Why Nvidia Stock Rocketed Higher Today
Key Points
Nvidia sales and profits both exceeded expectations.
The company issued guidance for next year that surpassed Wall Street's expectations by a wide margin
The stock is still remarkably cheap.
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Shares of Nvidia (NASDAQ: NVDA) charged sharply higher today, climbing as much as 8.4%. As of 11:11 a.m. ET, the stock was still up 7.6%.
The catalyst that sent the artificial intelligence (AI) chipmaker higher was quarterly results that were far more bullish than investors had anticipated.
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Image source: Nvidia.
The adoption of AI continues to accelerate
For its fiscal 2027 second quarter (ended July 26), Nvidia generated record revenue that soared 106% year over year and 18% quarter over quarter to $96.2 billion. This drove adjusted earnings per share (EPS) up 120% to $2.22. The rise in profitability was fueled by Nvidia's expanding gross margin, which rose to 75%.
For context, analysts' consensus estimates called for revenue of $92.2 billion and adjusted EPS of $2.10, so Nvidia cleared both bars with plenty of room to spare.
The company's data center segment, which includes chips used for AI, cloud computing, and data centers, carried the day, with revenue soaring 117% to $89 billion. Revenue from the edge computing segment, which includes chips used for PCs, workstations, game consoles, automotive, and robotics, climbed a respectable 27% to $7.2 billion.
Nvidia's outlook suggests the good times are poised to continue. Its third-quarter forecast calls for revenue to grow 89% at the midpoint of its guidance to $108 billion, with its gross margin dipping slightly to 74%.
Management's commentary also gave investors reason to celebrate. CFO Colette Kress revealed that Nvidia is forecasting 70% revenue growth in fiscal 2028, far exceeding Wall Street estimates of 44%. She went on to say that if not for supply constraints, growth would likely exceed 100%.
Despite the company's remarkable run, Nvidia stock is still attractively priced, selling for just 25 times forward earnings. This gives savvy investors the opportunity to pick up this industry leader at a discount.
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Danny Vena, CPA has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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