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Today, I’m diving deep into Nvidia’s latest earnings report and what it means for investors like us. Nvidia has been on an incredible run, but is this the end? Is the AI related data center spend, which has powered Nvidia’s growth, sustainable? Will it continue to grow at high rates? Or are we heading towards a bubble that’s ready to burst?

Let’s Break It Down!

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The Key Story

Nvidia is Selling Off After Earnings

Why It Matters

Nvidia is one of the most important stocks in the market, now valued at a market cap of $3 trillion. Alongside giants like Apple and Microsoft, Nvidia represents a significant portion of major index funds. NVDA stock is currently 6.67% of the S&P 500 and 8.14% of the NASDAQ 100. This means that Nvidia’s performance can influence the entire market. That is why the latest earnings are so critical.

The Earnings Breakdown

Nvidia just reported its Q2 Fiscal 2025 earnings, and the results were impressive:

• Revenue: $30 billion (+15% Q/Q, +122% Y/Y)

• Gross Margin: 75.15% (up from 70.05% in Q2 2024)

• Operating Income: $19.9 billion non-GAAP (+10% Q/Q, +156% Y/Y)

• Diluted EPS: $0.68 per share (+11% Q/Q, +152% Y/Y)

The core driver behind this growth is Nvidia’s Data Center business, which accounted for over 82% of their Q2 revenue. This segment has seen explosive growth due to the massive demand for AI technology, with quarterly revenues jumping from $3.8 billion in Q3 2023 to $26.2 billion in Q2 2025.

A Great Business Model

Nvidia is a fabless semiconductor company, meaning they design the chips and outsource the manufacturing. This makes them incredibly capital efficient. Nvidia is able to generate massive free cash flow—nearly $15 billion in a single quarter. That is due to a lack of the expensive capital expenditures typical of semiconductor manufacturing. This free cash flow allows them to return capital to shareholders and make strategic acquisitions. Nvidia just approved an additional $50 billion in share repurchases.

The Bear Case

Nvidia is priced for perfection. The big question is whether the data center demand will sustain itself in the long term. Most of Nvidia’s revenue growth is tied to capital expenditures from a handful of large tech companies. Big tech giants like Microsoft, Google, Amazon, Meta, and Tesla, are pouring billions into AI data centers. In a Bloomberg Interview, The Nvidia CEO said the hyperscale cloud companies (Microsoft Azure, Google Cloud, AWS, etc) account for 55% of their current revenue.

If these companies scale back their AI investments or if they don’t see the expected returns on their current spending, Nvidia’s growth could slow down significantly. In that case, the NVDA stock price would tank.

The Bull Case

Nvidia’s future growth looks promising, with a strong Q3 outlook projecting $32.5 billion in revenue and maintaining mid-70% gross margins. Analysts are optimistic, with earnings per share expected to grow significantly through fiscal 2029.

Nvidia’s CEO, Jensen Huang, argues that the demand for their AI chips will not only continue but also increase as companies upgrade to more efficient and powerful next-generation platforms. The reasoning here is that they’re more economical and power/time efficient. Also, staying at the cutting edge of AI technology is crucial for innovative tech companies. Many incentives lead to increased AI spend.

Final Thoughts

Nvidia is undeniably a powerhouse in the AI space, and its business model is currently unrivaled. But with great growth comes great expectations, and any slowdown could lead to significant stock price declines.

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SOMETHING FUN

Investors Had A Lot To Say About Nvidia Earnings

Thanks for the read! Let me know what you thought by replying back to this email.

— Zach

Disclaimer: Dividend Dividend (Dividend Data LLC) is not a professional financial service. All materials released from Dividend Data (Dividend Data LLC) are for educational and entertainment purposes. Dividend Data (Dividend Data LLC) is not a replacement for a professional's opinion. Contributors to the Dividend Data (Dividend Data LLC) might have equities mentioned in the newsletter