on artificial intelligence infrastructure could remain elevated beyond the current reporting period.

Data Center Revenue Drives Another Earnings Beat

NVIDIA reported revenue of $96.22 billion for its fiscal second quarter ended July 26, an increase of 18% from the previous quarter and 106% from a year earlier.

Adjusted earnings reached $2.22 per diluted share, compared with $1.01 in the same period last year. Wall Street had expected approximately $92.27 billion in revenue and adjusted earnings of $2.09 per share. Net income more than doubled to $59.69 billion.

Data center revenue remained the main growth engine, climbing 117% year over year and 18% sequentially to $89 billion. The segment accounted for more than 92% of NVIDIA’s quarterly sales, illustrating the company’s dependence on AI accelerators, networking equipment and related infrastructure.

The company also reported $7.2 billion in edge-computing revenue, up 27% from the previous year. This category includes gaming, professional visualisation, automotive and robotics products following NVIDIA’s revised reporting structure.

Fiscal 2028 Forecast Resets Growth Expectations

Management’s fiscal 2028 forecast was arguably more important to the market than the quarterly earnings beat.

NVIDIA expects revenue to increase approximately 70% during the fiscal year ending in January 2028. The company said the forecast reflects the supply it believes it can secure rather than the full level of customer demand, suggesting that component availability could limit growth more than order volumes.

For fiscal Q3 2027, NVIDIA guided revenue to $108 billion, plus or minus 2%. That was above Wall Street’s estimate of approximately $104.6 billion and would make the period NVIDIA’s first quarter with revenue exceeding $100 billion.

The company did not include any China-based data center computing revenue in that forecast. This makes the guidance less dependent on a recovery in Chinese sales, but it also highlights the revenue being restricted by export controls and regulatory uncertainty.

Also read NVDA Stock Forecast: Is $300 Within Reach After Record Q2 Earnings?

Vera Rubin and Customer Diversification Support Demand

NVIDIA said its next-generation Vera Rubin platform is entering full production, with systems operating at partners including CoreWeave, Google Cloud, Microsoft Azure, Oracle Cloud Infrastructure and Nebius.

Kress told investors that NVIDIA had received Vera Rubin orders from every major hyperscaler. Morgan Stanley analysts estimated that the platform could represent about one-fifth of current-quarter data center revenue, potentially accelerating the transition from Blackwell-based systems.

NVIDIA is also attempting to broaden demand beyond the largest cloud providers. The company highlighted growing activity among AI laboratories, startups, enterprises, sovereign AI projects and physical-AI developers. It also announced that SpaceXAI plans to deploy NVIDIA Vera CPUs for next-generation agentic AI applications.

Customer concentration nevertheless remains material. One direct customer accounted for 16% of fiscal Q2 revenue, while three customers represented nearly half of sales during the first six months of the fiscal year. Diversification is improving, but a slowdown at one or more large customers could still affect results.

Memory Costs Put Pressure on Gross Margins

NVIDIA recorded a 75% gross margin in fiscal Q2, but increasing memory prices are expected to weaken profitability during the second half of the year.

Management projected a fiscal Q3 gross margin of 74%, plus or minus 50 basis points. Margins are then expected to bottom between 71% and 72% in fiscal Q4 before stabilising at approximately 72% to 73% during fiscal 2028.

The company plans to introduce price increases at the beginning of fiscal 2028 to offset part of the higher cost of high-bandwidth memory and other components. However, NVIDIA appears prepared to absorb some cost inflation rather than passing the entire increase to customers.

This creates an important trade-off. Memory scarcity reflects exceptionally strong AI demand, but it can also constrain shipments, raise working-capital requirements and reduce the profit earned on each system.

Wall Street Raises NVIDIA Price Targets

Several analysts increased their NVIDIA price targets following the earnings release.

Raymond James raised its target from $352 to $515 and maintained a Strong Buy rating, citing NVIDIA’s fiscal 2028 outlook and the potential for revenue to approach $1 trillion in fiscal 2029 if supply constraints ease.

Bernstein SocGen lifted its target from $315 to $400, while Morgan Stanley raised its target from $288 to $300 and reiterated its overweight rating. Other revised targets included JPMorgan at $320, Mizuho at $315 and Goldman Sachs at $300.

These targets reflect analyst assumptions rather than guaranteed outcomes. Their wide range also demonstrates continuing disagreement over NVIDIA’s sustainable growth rate, margins and valuation.

China and Financing Risks Remain in Focus

Despite the strong regular-session rally, NVIDIA shares slipped about 1% in extended trading following a report that the company had paused parts of a recently launched revenue-sharing programme with smaller AI cloud providers.

The programme had offered financial support to cloud companies in exchange for a portion of the revenue generated by customers renting NVIDIA-powered computing capacity. NVIDIA said the model remained in place and was continuing to evolve, but the report revived concerns about the company using financing commitments to support demand for its products.

Investors are now likely to focus on the execution of the Vera Rubin ramp, memory availability, planned product-price increases, China export policy and whether NVIDIA can deliver its fiscal 2028 growth forecast without a sharper decline in profitability.

The earnings report strengthened the case that AI infrastructure demand remains robust. However, with NVIDIA trading close to its record high, future performance may increasingly depend on whether revenue growth, margins and cash generation can keep pace with substantially higher market expectations.