AI giant, Nvidia, reported a mixed bag with its Q2 results with slightly higher revenue and profit than expected by Wall Street, but a slight miss in data center sales estimates. To add to a topsy turvy report, the tech company's guidance for Q3 was less than the market had anticipated, causing a more than 2% dip in shares during after-hours trading.
One of the key issues at play in Nvidia's financial forecast is sales to China. With a revenue-sharing agreement struck with the Trump administration in place, Nvidia is waiting for licenses to resume sales of its critical AI chips, the h20, to China. However, the CFO, Colette Kress, disclosed that regulations have yet to be published by the government and as a result, h20 sales weren't factored into Nvidia's Q3 forecast.
The mixed financial results came off the back of a very strong start to the year for Nvidia, with a 35% increase in share value. The tech giant is expected to play a crucial role in the overarching market and AI stocks, in particular, owing to its involvement in the AI boom. With tech juggernauts like Microsoft, Meta, Amazon, and Alphabet committing to substantial infrastructure spending to boost their AI capacities, expectations for Nvidia's performance are higher than ever.
The company expects revenue for fiscal Q3 to be around the $54 billion mark with a margin of 2% flexibility up or down. Which would make the sales range anywhere from just above $55 billion at the high end to slightly below $53 billion on the lower end. Nvidia has also announced it's likely to buy back an additional $60 billion worth of its stock and is looking towards full-year gross margins in the “mid-70% range". Operating expenses have been projected to land somewhere between $4.2 to $5.9 billion for the current quarter.
AI chips are big business, and Nvidia occupies a strategic position in this market. As such, Wall Street remains overwhelmingly bullish about the company's prospects with 13 out of 14 analysts polled by Visible Alpha rating the stock as a "buy". As global tech continues to lean heavily into AI and prepare for massive spending sprees, Nvidia's AI tech and chips are well-placed to significantly affect the broader market.