Nvidia (NASDAQ: NVDA) delivered a stunning set of results for its fiscal 2027 second quarter, ending July 26, 2026, easily surpassing Wall Street’s revenue expectations and sending its stock up nearly 9% the following day.
The chipmaker reported $96.2 billion in quarterly revenue, crushing analyst estimates of $92.2 billion and representing a remarkable 106% increase from the same period a year ago.
The data center segment was the clear standout, generating $89 billion in revenue and growing at an even faster rate of 117% year over year.
Nvidia’s adjusted non-GAAP earnings also surged by 120% to $2.22 per share during the second quarter, driven in large part by the company’s ability to dictate prices amid a global shortage of AI chips.
The company’s new Vera Rubin systems, which include Rubin GPUs, Vera CPUs, and advanced networking components, deliver up to 30 times more performance per megawatt than its previous Blackwell Ultra systems.
Nvidia says Vera Rubin systems will also reduce inference token costs by 97% compared to Blackwell Ultra, which could dramatically lower the cost of deploying AI software and accelerate demand across the industry.
Despite its rapid growth, Nvidia’s stock trades at a price-to-earnings ratio of just 34.9 based on adjusted trailing 12-month earnings of $7.01 per share, well below its 10-year average P/E of 61.5.
In an unusual move, Nvidia also issued forward revenue guidance for fiscal 2028, projecting growth of at least 70%, a disclosure that caught Wall Street’s attention given the company rarely offers guidance a year in advance.
However, a growing concern surrounds what are being called circular financing deals, where Nvidia invests directly in AI companies and partially finances their purchases of its own GPUs and hardware.
Chief financial officer Colette Kress indicated that around 25% of Nvidia’s fiscal 2028 sales will come from customers the company has financed in some way, which could represent roughly $168 billion if total revenue tops $670 billion next year.
Nvidia has invested in a wide range of major AI labs, including OpenAI, Anthropic, xAI, Mistral AI, and Perplexity, many of which continue to lose significant sums of money as they build out their models.
Nvidia says the top five hyperscalers, which include companies like Microsoft and Amazon, will collectively spend $800 billion on AI infrastructure this year and a further $1.3 trillion the following year.
Smaller AI labs lack the same financial resources as these hyperscalers, which is precisely why Nvidia has stepped in to help fund their hardware purchases through these circular arrangements.
While Nvidia management has characterized these financing arrangements as low risk, the concentration of revenue tied to companies that cannot independently afford to pay for products upfront is a notable vulnerability.
If the AI boom were to slow or hit a serious obstacle, the financial exposure embedded in these circular deals could create volatile and unpredictable results for Nvidia going forward.
For investors with limited exposure to AI stocks, Nvidia still represents a potentially compelling opportunity given its valuation, dominant market position, and extraordinary growth trajectory.
Nvidia is widely expected to remain the leading supplier of AI hardware for years to come, but watching how circular financing evolves as a share of total revenue will be critical for assessing the stock’s long-term risk profile.
