Nvidia stock (NASDAQ: NVDA) drew attention Thursday after the chipmaker delivered a record quarter and offered a bullish view of how long the artificial-intelligence spending boom can run.
Fiscal second-quarter revenue reached $96.22 billion, up 106% year over year and above the $92.17 billion expected by analysts.
Data-centre revenue hit $89 billion, while Nvidia guided for $108 billion of third-quarter sales. Shares initially slipped before reversing higher in extended trading.
70% growth says Nvidia sees years of AI demand ahead
The biggest surprise was Nvidia’s rare long-range forecast.
Management expects revenue to grow about 70% in fiscal 2028, which ends in January 2028.
Wall Street had been modelling growth of roughly 44%, making the outlook a major statement that Nvidia does not see AI infrastructure spending approaching a near-term peak.
Futurum Equities chief market strategist Shay Boloor told Reuters that the forecast looks more credible because “demand is broadening beyond the original hyperscalers.”
AI clouds, enterprises, sovereign customers and industrial companies are becoming larger buyers alongside Microsoft, Amazon, Meta and other technology giants.
Nvidia also expects AI labs to account for roughly one-quarter of its overall business next year.
If 70% growth proves achievable, Wall Street earnings forecasts could still be too conservative.
71%-72% margins show growth is getting more expensive
Nvidia maintained an adjusted gross margin of about 75% in Q2 and expects roughly 74% in Q3.
However, management warned that margins could bottom between 71% and 72% in the January quarter before stabilising around 72%-73% in the following fiscal year.
The pressure comes largely from surging memory and component costs as AI demand strains supply.
That matters because Nvidia’s valuation has been supported not only by extraordinary revenue growth, but by exceptional profitability.
If sales continue climbing while margins contract, investors may demand more evidence that each additional dollar of AI revenue can generate sufficient earnings.
Forrester principal analyst Naveen Chhabra told MarketWatch that supply shortages and pressure on customers to demonstrate returns on AI investment are becoming “the dominant strategic issues.”
His point reaches beyond Nvidia’s costs. Customers must increasingly prove that expensive AI infrastructure generates measurable business value if current spending growth is to continue.
Also read- Nvidia to buy Hugging Face for $12.9B in major open-source AI bet: report
Supply constraints create a different problem for Nvidia
The third number is less precise but potentially just as important: Nvidia cannot currently satisfy all the demand customers are forecasting.
CFO Colette Kress told analysts that customer forecasts point to Nvidia’s growth potentially doubling next year, but added that the company remains supply-constrained.
That sounds bullish, yet it creates a difficult stock-market problem.
Seaport Research Partners analyst Jay Goldberg, speaking to Bloomberg, asked: “They’re sold out and where do you get upside when you’re sold out?”
His argument is not that AI demand is weakening, but that Nvidia may have less ability to deliver the enormous upside surprises investors have grown accustomed to when available capacity is already largely allocated.
Memory availability is particularly important, while manufacturing capacity and other components can also limit shipments.
That leaves Nvidia with an unusual challenge after another blockbuster quarter.
Demand remains exceptional and management is forecasting growth far beyond Wall Street’s previous assumptions. At the same time, margins are falling and supply constraints limit how quickly that demand can become revenue.
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