27 August 2026
Nvidia delivered a beat-and-raise quarter, but the real positive was the earnings call. Investors came into the results with a laundry list of concerns around competition, the durability of AI spending, memory costs, margins, financing arrangements, open-source models and China. Management did a good job of systematically addressing each one.
The headline numbers were strong, with guidance implying around 70% revenue growth despite demand running closer to 100% growth and remaining constrained by supply.
On competition, Nvidia pointed to AWS as a customer, reinforcing its position even as hyperscalers develop their own silicon. While concerns about competition are unlikely to disappear, management made a convincing case that its ecosystem continues to provide a significant advantage.
Durability was another key question investors wanted answered and management's response was robust. Alongside 70% growth guidance, Nvidia highlighted roughly $2 trillion of backlog, suggesting demand remains exceptionally strong.
Gross margins were probably the main negative. Nvidia reported margins of 75% but guided to 74%, citing rising memory prices. Management suggested margins could trough at around 71% before recovering as pricing adjusts. While worth monitoring, investors appeared comfortable with that explanation given the scale of demand.
Financing has also been flagged as a risk by some investors. Nvidia emphasised that it is not making loans to customers but creating financing platforms, which it views as vital to address this unique AI opportunity. Whether that becomes a meaningful business remains to be seen, but management sought to dispel credit risks being taken on.
Open-source AI was another area management addressed. Nvidia's view is that open and closed models will coexist, leaving the company well positioned regardless of how the market develops.
But China remains one of the bigger unresolved issues, with little contribution from the region reflected in the current numbers.
Overall, this was a strong quarter, but more importantly a strong call. Investors arrived with a long list of worries and management provided reassuring answers to most of them. The stock was initially flat after the results but rose around 5% following the call, suggesting that it was the commentary and strong guidance , rather than just the headline numbers, that ultimately convinced the market.
