[Live Playback: Nvidia FY2025Q2 Earnings Conference Call]
Nvidia forecast third-quarter gross margin on Wednesday that could miss market estimates and revenue that was largely in line, failing to impress investors who have driven a dizzying rally in its shares as they bet billions on the future of AI.
In a sign the market wants more from a company that has trounced even the most aggressive expectations over the past few quarters, Nvidia shares fell 6.8% in overnight trading.
The soft forecast overshadowed a beat on second-quarter revenue and adjusted earnings as well as the unveiling of a $50 billion share buyback.
Nvidia's stock has risen more than 150% so far this year. Its tepid forecast may weaken the artificial-intelligence rally that has lifted shares of chipmakers and tech firms over the past year.
"Here's the issue, the size of the beat this time was much smaller than we've been seeing," said Ryan Detrick, chief market strategist at the Carson Group.
"Even future guidance was raised, but again not by the tune from previous quarters. This is a great company that is still growing revenue at 122%, but it appears the bar was just set a tad too high this earnings season."
Nvidia expects adjusted gross margin of 75%, plus or minus 50 basis points, in the third quarter. Analysts on average forecast gross margin to be 75.5%, according to LSEG data. It reported a 75.7% gross margin in the second quarter versus an average estimate of 75.8%.
Investors had lofty expectations of the chipmaker, following a more than sevenfold surge in Nvidia's shares over the last two years - making it one of the biggest beneficiaries of the rally in AI-linked shares.
The company's capacity to surpass estimates faces increasingly greater challenges as each success prompts Wall Street to raise its targets even higher.
The company forecast revenue of $32.5 billion, plus or minus 2%, for the third quarter, compared with analysts' average estimate of $31.77 billion, according to LSEG data.
Second-quarter revenue was $30.04 billion, beating estimates of $28.70 billion.
Sales in Nvidia's data center segment grew 154% to $26.3 billion in the second quarter ended July 28, above estimates of $25.15 billion. From the first quarter, it increased 16%.
The company said it expects several billion dollars in revenue from its latest Blackwell chips in the fourth quarter, addressing widespread concerns of reported production delays hampering growth.
"Blackwell samples are shipping to our partners and customers," CEO Jensen Huang said in a statement.