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Nvidia (NVDA), an uncontroversial general in the AI trade, reported its second quarter (end of July) results on Wednesday after its conclusion, and the market treats it like a macro event. The company is the most important driver of the AI-LED Equity Rally, with a 7.6% weight recorded on the S&P 500, three times the overall energy sector. The expectation for this print is the height of the sky. Demand for hyperschool remains strong, with sovereign AI projects expanding, and the product transition from hopper to Blackwell (and soon Blackwell Ultra) looks smooth. At the same time, the risks are equally clear. China remains a troubling issue, with export controls disrupting H20 shipments and forced to improvise with an NVIDIA-compliant version. The competition between AMD and custom silicon grows quarterly. And the valuation is in the stratosphere, with stocks approaching 30x advance revenue despite a 30% annual rally.
Important metrics to watch
Street Consensus is looking for revenues of around $46 billion, slightly surpassing Nvidia's conservative $45 billion ± 2% guidance. The non-GAAP EPS is fixed at nearly $1.00 and has a wide range of estimates depending on the Chinese shipping assumptions. Analysts expect gross profits of around 71.8-72%, with management repeating their goal of reaching the 70% mid-term range as a Blackwell ramp later this year. Datacenter revenue remains a core driver, with forecasts of around $4.2-43 billion, up more than 70% from the previous year. While networking should contribute roughly $6 billion, gaming revenue is expected to normalize after a strong first quarter.
Guidance is equally important. For the third quarter, the consensus expects $53 billion and EPS revenue to be nearly $1.18, with several analysts modeling a nearly $55 billion model if China's shipments resume fully. Investors also analyze comments on operating expenses and net profit, taking into account NVIDIA operating leverage.
Products and Roadmap
Product launches remain at the heart of the Nvidia story. The Blackwell architecture, led by the GB200 GPU, is surged to Hyperscalers and Sovereign AI customers. Future GB300 (Ultra) refreshes are expected to improve inference workloads with high ASP and strong margins. Nvidia also lays the foundations for the next generation architecture “Rubin” scheduled for 2026, with CEO Jensen Huang seeing multiple tapeouts already being processed at TSMC. The migration of these products is being monitored carefully on the streets for signs of execution risk, but so far, Nvidia has demonstrated its ability to manage generational leap without disrupting customer demand.
The Chinese Dilemma
There are no more complicated issues than China. In the first quarter, export restrictions resulted in NVIDIA writing down its $4.5 billion H20 inventory, costing an estimated $2.5 billion in revenue. For the second quarter, the guidance already reflects around $8 billion in sales losses related to the China ban. The US government has since started issuing cargo licensing, and Nvidia is reportedly preparing a compliant version of Blackwell Chips for the Chinese market. Analysts estimate that if China reopens its freight fully, its quarterly revenue could account for between $600 billion and $10 billion, but management warns that the overall total address market could reach $50 billion and losing access would be a “significant negative impact.” The Bulls argue that the reopened sales represent pure advantages as the consensus largely excludes China in the short term.
Geographical Mix
Aside from China, Nvidia's revenue base remains diversified worldwide. The US continues to lead with Hyperscaler Capex as Amazon, Microsoft and Google are all expanding their AI infrastructure. Europe has emerged as a sovereign AI market, with Deutsche Telekom emerging among customers announcing large GPU purchases. In Asia, Taiwan and South Korea remain important manufacturing partners, with Japan and India beginning to expand their adoption of AI. Nvidia's ability to tap on these various markets helped mitigate China's shock and make growth rates extraordinary.
Q1 Summary
The first quarter set the stage for another blowout. Nvidia delivered an EPS (+33% year-on-year) adjusted to revenue of $44.1 billion (+69%), breaking street estimates despite a $4.5 billion Chinese post. Datacenter revenues surged 73% year-on-year to $39 billion, driven by Blackwell's ramps, which already accounted for nearly 70% of calculated revenue. Networking rose 64% to $5 billion, while gaming revenue reached $3.8 billion, up 48%. The total margin was 71.3% excluding China's accusations. This underscores Nvidia's pricing power. Management has given shareholders $14.3 billion back through buybacks and dividends, highlighting their trust in cash generation.
Growth indicators for Q2
For the second quarter, Street expects revenue growth of around +53%, with EPS rising nearly +50%. Continuingly, the consensus means revenue growth of around 4% from the first quarter. This appears conservative considering the Hyperscalar commentary and supply chain checks, suggesting a 20-25% growth in calculated cargo. If China's freight resumes meaningfully, some analysts believe revenue could exceed $48 billion. In particular, considering the mix shift to higher ASP blackwell GPUs, the total margin expansion is closely scrutinized.
Evaluation and market weighting
Nvidia's inventory is a paradox. It's expensive and definitely cheap. On a trailing basis, the company trades 30x forward revenues and nearly 30x sales, AMD multiples and even Broadcom's sales. However, the Bulls argue that growth justifies premiums. FY25 revenue was $130 billion, up more than 110% year-on-year, with analysts looking at a path of $200-30 billion in data center revenue by 2026.
The weight of a company within the index becomes systematically important. At 7.6% of the S&P 500, Nvidia alone is three times the impact across the energy sector. Disappointment can ripple across the market, but a strong beat can rekindle AI rally. Options activities suggest that traders are positioned for large movements, and have been buying over a large number of phones since September.
Conclusion
Wednesday's print is formed as one of the most resulting revenue events of the year. Nvidia enters with momentum: the demand for hyperschools, the build-out of sovereign AI, and the robust product pipeline are all tailwinds. The risk is real. China remains unstable, and AMD is hunger for shares. There is no room for error in the evaluation. However, as Nvidia offers another beat and Rays, the margins continue to rise and as management confirms the reopening of Chinese freight, stocks can once again reset the bar across AI trading. Due to the weight of markets and leadership roles in the AI ecosystem, Nvidia's second quarter results do not only determine the fate of one stock. They may decide the tone of their stock at the end of the year.
