Nvidia Corp 2027 Q2 Earnings Call

Thank you. Good afternoon, and welcome to NVIDIA's conference call for the second quarter of fiscal 2027. With me today from NVIDIA are Jensen Huang, President and Chief Executive Officer, and Colette Kress, Executive Vice President and Chief Financial Officer. Our call is being webcast live on NVIDIA's investor relations website. The webcast will be available for replay until the conference call to discuss our financial results for the third quarter of fiscal 2027. The content of today's call is NVIDIA's property. It cannot be reproduced or transcribed without our prior written consent. During this call, we may make forward-looking statements based on current expectations. These are subject to a number of significant risks and uncertainties, and our actual results may differ materially.

For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release, our most recent Forms 10-K and 10-Q, and the reports that we may file on Form 8-K with the Securities and Exchange Commission. All our statements are made as of today, August 26, 2026, based on information currently available to us. Except as required by law, we assume no obligation to update any such statements. During this call, we will discuss non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our CFO commentary, which is posted on our website. With that, let me turn the call over to Colette.

Thanks, Toshiya. We delivered another outstanding quarter with record revenue, operating income, and EPS. Total revenue of $96 billion more than doubled year-over-year as growth accelerated for the fourth consecutive quarter. The surge in AI demand is driving a global infrastructure build-out, supported by an expanding and diverse set of growth opportunities, spanning hyperscalers, AI labs, AI natives, enterprises, and sovereign customers. We expect to grow revenue by approximately 70% in fiscal 2028. This is a supply-constrained outlook. Q2 data center revenue increased 18% quarter-over-quarter to $89 billion, with strong contributions from both sub-segments, hyperscale and ACIE, which includes our NeoCloud, industrial, and enterprise customers. Hyperscale revenue of $49 billion grew 13% sequentially, driven by sustained strength in Blackwell.

Reinforcing that more compute drives more revenue as new GPU capacity comes online, our hyperscale customers delivered strong financial results in the quarter, with accelerating revenue growth and expanding margins. With cloud industry backlog now greater than $2 trillion, CapEx by the top five hyperscalers is expected to reach nearly $800 billion in 2026 and $1.3 trillion in 2027. Today, we are delighted to announce an expansion of our partnership with AWS. Building on its already vast installed base of NVIDIA Compute, AWS is deploying an additional 2 million GPUs starting this quarter through the second quarter of fiscal 2029, along with Vera CPUs, some integrated with Rubin, others standalone. AWS will serve NVIDIA Nemotron family of open models on Amazon Bedrock and SageMaker. Amazon will also adopt our full physical AI stack, Omniverse, Cosmos, Isaac, and Jetson to power its fleet of warehouse robots.

ACIE revenue of $40 billion increased 25% sequentially and 138% year-over-year. Growth was driven by NeoCloud capacity additions to meet the rising demand from enterprises, AI startups, and sovereigns, as well as hyperscalers purchasing capacity to supplement their own build-outs. Using NVIDIA DSX reference designs, our NeoCloud partners are bringing capacity online faster and at lower token cost. They are expected to exit the year with 8 gigawatts in total installed capacity, up from approximately 3 gigawatts at the end of 2025. Incredibly, we are seeing demand acceleration even at our scale. Customers' forecasts point to our growth doubling next year. However, as I mentioned earlier, we expect to grow approximately 70% as we are supply-constrained. NVIDIA Compute is fully utilized across every cloud we serve. The economic value it generates for our hyperscale, NeoCloud, and AI lab partners keeps rising.

Besides building the best AI computing technologies and the most capable supply chain, NVIDIA has three unique capabilities that are engines powering our growth. First, NVIDIA's architecture runs every model, and we're growing share as closed and open model adoption grow. Closed and open models alike, adoption is skyrocketing. NVIDIA runs the leading closed models, OpenAI, Anthropic, Groq, Meta, Gemini, and the leading open models, Thinking Machines Lab, Mistral AI, Qwen, Kimi, GLM, DeepSeek, MiniMax, and Nemotron. We're great at small models and giant ones, large or video, auto, regressive or diffusion, in the cloud or in the edge. NVIDIA is great at training, great at inference, great at agentic workloads. One platform, fungible for every model and workload. Durable for the entire life cycle of AI. That combination of performance, fungibility, and durability is what makes NVIDIA the productive and financiable compute infrastructure.

Our second unique capability is our full stack AI factory platform that is expanding our share of the data center TAM. Since Hopper, our revenue opportunity has grown from roughly $18 billion per gigawatt to $25 billion with Blackwell, to $40 billion with Vera Rubin, which now spans Vera CPU, Rubin GPU, NVLink, InfiniBand or Ethernet, and Groq LPU, announced earlier this week. Our ability to extreme co-design across GPU, CPU, NVLink scale-up networking, scale-out networking, systems, algorithms, and software enables us to deliver X factor performance gain every generation. Vera Rubin exemplifies this, delivering 30x higher throughput per megawatt and 35x lower token cost relative to Grace Blackwell Ultra. We commenced production shipments of Vera Rubin earlier this month. Having already received purchase orders from every major hyperscaler, AI cloud, and system OEM, we expect Vera Rubin to mark the fastest product ramp in NVIDIA's history.

Our networking business had another record quarter, with revenue growing 18% on a sequential basis. Spectrum-X Ethernet, which grew 2.6x on a year-over-year basis, is already helping us become the largest and fastest-growing network company in the world. Rising adoption of agentic AI is driving an acceleration in demand for data center CPUs. Our Grace CPU, introduced in 2021, has been a great success, with revenue on a trailing 12-month basis exceeding $5 billion. Today, we are in full production of our next generation Vera CPU. As a standalone product, Vera expands our TAM even further. Vera completes agentic tasks 1.8x faster on the spec benchmark and provides five times the bandwidth per watt than any other data center CPU.

We expect Vera to be deployed by every major hyperscaler, NeoCloud, AI lab, and system OEM, with shipments already underway to our lead partners, including Oracle Cloud Infrastructure, SpaceX AI, and starting this quarter, AWS. We continue to see demand for approximately $20 billion in total server CPUs. Based on our customer demand and improving supply outlook, our preliminary expectation is for CPU revenue to more than double in fiscal 2028, positioning us as one of the world's leading server CPU suppliers. Since the announcement of our Groq partnership last year, we've been working to unite NVIDIA's high throughput and Groq's high interactivity architectures. At Hot Chips earlier this week, we announced that Groq 3 LPX, our first rack-scale LPU system, is in full production and already setting records, demonstrating nearly 4x the number of tokens per second against the next best alternative on our Artificial Analysis benchmark.

We expect to ship Groq 3 LPX in volume later this quarter to early adopters. Nebius will be the first. Today, we're not just selling the best chips, we're selling a full stack AI factory platform, offering superior economics for customers and capturing a bigger share of the data center TAM. Our third unique capability is the combination of our full stack AI factory and rich CUDA ecosystem, allowing us to extend AI into markets a single chip alone can never reach. Beyond the hyperscalers lies a massive market anxious to adopt AI, customers with no interest in designing their own custom silicon.

NVIDIA's fully proven full stack platform is uniquely suited to help sovereigns, NeoClouds, and enterprises build their AI infrastructure, bring it to full operation, continuously optimize it through CUDA software, and connect it to offtake demand from our vast developer ecosystem. Hyperscalers will remain a major growth driver, but non-hyperscaler growth, our ACIE segment spanning sovereign regional NeoClouds, enterprise edge, and air gap data centers will represent roughly half of our data center business. Our AI native startup ecosystem, developed and running primarily on the NVIDIA compute platform, is scaling at a rapid pace. Global VC funding in AI, roughly 70% of which is spent on compute, exceeded $400 billion in the first half of 2026, surpassing the $265 billion raised in all of 2025.

Nearly 20 companies, including Cursor, owned by SpaceX, Figma, and Together AI, now exceed $1 billion in annualized run rate revenue, up from 13 companies in Q4 of last year, with vertical enterprise software logging the fastest growth. In enterprise, on a trailing 12-month basis, on-prem revenue in the automotive vertical reached $8 billion, while financial services, manufacturing, and healthcare combined contributed $7 billion in revenue. Hudson River Trading and Jane Street are leveraging NVIDIA-powered AI factories to accelerate quantitative trading. Samsung Electronics is using NVIDIA cuLitho to achieve up to 20x greater performance in computational lithography, while Bristol Myers Squibb is investing in Vera Rubin AI factory, a fast follow to the Roche and Lilly build-outs as drug R&D timelines compress from years to months. In sovereign AI, our business, primarily through the regional NeoClouds, grew 35% sequentially and more than tripled year-over-year in Q2.

A country or region can allocate land and power directly to a regional cloud partner in ways it never would to a foreign hyperscaler. We don't own a cloud ourselves. We are a neutral partner to every sovereign and NeoCloud. Because NVIDIA Compute is productive, fungible, rentable, and durable, regional cloud interest is surging around the world. We helped CoreWeave, Nebius, and Nscale build entire infrastructure businesses, and NeoClouds are emerging everywhere. Firebird in Armenia, Cassava Technologies across Africa, GMI Cloud in Taiwan, Yotta and Neysa in India, Firmus in Australia, YTL AI Cloud in Malaysia, pairing local land, power, and operating expertise with our platform. Last month, we announced a partnership with Noetra, Japan's national AI company, to build an NVIDIA DSX AI factory that will create open models to power AI agents, digital twins, robotics, and physical AI applications.