Despite Nvidia’s (NVDA) impressive financial results, business growth rates turned out to be largely predictable, believes Freedom analyst Natalia Milchakova. The market had anticipated a sharp revenue increase amid strong demand for AI chips, so the key positive signal was the continuation of large-scale purchases by customers and further expansion of their number. After the earnings release, Nvidia shares rose 7.7% in premarket trading.
Nvidia revenue rose 106% and beat the forecast
Nvidia is the largest developer of graphics processors and accelerators used to train and run artificial intelligence models. The main source of the company’s growth remains the data-center segment: its quarterly revenue reached $89 bn and increased 117% year over year.
In Q2, Nvidia revenue reached $96,22 bn versus $46,74 bn a year earlier, rising 106%. The consensus had assumed about $92,2 bn, so the company beat expectations by roughly 4,3%. Adjusted earnings were $2,22 per share versus the expected $2,09.
Milchakova estimates that strong momentum was driven by high global demand for powerful AI chips and increased purchase volumes from existing customers. Additional support comes from the expansion of Nvidia’s client base.
New cloud companies are expanding Nvidia’s client base
One source of additional demand is neocloud companies—specialized cloud providers that build computing infrastructure primarily for artificial intelligence tasks.
The emergence of such customers expands Nvidia’s buyer base beyond the largest technology corporations and supports demand for its accelerators. At the same time, cost control allowed the company to convert rapidly rising sales into profit growth.
Why Nvidia’s strong report was expected
Milchakova notes that a doubling of the business itself was no longer a surprise. Before the report was released, analysts had projected revenue growth of about 92% year over year. Nvidia cleared this high bar, but robust demand for its equipment had already been priced into market expectations.
At the same time, the company delivered a strong outlook for the next quarter. Nvidia expects revenue of about $108 bn, while the consensus was around $104,9 bn. The forecast does not include potential sales of data-center computing chips in China.
Nvidia shares rose after a decline on AI-bubble fears
Ahead of the report, Nvidia shares were under pressure due to investors’ concerns about a potential bubble forming around artificial intelligence. However, the results confirmed that demand for computing infrastructure remains high. In premarket trading on August 27, the stock was up about 7.7%.
Nvidia’s report showed that massive investments by the tech sector in AI continue to support demand for its equipment. However, a high base and expectations already embedded in valuations raise investors’ requirements for the company’s future results: for Nvidia shares to continue rising, it will need to keep beating already lofty forecasts.
Big Tech investment supports demand for Nvidia chips
Strong demand for Nvidia accelerators is supported by large-scale data-center construction and rising spending by technology companies on AI infrastructure. In Freedom’s August investment review, it noted that after the latest earnings season, capital expenditure forecasts for the largest technology companies were revised upward: 2026 targets increased by 17%. Analysts called Nvidia one of the main beneficiaries of this trend.
Previously, Freedom also assessed Nvidia’s prospects in the data-center market. According to analysts’ forecast, global data-center capex could increase from $420 bn in 2024 to $620 bn in 2026 and $1,1 tn by 2029. The rise in infrastructure spending creates an additional market for graphics accelerators and other Nvidia equipment.