Nvidia reported second-quarter earnings, delivering $46.7 billion in revenue, a rise of 6% from Q1 and 56% higher than the same quarter last year, according to an earnings report published Tuesday.
But the market didn’t reward it. Instead, the stock dipped in extended trading as the company’s data center unit, which Wall Street treats like the heartbeat of its AI engine, underperformed estimates again.
The numbers weren’t soft. Nvidia’s Blackwell Data Center revenue climbed 17% quarter-over-quarter, showing demand is still running hot. But expectations were too high for just “hot.” The company also revealed that it made zero sales of its H20 AI chips to Chinese customers during Q2.
Instead, it leaned on a $180 million inventory release of previously held H20 units and sold around $650 million worth of unrestricted H20 chips to one buyer outside China. It helped smooth out the financials, but it didn’t fix the market’s mood.
Nvidia pads margins and EPS with inventory release, skips China
Gross margins were 72.4% GAAP and 72.7% non-GAAP. Without the $180 million bump from that inventory release, the non-GAAP margin would’ve been 72.3%. The company also printed $1.08 in GAAP EPS and $1.05 in non-GAAP EPS. Again, take out the H20 trick and tax adjustment, and the number drops to $1.04 per share.
In the middle of all this, CEO Jensen Huang threw the spotlight on the company’s flagship AI product line. “Blackwell is the AI platform the world has been waiting for, delivering an exceptional generational leap,” Jensen said , adding that production of Blackwell Ultra chips was moving fast.
He said demand is “extraordinary.” He also highlighted Nvidia’s NVLink rack-scale computing, calling it “revolutionary” and claiming it arrives just in time to handle the load from new reasoning-based AI models.
While AI demand might be “extraordinary,” investors clearly expected more. Despite Nvidia’s year-to-date stock gain of 35%, and its 2024 run where it almost tripled, the stock still dropped after the bell.
That’s two quarters in a row where the data center segment missed analyst estimates. Wall Street doesn’t care how fast the chips are if the money doesn’t land exactly where expected.
Company ramps up buybacks, eyes $54 billion in Q3 revenue
The company’s shareholder returns in the first half of fiscal 2026 were heavy. Nvidia gave back $24.3 billion in the form of stock repurchases and dividends. At the end of Q2, it still had $14.7 billion left in buyback authorization. Then on August 26, the board added another $60 billion, with no expiration date.
Nvidia also announced that its next dividend will be $0.01 per share, payable on October 2, 2025, to shareholders who are on the books by September 11, 2025.
Looking ahead, the company’s Q3 revenue forecast came in at $54 billion, plus or minus 2%. Just like this quarter, Nvidia expects no sales of H20 chips to China in that period either.
The company forecasted gross margins of 73.3% GAAP and 73.5% non-GAAP, with a 50 basis point wiggle room either way. It also said it expects to exit the fiscal year with non-GAAP gross margins in the mid-70s.
Operating expenses are set to climb. Nvidia projected $5.9 billion GAAP and $4.2 billion non-GAAP for Q3. The company also told investors to expect high-30% full-year growth in overall operating costs.
For non-core income, it expects $500 million, excluding swings in private or public equity holdings. Tax rates are locked at 16.5%, give or take 1%, unless anything unusual happens.
Even with all this, the market wasn’t thrilled. The same company that helped ignite the AI trade and posted one of the largest rallies in 2024 is now being punished for delivering “just strong” instead of “insane.”
Wall Street gave Nvidia credit for revolutionizing compute. But now, it’s demanding faster, bigger, and somehow cleaner growth, even when margins are north of 70% and revenue is climbing by billions every few months.
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