NVIDIA Corp (NVDA) 10-Q 2025: AI Summary

Summary

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NVIDIA reported Q2 FY2026 revenue of $46.7B (up 56% YoY), net income of $26.4B, and diluted EPS of $1.08, with Data Center revenue of $41.1B driven by the Blackwell ramp.

Revenue increased 56% YoY to $46.7B and 6% sequentially, which management attributes to demand for the accelerated computing platform used for large language models, recommendation engines, and generative and agentic AI applications, and to the continued Blackwell architecture ramp. Gross margin decreased 2.7 percentage points YoY to 72.4% as Blackwell revenue consists primarily of full-scale datacenter systems compared to Hopper HGX systems last year, and increased 11.9 points sequentially as the prior quarter included a $4.5B charge associated with H20 excess inventory and purchase obligations. Operating expenses rose 38% YoY, which management attributes primarily to compute and infrastructure costs and higher compensation and benefits due to compensation increases and employee growth.

Revenue rose 56% YoY to $46.7B and 6% sequentially from $44.1B, with Compute & Networking revenue of $41.3B (up 56% YoY) and Graphics revenue of $5.4B (up 51% YoY).
Net income was $26.4B (up 59% YoY) and diluted EPS was $1.08 (up 61% YoY); gross margin declined to 72.4% from 75.1% a year ago, which management attributes to Blackwell revenue consisting primarily of full-scale datacenter systems compared to Hopper HGX systems last year.
Data Center revenue was $41.1B (up 56% YoY, up 5% sequentially), with networking revenue of $7.3B (up 98% YoY) and compute revenue of $33.8B (up 50% YoY); the company recognized approximately $650M of H20 revenue from sales to an unrestricted customer outside of China, resulting in a $180M release of previously reserved H20 inventory.
Operating cash flow was $42.8B for the first half of FY2026, and the Board approved an additional $60.0B in share repurchase authorization on August 26, 2025, bringing total availability to $71.2B.

Results That Matter

Revenue
Current period
$46.7B
Prior period
$30.0B
Change
+55.6%
Management attributes the increase to demand for the accelerated computing platform used for large language models, recommendation engines, and generative and agentic AI applications, and to the Blackwell architecture ramp.
Gross profit
Current period
$33.9B
Prior period
$22.6B
Change
+50.0%
Gross margin decreased to 72.4% from 75.1% YoY as Blackwell revenue consists primarily of full-scale datacenter systems compared to Hopper HGX systems last year.
Operating income
Current period
$28.4B
Prior period
$18.6B
Change
+52.6%
Operating margin was 60.8% versus 62.1% a year ago; operating expenses rose 38% YoY, which management attributes primarily to compute and infrastructure costs and higher compensation and benefits.
Net income
Current period
$26.4B
Prior period
$16.6B
Change
+59.2%
Net margin was 56.5% versus 55.3% a year ago; total other income (expense), net increased to $2,766M from $572M, which management attributes primarily to unrealized gains in publicly-held equity securities.
Net income per diluted share
Current period
$1.1
Prior period
$0.67
Change
—
Diluted weighted average shares declined to 24,532M from 24,848M a year ago, reflecting share repurchases.

Financial highlights: current period, prior period, change, and investor takeaway per metric
Metric	Current Period	Prior Period	Change	Investor Takeaway
Revenue	$46.7B	$30.0B	+55.6%	Management attributes the increase to demand for the accelerated computing platform used for large language models, recommendation engines, and generative and agentic AI applications, and to the Blackwell architecture ramp.
Gross profit	$33.9B	$22.6B	+50.0%	Gross margin decreased to 72.4% from 75.1% YoY as Blackwell revenue consists primarily of full-scale datacenter systems compared to Hopper HGX systems last year.
Operating income	$28.4B	$18.6B	+52.6%	Operating margin was 60.8% versus 62.1% a year ago; operating expenses rose 38% YoY, which management attributes primarily to compute and infrastructure costs and higher compensation and benefits.
Net income	$26.4B	$16.6B	+59.2%	Net margin was 56.5% versus 55.3% a year ago; total other income (expense), net increased to $2,766M from $572M, which management attributes primarily to unrealized gains in publicly-held equity securities.
Net income per diluted share	$1.1	$0.67	—	Diluted weighted average shares declined to 24,532M from 24,848M a year ago, reflecting share repurchases.

Earnings Quality & Cash Conversion

Reported operating income of $28,440M includes a $180M release of previously reserved H20 inventory recognized in the second quarter upon the sale of approximately $650M of H20 products to an unrestricted customer outside of China. Provisions for inventory and excess inventory purchase obligations totaled $1.0B for the second quarter, and sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $501M, for a net unfavorable impact on gross margin of 1.1% in the second quarter. The first half of FY2026 included a $4.5B charge associated with H20 excess inventory and purchase obligations recorded in the first quarter. The filing does not report an adjusted or non-GAAP earnings total.

Red flag

Inventories increased to $14,962M at July 27, 2025 from $10,080M at January 26, 2025, with finished goods rising to $8,708M from $3,273M.

Red flag

Accounts receivable, net increased to $27,808M at July 27, 2025 from $23,065M at January 26, 2025, and three direct customers accounted for 23%, 19% and 14% of the accounts receivable balance as of July 27, 2025.

Value Drivers & Capital Allocation

Capital returned — dividends paid $244.0M (prior $246.0M).

“Cash used in financing activities increased in the first half of fiscal year 2026 compared to the first half of fiscal year 2025, mainly due to higher share repurchases.”
— Filing statement

Return on equity was 26.4% (prior 28.5%) (period net income / period-end equity, not annualized); return on assets 18.8% (period net income / period-end assets, not annualized).

Forward Signals

The filing does not provide financial guidance for future periods.

Known trends

In April 2025, the U.S. government informed NVIDIA that a license is required for exports of its H20 product into the China market; in August 2025, the USG granted licenses that would allow shipment of certain H20 products to certain China-based customers, but to date the company has not generated any revenue or shipped any H20 products under those licenses.
In January 2025, the USG published the "AI Diffusion" IFR, which would have imposed a worldwide licensing requirement on data center products such as H200, GB200 and GB300; in May 2025, the USG announced it would rescind the AI Diffusion IFR and implement a replacement rule whose scope, timing, and requirements remain uncertain.
The company plans to increase its U.S.-based manufacturing and invest in specialized equipment and processes to support domestic production, which it states is expected to strengthen its supply chain, boost resiliency and redundancy, and meet the growing demand for AI infrastructure.

Subsequent events

From July 28, 2025 through August 26, 2025, the company repurchased 20 million shares for $3.5 billion pursuant to a pre-established trading plan.
On August 26, 2025, the Board of Directors approved an additional $60.0 billion in share repurchase authorization, without expiration.

“We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months and thereafter for the foreseeable future, including our future supply obligations.”
— NVIDIA Corporation

Risks

4 source-verified filing excerpts. Selected excerpts are not a complete risk inventory.

Filing excerpt 1

EvidenceAs a result of these new requirements, we incurred a $4.5 billion charge in the first quarter of fiscal year 2026 associated with H20 for excess inventory and purchase obligations, as the demand for H20 diminished.

Filing excerpt 2

EvidenceFor the second quarter of fiscal year 2026, sales to one direct customer, Customer A, represented 23% of total revenue; and sales to a second direct customer, Customer B, represented 16% of total revenue, respectively, both of which were attributable to the Compute & Networking segment.

Filing excerpt 3

EvidenceFor example, the French Competition Authority collected information from us regarding our business and competition in the graphics card and CSP market as part of an ongoing inquiry into competition in those markets.

Filing excerpt 4

EvidenceAs of July 27, 2025, there are no accrued contingent liabilities associated with the legal proceedings described above based on our belief that liabilities, while reasonably possible, are not probable.

Segments

Segment	Revenue	Operating Income	Revenue Change	Commentary
Compute & Networking	$41.3B	$28.4B	+56.3%	69% operating margin — Includes Data Center accelerated computing platforms and AI solutions and software, networking, automotive platforms, Jetson for robotics and other embedded platforms, and DGX Cloud computing services; management attributes the year-over-year increase to demand for the accelerated computing platform used for large language models, recommendation engines, and generative and agentic AI applications.
Graphics	$5.4B	$2.2B	+50.6%	41% operating margin — Includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service, Quadro/NVIDIA RTX GPUs for enterprise workstation graphics, virtual GPU software, automotive platforms for infotainment systems, and Omniverse Enterprise software; management attributes the year-over-year increase to sales of the Blackwell architecture.

Balance Sheet & Liquidity

Leverage: Identified debt as of 2025-07-27: reported debt balance of unestablished maturity scope of $8.5B. The concept behind this balance does not establish which maturities it covers. Total debt, net debt and debt-to-equity are therefore not stated.

Liquidity: Cash, cash equivalents and marketable securities totaled $56,791M at July 27, 2025, compared with $43,210M at January 26, 2025; the company also has a $575 million commercial paper program with no commercial paper outstanding as of July 27, 2025.

Working capital: Current assets $102.2B vs. current liabilities $24.3B (current ratio 4.21x). Prior reported balance sheet as of 2025-01-26: $80.1B vs. $18.0B (4.44x).

Maturities & covenants

Aggregate debt maturities as of July 27, 2025 were $3,750M due in one to five years, $1,250M due in five to ten years, and $3,500M due in greater than ten years, less $34M of unamortized debt discount and issuance costs.
As of July 27, 2025, the company complied with the required covenants, which are non-financial in nature, under the outstanding notes.

Notable Footnotes

Item	Impact
H20 inventory charge and release	A $4.5 billion charge in the first quarter of fiscal year 2026 associated with H20 excess inventory and purchase obligations, and a $180 million release of previously reserved H20 inventory in the second quarter upon the sale of approximately $650 million of H20 products to an unrestricted customer outside of China.
Deferred revenue and customer advances	Deferred revenue additions of $8,275 million in the first half of fiscal year 2026 included $7.5 billion of customer advances, and revenue recognized of $8,053 million included $7.5 billion related to customer advances.
Income taxes	Income tax expense was $4.8 billion for the second quarter of fiscal year 2026, and the effective tax rate increased to 15.3% from 13.6% a year ago.
Commitments	Total future commitments as of July 27, 2025 were $45,774 million, of which $30,930 million is due in fiscal year 2026 excluding the first half of fiscal year 2026.

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AI-generated. Informational only, not investment advice. May be incomplete or contain errors. The authoritative source is always the original SEC filing.