Nvidia's quarterly results beat expectations and third-quarter revenue guidance exceeded the market forecast, but elevated expectations may keep the stock range-bound in the short term

Overview

This report reviews Nvidia's latest quarterly results and third-quarter guidance. Goldman Sachs believes the company delivered solid quarterly performance and revenue guidance above market expectations, reflecting a still-robust AI spending environment. However, because recent capital expenditure increases by hyperscale cloud providers have already raised market expectations, the stock may remain range-bound in the short term following the earnings report.

Core views

Goldman Sachs first concludes that Nvidia's stock may remain range-bound following the earnings report. This is not due to weak performance, but rather because the market had already formed elevated expectations before the report, particularly after hyperscale cloud providers recently raised capital expenditures, leaving investors highly optimistic about AI infrastructure demand. Therefore, solid results and better-than-expected guidance support the fundamentals, but the stock's short-term reaction may be constrained by the high expectations baseline. Most quarterly metrics exceeded Goldman Sachs and market expectations. Revenue was $96.2 billion, above Goldman Sachs' forecast of $93.1 billion and the market forecast of $92.4 billion; gross margin was 75.0%, in line with Goldman Sachs' forecast and slightly above the market forecast of 74.8%; operating margin was 66.5%, above Goldman Sachs' forecast of 66.0% and the market forecast of 66.1%; and operating earnings per share were $2.22, above Goldman Sachs' forecast of $2.12 and the market forecast of $2.09. By business, Data Center revenue was $89.0 billion, above Goldman Sachs' forecast of $86.5 billion and the market forecast of $85.9 billion; Edge Computing revenue was $7.2 billion, also above Goldman Sachs and market expectations of $6.5 billion, indicating better-than-expected performance in both core computing demand and the edge computing business. Operating metrics, meanwhile, show increased capital tied up in assets. Second-quarter inventory reached $31.6 billion, up 22% quarter over quarter, while days inventory outstanding was 120 days, up 4 days quarter over quarter. Accounts receivable reached $63.1 billion, up 55% quarter over quarter, while days sales outstanding was 60 days, up 14 days quarter over quarter. These figures rose alongside revenue growth, reflecting the company's greater deployment of inventory and receivables resources to support business expansion, and they remain operating variables that warrant continued monitoring. Third-quarter guidance presents a combination of strong revenue and modest gross margin pressure. The midpoint of revenue guidance was $108.0 billion, slightly below Goldman Sachs' forecast of $110.7 billion but above the market forecast of $104.6 billion. Non-GAAP gross margin guidance was 74.0%, below Goldman Sachs' forecast of 74.9% and the market forecast of 74.8%; operating expense guidance was $9.0 billion, and non-GAAP tax rate guidance was 18%. Based on these figures, Goldman Sachs calculates implied non-GAAP earnings per share of $2.43, below its own forecast of $2.56 but above the market forecast of $2.32. This suggests that demand and revenue remain strong, but margin guidance limits the upside in earnings relative to Goldman Sachs' forecast. Goldman Sachs believes the third-quarter guidance supports the view that the AI spending environment remains robust and is most constructive for Broadcom, AMD, Marvell, ARM, and Intel within its digital semiconductor coverage. At the upcoming conference call, areas of investor focus include whether Nvidia's cumulative $1 trillion Data Center revenue target has further upside; the specific structure of the previously announced $500 billion partner financing platform; gross margin trends in the second half of 2026 and in 2027; and progress in the CPU-only rack business driven by agentic AI. On valuation, Goldman Sachs assigns Nvidia a Buy rating and a 12-month price target of $285. The target price is derived by applying a 30x P/E multiple to a normalized earnings-per-share estimate of $9.50; relative to the price of $213.05, this implies 33.8% upside. The downside risks explicitly identified in the report include a slowdown in AI infrastructure spending, intensifying competition resulting in market share losses, margin compression caused by competitive pressure, and supply constraints.

Analysis framework

Goldman Sachs first compares actual quarterly results with its own forecasts and market consensus, separately assessing variances in revenue, margins, earnings per share, and business revenue. It then examines operating metrics such as inventory, accounts receivable, and turnover days before converting third-quarter revenue, gross margin, expense, and tax rate guidance into implied earnings per share. Finally, the report uses these findings to assess the AI spending environment and implications for semiconductor peers, and determines the price target using normalized earnings per share and a P/E multiple.

Methodology notes

• Event-Driven Trading and Behavioral FinanceExpectation Gap/Expectation Management

  Comparison of actual results and guidance with Goldman Sachs forecasts and market consensus

  The report compares each quarterly result and third-quarter guidance item with Goldman Sachs and market expectations to determine whether fundamentals exceeded expectations, while also considering elevated pre-earnings market expectations in assessing the stock's short-term reaction.

• Valuation MethodologyPE/PEG valuation

  Normalized earnings-per-share P/E valuation

  Goldman Sachs applies a 30x P/E multiple to a normalized earnings-per-share estimate of $9.50 to derive a 12-month price target of $285.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Nvidia Corp. (NVDA)

  Subject of the report; quarterly revenue and earnings per share exceeded expectations, third-quarter revenue guidance surpassed market consensus, and Goldman Sachs assigns a Buy rating.

  Strengths

  Data Center and Edge Computing revenue both exceeded Goldman Sachs and market expectations, while the AI spending environment remains robust.

  Weaknesses

  Third-quarter gross margin guidance was below Goldman Sachs and market expectations, while inventory, accounts receivable, and related turnover days increased quarter over quarter.

  Comparison

  Quarterly revenue, operating margin, operating earnings per share, and revenue from major businesses met or exceeded Goldman Sachs and market expectations; third-quarter implied non-GAAP earnings per share were below Goldman Sachs' forecast but above the market forecast.

  Risks

  A slowdown in AI infrastructure spending, market share losses or margin compression due to intensifying competition, and supply constraints.

• Broadcom, AMD, Marvell, ARM, Intel

  Goldman Sachs believes Nvidia's third-quarter guidance reflects a robust AI spending environment and is most constructive for these digital semiconductor coverage names.

Key data

• Quarterly Revenue$96.2 bnAbove Goldman Sachs' forecast of $93.1 bn and the market forecast of $92.4 bn
• Quarterly Gross Margin75.0%In line with Goldman Sachs' forecast of 75.0% and slightly above the market forecast of 74.8%
• Quarterly Operating Margin66.5%Above Goldman Sachs' forecast of 66.0% and the market forecast of 66.1%
• Quarterly Operating Earnings per Share$2.22Above Goldman Sachs' forecast of $2.12 and the market forecast of $2.09
• Data Center Revenue$89.0 bnAbove Goldman Sachs' forecast of $86.5 bn and the market forecast of $85.9 bn
• Edge Computing Revenue$7.2 bnAbove Goldman Sachs and market expectations of $6.5 bn
• Second-Quarter Inventory$31.6 bnUp 22% quarter over quarter; days inventory outstanding was 120 days, up 4 days quarter over quarter
• Accounts Receivable$63.1 bnUp 55% quarter over quarter; days sales outstanding was 60 days, up 14 days quarter over quarter
• Midpoint of Third-Quarter Revenue Guidance$108 bnSlightly below Goldman Sachs' forecast of $110.7 bn and above the market forecast of $104.6 bn
• Third-Quarter Non-GAAP Gross Margin Guidance74.0%Below Goldman Sachs' forecast of 74.9% and the market forecast of 74.8%
• Third-Quarter Operating Expense Guidance$9.0 bnCompany guidance
• Third-Quarter Non-GAAP Tax Rate Guidance18%Company guidance
• Third-Quarter Implied Non-GAAP Earnings per Share$2.43Below Goldman Sachs' forecast of $2.56 and above the market forecast of $2.32
• 12-Month Price Target$285Based on a 30x P/E multiple and a normalized earnings-per-share estimate of $9.50; implies 33.8% upside from the price of $213.05

Impact & implications

The report believes third-quarter revenue guidance indicates that the AI infrastructure spending environment remains robust and provides a positive industry read-through for digital semiconductor coverage names such as Broadcom, AMD, Marvell, ARM, and Intel. However, gross margin guidance below Goldman Sachs and market expectations, combined with already elevated pre-earnings expectations, means strong fundamentals may not immediately translate into a short-term stock-price breakout.

Risks

• AI infrastructure spending may slow.
• Greater competitive intensity may cause Nvidia to lose market share.
• Intensifying competition may erode margins.
• Supply constraints may limit business performance.

What to watch

• Monitor whether Nvidia's cumulative $1 trillion Data Center revenue target has further upside.
• Monitor the specific structure of the previously announced $500 billion partner financing platform.
• Monitor gross margin trends in the second half of 2026 and in 2027.
• Monitor progress in the CPU-only rack business driven by agentic AI.