NVIDIA Earnings Call Summary: Robust FY28 guidance, AWS expansion, CapEx growth by hyperscalers, Vera Rubin production begins, gross margin to bottom in Q4 (209.66)
- We think the biggest takeaways from the call are: 1) guiding FY28 revenue well above consensus; 2) announcing an expansion of its partnership with AWS; 3) strong CapEx growth by the top-five hyperscalers; 4) NVDA has commenced production shipments of Vera Rubin; and 5) expects gross margins to bottom in Q4 (Jan).
- Co said it expects to grow FY28 revenue by approximately 70% (vs +45% FactSet consensus). This is a supply-constrained outlook. NVIDIA Compute is fully utilized across every cloud NVDA serves. The economic value it generates for its hyperscale, neocloud, and AI lab partners keeps rising. With cloud industry backlog now greater than $2 trillion, CapEx by the top-five hyperscalers is expected to reach nearly $800 bln in 2026 and $1.3 trillion in 2027.
- Co announced an expansion of its partnership with AWS. Building on its already vast installed base of NVIDIA Compute, AWS is deploying an additional 2 mln GPUs starting this quarter through Q2 FY29 along with Vera CPUs, some integrated with Rubin, others stand-alone. AWS will serve NVIDIA Nemotron family of open models on Amazon Bedrock and SageMaker. Amazon will also adopt NVDA's full physical AI stack; Omniverse, Cosmos, Isaac, and Jetson, to power its fleet of warehouse robots.
- NVDA commenced production shipments of Vera Rubin earlier this month. Having already received purchase orders from every major hyperscaler, AI cloud, and system OEM, NVDA expects Vera Rubin to mark the fastest product ramp in NVIDIA's history. Co is in full production of its next-generation Vera CPU. Vera completes agentic tasks 1.8x faster on the spec benchmark and provides 5x the bandwidth per watt than any other data center CPU. Co expects Vera to be deployed by every major hyperscaler, neocloud, AI lab, and system OEM, with shipments already underway to lead partners, including OCI, SpaceXAI, and starting this quarter, AWS.
- China: In Q2, NVDA shipped less than 1% of total data center revenue in Hopper 200 products to customers based in China in accordance with the US government licenses. Current Hopper shipments are dilutive to corporate gross margins. And given ongoing geopolitical uncertainty, there is no China data center compute revenue in co's forward outlook.
- Guidance: NVDA expects sequential growth to be driven primarily by ACIE with data center, while growth in hyperscale is expected to reaccelerate in Q4 (Jan) and into FY28 as supply of Vera Rubin grows over time. NVDA sees Vera Rubin accounting for about 20% of data center revenue in Q3. In terms of the 70% growth expected in FY28, NVDA plans to work to close the supply-demand gap, but expects supply to remain a bottleneck at least through the end of FY28.
- Margins: NVDA said many analysts have expressed concerns regarding gross margins as component costs have risen significantly. NVDA says it's experiencing extreme pricing conditions in memory. The magnitude of the price increase has exceeded prior expectations and is headed even higher into next year. As a result, NVDA is resetting expectations now. For Q3 (Oct), co expects non-GAAP gross margin to be 73.5-74.5% vs 75% in both Q2 and Q1. Co expects margins to bottom in Q4 (Jan) in the 71-72% range before settling at 72-73% in FY28 as executed price increases take effect in Q1. NVDA said it wants to be direct about this rather than let it linger as an open question. Memory scarcity today is being driven in large part by the AI buildout itself, and unlike a component that simply raises cost with no offset benefit, tighter memory supply is a symptom of the same demand surge that's driving NVDA's own growth.