Jensen Huang Just Delivered Great News to Nvidia Shareholders

With the broader stock market struggling in recent weeks, all eyes were on Nvidia's (NASDAQ:NVDA) fiscal 2027 second-quarter earnings results, and boy, did the $5 trillion artificial intelligence semiconductor giant deliver.

Nvidia posted adjusted earnings per share of $2.22, up 120% year over year, on total revenue of $96.22 billion, up 106%.

Nvidia's results topped Wall Street consensus estimates of $2.10 in earnings and $92.17 billion in revenue.

Nvidia guided for $108 billion in revenue in the third quarter, plus or minus 2%, excluding any data center revenue from China. The company also guided for a gross margin of 74%, plus or minus 0.5%. Consensus estimates had expected $104.2 billion in revenue.

Furthermore, Nvidia repurchased $26 billion of stock in the second quarter and has $99 billion remaining under its share buyback authorization.

As of 6:12 p.m. ET on Aug. 26, Nvidia shares had flipped positive and traded roughly 3.8% higher. CEO Jensen Huang just delivered great news to shareholders.

Image source: Nvidia.

AI is at an 'inflection point'

Beating estimates and raising guidance is nothing new for Nvidia. In fact, perhaps the one rare thing about today's report is that shares are actually green in after-hours trading, at least as of this writing.

The other great news that Huang delivered to shareholders is his belief that AI has "reached its inflection point."

"It's doing useful work. Its tokens are productive and profitable. Now, compute is revenue," Huang stated in the earnings release. "And demand is accelerating. This time last year, one lab alone was driving the buildout; today, we have a golden age of new AI labs and start-ups, multiple frontier labs scaling in parallel, a thriving open-model ecosystem and physical AI coming online -- with strong momentum across the U.S. and around the world."

In the second quarter, about 54% of Nvidia's data center revenue came from hyperscalers, with the remainder from AI clouds, industrial companies, and enterprise (ACIE).

"The AI infrastructure buildout is at full steam. Vera Rubin, now in full production, was built to power exactly this moment," Huang stated.

Furthermore, Nvidia's newer central processing unit (CPU) business, specifically built to power agentic AI, continues to ride strong momentum. Last quarter, Nvidia said it expected CPU sales in the current fiscal year to hit $20 billion, instantly making it one of the world's leading CPU companies.

CFO Colette Kress now expects that number to more than double in fiscal 2028. She also said the company is projecting 70% annual revenue growth in fiscal 2028, well ahead of consensus estimates.

Long-term questions remain, but hard to ignore near-term positives

Being the world's largest company by market cap has set a high bar for investors, which could explain why previous strong quarters have failed to excite the market. Prior to the earnings report, Nvidia traded at about 23 times forward earnings.

"Nvidia is on track to grow as fast if not faster than Intel and AMD, and their market position is stronger," D.A. Davidson's Head of Technology Research Gil Luria said, according to The Wall Street Journal. "... The market is treating it as if 'No, no, these numbers are so big, there's no where they can grow from here.'"

Long-term questions will remain. Investors are still likely to have concerns about where gross margins go if competition increases and the chip business becomes more commoditized.

There will likely continue to be concerns about how Nvidia invests in key suppliers and customers, and about its growing role in financing the data centers that host its chips.

But for now, it's hard to see this recent quarter as anything but great news for shareholders.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool has a disclosure policy.