NVIDIA delivered a robust quarterly performance, with second-quarter revenue guidance significantly surpassing market forecasts alongside a substantial enhancement of shareholder returns.
Goldman Sachs, in its earnings review, highlighted that the key takeaways extend beyond the outperforming figures, emphasizing improvements in the sustainability of AI investments and a marked increase in capital returns. From Goldman Sachs' perspective, the upward cycle in AI compute capital expenditure is far from over, providing NVIDIA with a clearer and more predictable growth trajectory and offering a firmer foundation for its stock price.
The core driver of this cycle is the positive economic feedback loop established between NVIDIA and cloud service providers. NVIDIA continues to drive down Token costs by over 70% annually, leading to a significant compression in compute costs for cloud providers. However, the prices at which these providers sell Tokens externally have not decreased proportionally, instead stabilizing, which has notably boosted their unit profitability. These improved returns further support hyperscale cloud providers in continuously increasing their AI capital expenditures, generating more durable demand momentum for NVIDIA.
Furthermore, while advancing product innovation and ecosystem investments, NVIDIA has placed significant emphasis on shareholder returns, substantially strengthening its capital return program: the share repurchase authorization was increased by $80 billion, bringing the total authorization to $1.19 billion when combined with the remaining $39 billion from the previous plan. The quarterly dividend was also raised sharply from $0.01 to $0.25 per share.
Based on this analysis, Goldman Sachs maintains its "Buy" rating on NVIDIA and has raised its 12-month price target from $250 to $285.
**Quarterly Report Exceeds Expectations Across the Board, Data Center Leads** NVIDIA's key financial metrics for the first fiscal quarter exceeded market expectations. Data Center revenue reached $75.2 billion, surpassing Goldman Sachs' estimate of $74.7 billion and the market consensus of $73.2 billion. The Edge Computing segment, which now includes the former Gaming and Professional Visualization businesses, generated revenue of $6.4 billion, exceeding Goldman Sachs' forecast of $5.4 billion and the market expectation of $5.6 billion by 13% to 18%.
In terms of profitability, the gross margin was 75.0%, slightly above Goldman Sachs' estimate of 74.7%. The operating margin stood at 65.9%, also exceeding the forecast of 65.4%. Non-GAAP earnings per share were $1.87, approximately 5% to 6% higher than Goldman Sachs' estimate of $1.79 and the market consensus of $1.75.
Operational efficiency metrics remained solid. Inventory at the end of Q1 was $25.8 billion, a sequential increase of 21%, but days of inventory held steady at 115 days, indicating inventory growth aligned with business expansion. Accounts receivable were $40.7 billion, up 6% sequentially, while days sales outstanding decreased by six days to 45, reflecting improved collection efficiency.
**Q2 Guidance Surpasses Expectations, Full-Year Gross Margin to Stay in Mid-70% Range** NVIDIA's second-quarter revenue guidance also surpassed expectations. The company projects revenue in the range of $89.2 to $91.8 billion, with a midpoint of $91.0 billion, representing approximately 9.3% sequential growth and a year-over-year surge of about 95%. The Non-GAAP gross margin guidance is 75.0%, aligning closely with Goldman Sachs' forecast of 74.8%. Based on this guidance, Goldman Sachs calculates an implied Non-GAAP EPS of approximately $2.06 for Q2, higher than its prior estimate of $1.97 and the market consensus of $1.94.
For the full fiscal year, management expects gross margins to remain in the mid-70% range. Concurrently, the company has increased its supply chain purchase authorization to $145 billion to ensure sufficient component supply supports capacity ramp-up. Regarding operating expenses, due to the significant upward revision in revenue forecasts, management raised its full-year FY27 operating expense growth expectation from the low-40% range to the high-40% range.
**Rubin Platform Accelerates, CPU Business Opens New Growth Avenue** Regarding the product roadmap, NVIDIA's management indicated that the Rubin platform will see a strong ramp in the second half of the year, with initial revenue recognition beginning in the third fiscal quarter (August to October). The company anticipates that combined revenue from the Rubin and Blackwell platforms will exceed the previously projected $1 trillion target, driven by core hyperscale cloud providers' rising cloud computing capex, outperformance of standalone Vera CPU racks, and contributions from products like LPX (Groq) and Rubin-CPX.
For the CPU business, management stated that standalone CPU revenue this year could reach at least $20 billion. Goldman Sachs views this as a robust initial ramp for NVIDIA's standalone CPU products and further evidence of rising structural CPU demand as agentic AI continues to proliferate.
**Goldman Sachs Raises Price Target, CY27 EPS Forecast Over 30% Above Consensus** Goldman Sachs has raised NVIDIA's 12-month price target from $250 to $285, based on a 30x P/E multiple applied to a normalized EPS of $9.50 (previously $8.25). Based on the current stock price of $223.47, this implies an approximate upside potential of 27.5%, with total return including dividends around 28%.
Regarding earnings forecasts, EPS estimates for FY27 and FY28 were raised by an average of approximately 6%, primarily reflecting higher revenue expectations and a lower tax rate assumption. Specifically, the FY27 EPS forecast is $15.25 and FY28 is $19.50, both more than 30% above the market consensus.
Additionally, the report notes that NVIDIA's strong Q2 guidance sends a positive signal for the broader AI capital expenditure environment, constituting the most favorable indicator for the covered digital semiconductor universe, including
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