Nvidia Says Its Cloud Customers Are Sitting on a $2 Trillion Backlog -- Here's What Nvidia's Cut Is Worth by 2028

Nvidia (NASDAQ:NVDA) reported its fiscal second-quarter results on Aug. 26, and the figures were extraordinary. Quarterly revenue rose 106% year over year to $96.2 billion, accelerating from the 85% growth recorded in the fiscal first quarter. Data center revenue rose 117% to $89.0 billion.

But the figures that caught my eye came out of the earnings call, from chief financial officer Colette Kress.

"With cloud industry backlog now greater than $2 trillion, [capital expenditures] by the top 5 hyperscalers is expected to reach nearly $800 billion in 2026 and $1.3 trillion in 2027," Kress said.

That backlog is the pipeline behind both spending figures: cloud customers turn it into data centers, and a meaningful share of every data center dollar goes to Nvidia. So the way to size Nvidia's cut is to pin down that share.

Image source: Nvidia.

How much of hyperscaler spending goes to Nvidia?

Nvidia divides its data center revenue into two categories. The hyperscaler category takes in the public clouds plus the world's biggest consumer internet companies. The rest (AI clouds, industrial and enterprise customers, which the company abbreviates as ACIE) covers everyone else.

Revenue from hyperscalers reached $48.7 billion in the fiscal second quarter. That was a 13% rise from the $43.1 billion in the fiscal first quarter, and was more than double the $24.2 billion Nvidia recorded a year earlier (Nvidia recast prior periods after moving a customer to the hyperscaler category).

Multiply the $48.7 billion from the second quarter by four, and revenue from hyperscalers reaches a run rate of about $195 billion a year. If you compare that figure with the nearly $800 billion in capital expenditures Kress says the top five hyperscalers are expected to make in 2026, Nvidia's share comes out to about 24%.

The comparison is loose, to be sure: Nvidia's fiscal year ends in late January, so its fiscal 2027 aligns only approximately with calendar 2026, and its hyperscaler category includes more customers than those five -- which means the true share of those five companies' spending runs somewhat lower. Even so, the last two quarters come to about $92 billion against half of this year's $800 billion -- about $400 billion, if that spending were distributed evenly throughout the year -- or about 23%.

Nvidia's share of the $1.3 trillion is about $315 billion

If that share holds, 24% of $1.3 trillion equals about $315 billion in revenue from hyperscalers in calendar 2027, most of which falls into Nvidia's fiscal 2028. That single category would be larger than the $215.9 billion Nvidia brought in for all of fiscal 2026.

And hyperscalers represent only about half of Nvidia's data center business. ACIE revenue was $40.3 billion in the second quarter, a 25% quarter-over-quarter increase and a 138% year-over-year increase. Kress said that non-hyperscaler business should continue to represent about half of data center revenue.

If that distribution holds and the $315 billion is doubled, data center revenue in fiscal 2028 comes out to about $630 billion. Use the second quarter's actual split instead (hyperscalers were about 55% of the data center total) and the figure comes out closer to $575 billion.

Nvidia cannot manufacture everything its customers want

Wherever demand for Nvidia's products lands, there's a holdup: manufacturing.

Kress said the company's preliminary expectation is that fiscal 2028 revenue will grow about 70%, and that the figure reflects supply constraints.

CEO Jensen Huang put it more directly, saying "even though our demand is much greater than 70%, our supply allows us to confidently deliver 70%."

What does 70% equal in dollars?

Nvidia's revenue during the first half of fiscal 2027 was $177.8 billion, and the company forecast $108 billion for the third quarter. And a fourth quarter that matched the third would put fiscal 2027 near $394 billion. If that figure grows by 70%, fiscal 2028 revenue comes to about $670 billion.

Data center revenue accounted for more than 92% of Nvidia's total last quarter, so $670 billion in total revenue implies about $620 billion for the data center business -- right in the middle of the $575 billion to $630 billion the demand math yields. That is what you would expect if supply is the real limit: revenue can only reach what Nvidia can build, and the demand Huang says runs well past 70% shows up in the backlog instead of the income statement.

One risk is how much it costs to manufacture all that. Memory prices are rising, and the company now expects its gross margin to bottom out in the fiscal fourth quarter between 71% and 72%, compared with 75% in the second quarter.

The other risk is the share itself. Capital spending also buys land, buildings, power, and networking gear, and the big cloud companies design some chips of their own -- so Nvidia's quarter of the total is an observation, not a guarantee.

As for the stock, it trades at about $217 as of this writing, up about 4% since the report and about 8% below its 52-week high. The stock trades at about 27 times earnings. Relative to the earnings analysts expect for fiscal 2028, the price-to-earnings multiple drops to about 14, which seems reasonable to me for a company expecting 70% growth.

The semiconductor industry is cyclical, of course, and a $2 trillion backlog could shrink just as fast as it was built. But Nvidia has already told the market how much it expects to grow next year, and said demand is higher than that figure. With this in mind, I do think shares look attractive here. But I would simply maintain a modest position, given how cyclical chips have always been.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.