NVIDIA's Q2 earnings exceeded expectations but gross margin contracted quarter-over-quarter despite record revenues.

Nvidia reported record second-quarter revenues as global data centers accelerated their modernization efforts with accelerated computing and generative AI. Founder and CEO Jensen Huang stated: "NVIDIA achieved record revenues as global data centers are in full throttle to modernize the entire computing stack with accelerated computing and generative AI." The company's earnings and revenue more than doubled from the year-ago period. However, despite these strong results, the stock declined 3.6% in after-hours trading.

The sequential decline in gross margin was attributed to inventory provisions for low-yielding Blackwell material and a higher mix of new products within the data center business, potentially referring to the H20 chips developed exclusively for China. CEO Huang noted that Hopper demand remains strong and that "the anticipation for Blackwell is incredible," with Blackwell samples already shipping to partners and customers. He also highlighted that "Spectrum-X Ethernet for AI and NVIDIA AI Enterprise software are two new product categories achieving significant scale, demonstrating that NVIDIA is a full-stack and data center-scale platform."

Nvidia's board approved an additional $50 billion in share repurchases without expiration, and the company announced a quarterly cash dividend of 1 cent per share payable October 3 to shareholders of record as of September 12. The remaining business segments also posted revenue growth both year-over-year and sequentially.

Looking ahead, Nvidia issued third-quarter revenue guidance of $32.5 billion plus or minus 2%, compared to consensus estimates of $31.69 billion. The company guided to a third-quarter non-GAAP gross margin of 75% plus or minus 50 basis points, with full-year guidance for a non-GAAP gross margin in the mid-70% range. Consensus estimates for annual earnings and revenue stand at $2.75 per share and $121.63 billion, respectively.

Analysts focused on the rumored delay in the Blackwell 200 AI accelerator, attributed to a design flaw. Fund manager Louis Navellier expected investors to scrutinize management commentary on the chip's timeline more closely than the quarterly results themselves. TFI analyst Ming-Chi Kuo said he would examine whether the Blackwell 200 re-tape-out would impact profit and margin near-term, noting that if Nvidia could provide details to allay investors' concerns about GB200 shipment schedules, it would benefit the stock performance of both Nvidia and its supply chain over the next three months.