NVIDIA Posts Strong Revenue and Profit Beat — So Why Did Shares Drop Over 5% After Hours? What Is the Market Worried About?

TradingKey - The much-anticipated Q2 2026 earnings report from NVIDIA (NVDA.US) is in:

• Revenue of $46.74 billion
• Net income of $26.42 billion

Both figures surged over 55% year-over-year and exceeded analyst expectations. Yet, the stock plunged more than 5% in after-hours trading, eventually closing down 3% in extended session. The seemingly contradictory reaction reflects not disappointment, but a reassessment of growth sustainability.

While the headline numbers were stellar, concerns emerged from the details.

• Core Data Center revenue, which drives the majority of growth, missed expectations for the second consecutive quarter.
• Sequential growth in the segment was just 6%, the first single-digit increase since the AI boom began — a sign that the pace of expansion may be moderating.

Some analysts interpreted this as a potential inflection point.

• Taufiq Rahim, Chief at 2040 Advisory, noted that data center compute revenue growth slowed sequentially, highlighting the challenge of sustaining triple-digit momentum.
• Brian Mulberry of Zacks Investment Management pointed out that while 50%-55% growth remains strong, it pales in comparison to last year’s over 100% gains, weakening the stock’s momentum narrative.

However, many institutional investors viewed the sell-off as an overreaction.

• David Wagner of Aptus Capital emphasized that NVIDIA delivered over 50% year-over-year growth even excluding the restricted China market, with a robust 73.5% gross margin guidance — a sign of enduring profitability. He called the pullback a “buy-on-dip opportunity.”
• Thomas Martin of Globalt Investments and Matt Orton at Raymond James both stressed that continued massive capex from hyperscalers proves AI is still in its early innings, with demand remaining “very, very strong.”

Dimitri Zabelin, analyst at PitchBook, highlighted NVIDIA’s strategic push into sovereign AI buyers, diversifying its customer base beyond tech giants.

Overall, this earnings report is not a red flag for slowing growth, but rather a market recalibration of expectations. The consensus on Wall Street remains clear: the AI journey is far from over, NVIDIA’s fundamentals remain rock-solid, and short-term volatility does not undermine its long-term leadership.

One additional note: U.S. Treasury Secretary Scott Bessent confirmed on Wednesday (local time) that while the U.S. government may consider taking equity stakes in other strategic industries following the Intel deal, NVIDIA is not under consideration.

For deeper insights, click to read the TradingKey analyst report: NVIDIA Q2 FY2026: Surfing the AI Surge with Blackwell, Steering Through China’s Export Challenges