NVIDIA Surpasses Earnings and Guidance Expectations, Yet Stock Falls in After-Hours Trading

[By Myung Jeong-seon, Block Media] NVIDIA has exceeded market expectations with its Q2 fiscal year 2027 earnings and next quarter revenue forecast. Core data center revenue increased by 117% year-on-year, accounting for 92% of total revenue. It has also been confirmed that investments in artificial intelligence (AI) infrastructure are spreading beyond large tech companies to businesses and industries as a whole. Although the next quarter's revenue forecast has surpassed Wall Street's expectations, the stock fell in after-hours trading. Despite the sharp growth in earnings, it was deemed insufficient to meet the heightened expectations of investors, shifting market attention to the sustainability and growth rate of future AI investments.

NVIDIA announced on the 26th (local time) that its adjusted earnings per share (EPS) for Q2 of fiscal year 2027 reached $2.22, exceeding the market expectation of $2.10 by approximately 5.7%.

Quarterly revenue was $96.22 billion, surpassing the market expectation of $92.17 billion by about 4.4%. This represents a 106% increase compared to $46.7 billion in the same period last year, more than doubling.

Net income also rose to $53.95 billion, more than doubling from $24.76 billion in the same period last year. EPS increased from $1.87 in the same period last year to $2.22. This net income includes a valuation gain of $7.8 billion from equity investments. NVIDIA has been making large-scale investments in companies like Intel and SpaceX.

Data Center Revenue at $89 Billion, Accounting for 92% of Total Revenue

The key driver of NVIDIA's high growth has been its data center business.

In Q2, data center revenue reached $89 billion, exceeding the market expectation of $86.33 billion as compiled by StreetAccount. The year-on-year growth rate reached 117%.

The share of the data center business in total revenue has risen to 92%. This highlights that NVIDIA's performance is essentially driven by the AI semiconductor and data center investment cycle.

Notably, the demand for AI investments is not concentrated solely among a few large hyperscalers.

NVIDIA's AI cloud and enterprise customer segment, ACIE, saw revenue soar to $40.3 billion, a 138% increase year-on-year. Revenue related to hyperscalers also recorded $48.7 billion, more than doubling.

While large internet companies still account for a significant portion of NVIDIA's revenue, the demand for AI infrastructure in the corporate and industrial sectors is growing at a faster pace. This expansion of the AI investment base is seen as a key indicator for assessing NVIDIA's future growth potential.

NVIDIA maintains a dominant position in the GPU market used for AI model training and inference. Although it has been about four years since the generative AI boom began, the doubling of data center revenue has alleviated concerns about a slowdown in AI infrastructure investment to some extent.

Next Quarter Revenue Forecast at $108 Billion, Exceeding Expectations Without Chinese Revenue

Another aspect of the earnings report that caught the market's attention was the guidance.

NVIDIA projected current quarter revenue at $108 billion, with a range of ±2% around this forecast. This is approximately 3.6% higher than the market expectation of $104.2 billion.

Notably, this forecast does not include revenue from Chinese data centers. Even under the assumption that no additional revenue will be generated from the Chinese market, NVIDIA has provided a forecast that is higher than Wall Street's expectations.

This is interpreted as a signal that global AI infrastructure investments continue to support NVIDIA's growth. While there may be additional growth potential if the Chinese business normalizes, the current guidance does not reflect this, which is likely to increase market interest.

However, there are also burden factors in the growth process. A global memory supply shortage continues, leading to a rapid increase in memory prices. As demand for high-performance memory required for AI servers surges, a prolonged supply shortage could impact the supply and profitability of next-generation AI semiconductors.

The expansion of AI semiconductor competition, particularly among AMD and Google, is also a variable. Even if NVIDIA maintains its market dominance, the competition from big tech companies developing their own AI accelerators and rivals is a factor to watch in the medium to long term.

"Numbers" Surpassed, Yet After-Hours Decline... Heightened Expectations as a Variable

Despite both earnings and guidance surpassing market expectations, NVIDIA's stock fell in after-hours trading.

On this day, NVIDIA closed at $209.66, down 1.59% from the previous trading day. In after-hours trading following the earnings announcement, it fell further to $207.73, a decline of an additional 0.92%. Immediately after the earnings report, the stock sharply dropped to around $205 before recovering some of the losses, showing high volatility.

The decline in stock price despite strong earnings indicates that investor expectations for NVIDIA have risen significantly.

In the previous four earnings announcements, key metrics including EPS and revenue also met or exceeded market expectations, but the stock price fell on the following trading day each time. After a steep rise in stock price over the past three years due to the AI boom, it has become difficult to drive further increases based solely on surpassing expectations.

As of the close of regular trading on this day, NVIDIA's stock price has risen approximately 13% this year. This is slightly higher than the Nasdaq index, but compared to the record rise over the past three years, the stock's momentum has slowed.

Ultimately, investor attention is shifting from the earnings numbers to the explanations from Jensen Huang, NVIDIA's CEO. The market is expected to confirm the management's comments on the demand for next-generation AI semiconductors, the impact of memory supply shortages, and the sustainability of AI infrastructure investments during the conference call.

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