HCA Red Flag: NVIDIA beats all expectations, but then lowers margin guidance (AI)
HC Andersen Capital
Summary
- NVIDIA's Q2 FY2027 results exceeded expectations with sales of USD 96.2B, surpassing the analyst estimate of USD 92.2B, and an adjusted EPS of USD 2.22, beating the expected USD 2.09.
- Despite strong sales, NVIDIA lowered its gross margin guidance for the October quarter to 74.0%, down from the previous quarter's 75.0%, marking the first breach of its mid-70s margin promise for the year.
- Free cash flows significantly decreased to USD 21.3B from USD 48.6B in the previous quarter, attributed to extended payment terms on large deals.
- NVIDIA has committed USD 105B in guarantees for a facility in Ohio leased to OpenAI and issued USD 25B in bonds during the quarter.
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Automatic translation: Originally published in undefined 26/08/2026, 20:31 GMT. Give feedback here.
Red flag · First read of the financial statements · AI-generated content
HCA Red Flag: NVIDIA beats all expectations, but then lowers margin guidance (AI)
NVIDIA (NVDA) · Q2 FY2027 · August 26
Shares unchanged over 3 months, 9% below the record closing price from May
| Overall assessment | Slightly positive |
| Positive view | Balanced | Negative view |
NVIDIA expects sales of USD 108.0B for the October quarter vs. the analysts' expectation of USD 104B, so the shares should open higher. On the other hand, the gross margin is expected to fall from 75.0% to 74.0%, the first breach of a promise that has held all year.
Red flags in the financial statements
Margin promise broken in the next quarter
Q3 guidance 74.0% · Q2 actual 75.0%
NVIDIA expects a gross margin of 74.0% in the October quarter, a full percentage point below the 75.0% the company just delivered, and the first breach of the mid-70s it has promised all year. Purchase obligations more than doubled to USD 279B in three months, which the company primarily attributes to the purchase of memory chips.
Cash flows more than halved
Free cash flows USD 21.3B · Q1 USD 48.6B
Free cash flows fell to USD 21.3B from USD 48.6B in the previous quarter, even though sales rose 18%. NVIDIA offered longer payment terms on large deals across multiple quarters, extending the time it takes to receive payment from 45 days to 60.
NVIDIA now guarantees USD 108.5B for customers
New: USD 105B in guarantees for Ohio facility
NVIDIA has undertaken guarantees with a cap of USD 105B for land, power, and buildings at a 4.25-gigawatt facility in Ohio leased to OpenAI, the creator of ChatGPT, plus USD 3.5B for other AI cloud partners. In addition, the company issued bonds of USD 25B during the quarter.
Green flags in the financial statements
October guidance cleared the crucial figure
Guidance USD 108.0B · Est. USD 104.1B
NVIDIA told investors to expect USD 108.0B for the October quarter, about 4% above the USD 104B that analysts had already counted on. The guidance once again assumes zero sales from data center compute in China.
Sales beat even the unofficial expectation
Actual USD 96.2B · Est. USD 92.2B
Sales of USD 96.2B came in above the USD 92.2B expected by analysts, and above the USD 94B to USD 95B set internally by JPMorgan, Jefferies, and UBS. An adj. result of USD 2.22 per share beat the expected USD 2.09.
The non-hyperscale segment is now growing the fastest
ACIE USD 40.3B · up 138% in a year
AI Clouds, Industrial and Enterprise, the customers outside the major cloud companies, grew 25% in three months to USD 40.3B, while hyperscale grew 13%. The group now accounts for 45% of data center sales vs. 41% a year ago.
Disclaimer: This is an HCA AI-generated research commentary based solely on the company's published financial statements. The commentary does not constitute investment consulting and should not be used as the sole basis for investment decisions. Investing in shares involves the risk of loss. Seek professional consulting. /HC Andersen Capital, TIMESTAMP_TOKEN