NVIDIA announced on August 26 that revenue for the second quarter of FY2027 was $96.221 billion, an increase of 1,061 TP3T from a year ago. Non-GAAP earnings per share of $2.22 exceeded market expectations of $2.10, and revenue guidance for the third quarter was set at $108 billion. Operating cash flow for the same quarter stood at only $24.077 billion, falling short of even half of the previous quarter's figure. With a 12-month baseline target of $300 and a Buy rating, the key factor in the assessment is the speed of cash recovery, not growth rate.
All figures in Korean Won were calculated at 1,385 Won per Dollar (closing price on August 26, 2026). The source of the earnings figures is a press release distributed by the company after the market closed on August 26, U.S. time, and this article was written on August 27.
- NVIDIA (NVDA) Q2 Earnings: Starting with figures that exceeded consensus
- $89 billion in data centers and margin structure
- Record-high net profit, operating cash flow halved
- What the Balance Sheet Tells Us: Accounts Receivable, Liabilities, and Circular Investment
- NVIDIA (NVDA) Valuation: Is a Forward P/E of 16x Really Cheap?
- NVIDIA (NVDA) 12-Month Target Price Scenario
- NVIDIA (NVDA) Risk: Four Bear Triggers
- Stories outside the data
- NVIDIA (NVDA) Investment Opinion Conclusion
- Frequently Asked Questions
- source
NVIDIA (NVDA) Q2 Earnings: Starting with figures that exceeded consensus
Revenue for the second quarter of FY2027 was $96.221 billion (approx. 133.27 trillion won), exceeding the market consensus of $92.165 billion by 4.41 TP3T, with the data center segment accounting for $89 billion of that total at $921 TP3T.
Operating cash flow for the same quarter was $24.077 billion, amounting to only 401 TP3T of GAAP net income. In the previous quarter, this ratio was 861 TP3T.
The 12-month baseline target price is $300 (approx. 415,500 won), and the investment rating is Buy. The expected return, weighted 50/25/25 with a bullish target of $380 and a bearish target of $150, is +34.71 TP3T relative to the closing price of the regular session.
To summarize the quarterly earnings report first, revenue increased by 181 TP3T from the previous quarter and by 1,061 TP3T from the same period last year. GAAP earnings per share of $2.46 (approx. 3,407 KRW) more than doubled from $1.08 a year ago, while non-GAAP earnings per share were $2.22 (approx. 3,075 KRW). Both GAAP and non-GAAP gross profit margins stood at 75.01 TP3T, up 2.61 TP3T points from 72.41 TP3T a year ago.
It is worth noting that GAAP net income of $59.688 billion (approximately 82.67 trillion won) was greater than non-GAAP net income of $53.954 billion (approximately 74.73 trillion won). While the opposite is usually true, this quarter saw gains of $7.771 billion from the valuation and disposal of equity securities push up GAAP earnings. In the first quarter, this item was larger at $15.936 billion. This implies that one must look at the non-GAAP side to assess the profitability of the company's core business, a point that will be discussed further later.
The third-quarter guidance is revenue of $108 billion (approximately 149.58 trillion KRW) ±21 TP3T. This is a commitment to surpass $100 billion in quarterly revenue for the first time, and includes Chinese data center compute revenue is not reflected at all.. The gross profit margin guidance is 74.01 TP3T ±50bp, 11 TP3T points lower than this quarter's 75.01 TP3T. The original text of the earnings figures is 8-K press release filed with the SECIt is confirmed in.
The stock price reaction was two-stage. In regular trading prior to the earnings announcement, it closed at $209.66 (approximately 290,380 won), down 1.591 TP3T, but immediately after the announcement, it rose to $219.53 (approximately 304,049 won) in after-hours trading, up 4.711 TP3T. What triggered the rebound was not the second-quarter earnings themselves, but the FY2028 outlook presented during the conference call.
$89 billion in data centers and margin structure
Data center revenue of $89 billion (approx. 123.27 trillion KRW) increased by 181 TP3T from the previous quarter and 1,171 TP3T from the previous year. The edge computing segment recorded $7.2 billion (approx. 9.97 trillion KRW), an increase of 131 TP3T from the previous quarter and 271 TP3T from the previous year. Almost all of the growth came from data centers, and the company's business structure is effectively converging into a single segment.
The substance of this quarter's growth is the full-scale mass production of the Vera Rubin platform. The company Coreweave (CRWV), Google Cloud, Microsoft Azure, Oracle Cloud Infrastructure, and Nevius (NBIS)It was announced that the Vera Rubin rack is in operation. Shipments have also begun for Vera, the first CPU designed for AI agents, the Groq 3 LPX inference accelerator, and the Spectrum-6 switch system. This effectively marks the beginning of revenue reflection from the transition from a single GPU supplier to a rack-unit system supplier.
The revenue per gigawatt figures disclosed by the company during the conference call encapsulate the economics of this transition. The Hopper generation generated $18 billion per gigawatt, Grace Blackwell $25 billion, and Vera Rubin $40 billion. This means that the revenue NVIDIA generates from data centers using the same amount of power has 2.2 times in just two generations. CEO Jensen Huang stated that he expects this trend to continue.
However, a shadow fell over the margins. The company Extreme price situation of memory Consequently, the company stated that it is facing constraints on production capacity and forecasted that gross profit margins would decline in the third and fourth quarters of FY2027. This is a period where the surge in HBM and DRAM prices is directly reflected in costs. The company has announced plans to recover margins by raising product prices in FY2028, and the very fact that it is in a position to publicly declare that it can pass on price increases demonstrates its negotiating power. Conversely Cerebras (CBRS) As competitors specializing in the same inference field are also experiencing the same component shortages, the memory bottleneck is an industry-wide issue, not just for Nvidia.
Record-high net profit, operating cash flow halved
The most important table in this quarter's data is not the income statement, but the cash flow statement. While sales and profits reached all-time highs, operating cash flow fell to less than half of the previous quarter's level. If you place the two quarters side by side, the reason becomes clear at a glance.
| item | Q1 FY27 | Q2 FY27 | change |
|---|---|---|---|
| sales | $81.615 billion | $96.221 billion | +18% |
| GAAP Net Income | $58.321 billion | $59.688 billion | +2% |
| Increase in accounts receivable (cash outflow) | -$2.244 billion | -$22.346 billion | 10 times |
| Increase in inventory (cash outflow) | -$4.42 billion | -$5.784 billion | +31% |
| Operating cash flow | $50.344 billion | $24.077 billion | -52% |
| Free cash flow | $48.554 billion | $21.341 billion | -56% |
| Operating cash flow relative to net profit | 86% | 40% | -46%p |
The key factor is accounts receivable. Accounts receivable, which increased by $2.244 billion in the first quarter, rose by $22.346 billion (approximately 30.95 trillion won) in the second quarter. That is exactly a tenfold increase. The fact that accounts receivable increased by $22.3 billion while quarterly revenue increased by $14.6 billion means that a larger amount than the revenue recognized this quarter remains uncollected. The balance of accounts receivable at the end of the quarter was $63.059 billion (approximately 87.34 trillion won), and the collection period divided by quarterly revenue is about 60 days.
On top of this, inventory accumulated by an additional $5.784 billion. With accounts receivable and inventory alone, $28.1 billion was tied up in working capital, causing net income of $59.7 billion to decrease to operating cash flow of $24.1 billion. Free cash flow of $21.341 billion (approximately 29.56 trillion won) represents a decrease of 561 TP3T compared to the previous quarter.
However, it is also necessary to view this fairly. In the same quarter a year ago, operating cash flow was $15.365 billion and free cash flow was $13.45 billion. Compared to the previous year, these figures increased by 571 TP3T and 591 TP3T, respectively. In other words, it is not that cash generation ability itself has been impaired, but rather, The growth rate outpaced the cash recovery rate.It is more accurate to read it that way. The problem is that it is currently impossible to distinguish whether this gap is due to temporary seasonality or a signal that sales conditions are structurally loosening. The magnitude of the increase in accounts receivable in the third quarter will provide the answer.
What the Balance Sheet Tells Us: Accounts Receivable, Liabilities, and Circular Investment
A comparison of the balance sheets on January 25 and July 26 reveals that the nature of the company has changed significantly over the past six months. Total assets increased from $206.8 billion to $320.3 billion, but a significant portion of this increase consists of investment assets and receivables rather than operating assets.
The most notable item is non-marketable securities. They increased 2.3-fold from $22.251 billion to $51.157 billion (approximately 70.85 trillion won). Listed equity securities also grew from $12.886 billion to $42.783 billion. The cash spent on purchasing equity securities over the six-month period amounted to $42.404 billion. Nvidia is making large-scale acquisitions of stakes in AI infrastructure companies that purchase its chips, and this investment inflates the balance sheet while serving as the source of the aforementioned GAAP valuation gains.
In the same vein, the most controversial aspect of this quarter's announcement is not the earnings figures, but the financing plan. The company announced that it will partner with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR to establish an independent compute financing platform capable of mobilizing $500 billion (approximately 692.5 trillion won) in third-party capital for building AI infrastructure. During the conference call, it explained that the long-term goal is to grow non-hyperscaler customers to account for half of the data center business. Figures were also presented showing that the cloud industry's order backlog exceeds $2 trillion (approximately 2,770 trillion won).
Debt also increased. Long-term debt jumped from $7.469 billion to $32.366 billion (approximately 44.83 trillion won), and the company issued $24.896 billion worth of bonds in the second quarter alone. The funds raised are intended for shareholder returns and investment. In the second quarter, the company returned approximately $26 billion (approximately 36.01 trillion won) to shareholders, combining $19.732 billion in share buybacks and $6.047 billion in dividends, with a remaining share buyback limit of $99 billion. The dividend for the next quarter is $0.25 per share and will be paid on October 1.
To summarize, it works like this: NVIDIA invests in client equity, and those clients purchase NVIDIA systems, delaying payment collection; in the meantime, the company issues bonds to buy back its own shares. Each piece represents a rational allocation of capital, but when combined, it appears to be a structure where a significant portion of demand circulates within the NVIDIA ecosystem. This structure does not reveal problems as long as the AI investment cycle is maintained.
NVIDIA (NVDA) Valuation: Is a Forward P/E of 16x Really Cheap?
Based on the regular trading closing price of $209.66, the market capitalization is approximately $5.078 trillion (approximately 7,033 trillion won). Based on trailing earnings per share of $6.44, the trailing P/E is 32.6 times, and based on the market consensus forward earnings per share of $13.13, the forward P/E is 15.97 timesC. It is an awkward figure from a common-sense perspective that a company with a revenue increase of 1061 TP3T has a forward P/E of 16 times.
This discrepancy is not because the market does not trust the earnings, but I can't trust consistency.It should be interpreted as such. While semiconductor ETFs have risen by 641 TP3T this year, Nvidia has only risen by 131 TP3T. Earnings are at their peak, but the stock price has lagged behind, resulting in suppressed multiples. In effect, the market is discounting the FY2028 consensus earnings themselves.
Based on a direct estimate, the figures are as follows. If we assume revenue of $177.8 billion for the first half of FY2027, guidance of $108 billion for the third quarter, and a conservative estimate of $120 billion for the fourth quarter, the annual figure is approximately $406 billion. Applying the FY2028 revenue growth rate of 701 TP3T presented by the company in the call yields approximately $690 billion. Subsequently applying a gross margin of 72–73.51 TP3T (calculated based on memory costs), operating expenses of $48 billion, and a tax rate of 171 TP3T, the non-GAAP earnings per share for FY2028 are... About $15 It is calculated at a level higher than the consensus of $13.13, which appears to be because the FY2028 guidance was presented for the first time during the conference call and has not yet been fully reflected in the estimates.
Even considering the competitive landscape, there is little basis to significantly reduce the appropriate multiple. AMD still lags behind in GPUs, Broadcom's custom XPUs are several years behind in terms of volume, and inference-specialized vendors face scale issues. Since moving up to rack-unit systems, Astera Labs (ALAB) Even the same connected semiconductor companies are following a trend of reorganization around the NVIDIA platform. In a business with a gross profit margin of 751 TP3T and a return on equity of 1141 TP3T 20x forwardWe consider this to be the appropriate level. The current 16x represents a discount of approximately 201 TP3T compared to this appropriate level, and the valuation assessment is Undervaluedall.
NVIDIA (NVDA) 12-Month Target Price Scenario
| scenario | Target price | Compared to closing price | Probability | Key assumptions |
|---|---|---|---|---|
| stress | $380 (approx. 526,300 won) | +81.3% | 25% | FY2028 EPS $16.5, successful memory cost pass-through, multiple recovers to 23x |
| basic | $300 (approx. 415,500 won) | +43.1% | 50% | FY2028 EPS $15 × Fair Multiple 20x |
| Weakness | $150 (approx. 207,750 won) | -28.4% | 25% | AI Enters Capex Digestion Phase, EPS Contracts to $11.5, Multiples to 13x |
The 50/25/25 weighted expected value is $282.5 (approximately 391,262 KRW), and the expected return relative to the regular session closing price is +34.7%C. If the after-hours level of $219.53 is used as the baseline, the upside potential of the base scenario is reduced to +36.71 TP3T.
There are three drivers of growth. First, if Vera Rubin maintains its revenue of $40 billion per gigawatt, revenue generated from the same power infrastructure will continue to increase. Second, once the $500 billion financing platform becomes operational, demand from outside the hyperscaler sector will open up. Third, national-level AI infrastructure projects, including those in Korea and Japan, will emerge as new sources of demand. This quarter, the company announced collaborations on gigawatt-scale Sovereign AI infrastructure with SK Telecom, Naver, and Brookfield, as well as a multi-year partnership with SK Hynix for next-generation memory.
The average target price from 58 analysts is $305.79, with a median of $300, a high of $500, and a low of $180. The baseline target price of $300 in this analysis aligns with the consensus median. However, the assessment regarding the path to reach this target price differs. While the consensus is based on the sustainability of growth, this analysis sees greater room for the recovery of the already suppressed multiples.
NVIDIA (NVDA) Risk: Four Bear Triggers
- If the growth in accounts receivable remains in the $20 billion range in the third quarter Relaxation of sales conditions or payment delays by specific customers signal structural problems. The key points for verification are the change in accounts receivable in the third-quarter cash flow statement and the collection period at the end of the quarter.
- If memory price increases continue until FY2028 — The company stated it would offset the losses with price increases, but if customers do not accept the hikes, volumes will decrease or margins will be cut. The key point to watch is whether the fourth-quarter gross profit margin guidance falls further below 741 TP3T.
- If the financing platform fails to reach a firm agreement — The $500 billion plan is not yet a binding agreement but is conditional. If demand for non-hyperscalers does not open up, a significant portion of the FY2028 growth rate of 70% will lose its basis.
- When the client's equity value declines $51.1 billion in non-marketable securities and $42.8 billion in listed equity move in tandem with AI infrastructure valuations. During the correction phase, the vulnerabilities of the cyclical structure are revealed all at once as GAAP earnings plummet due to valuation losses.
The China variable remains here. The company did not include China data center compute revenue at all in its third-quarter guidance. While this could be viewed as upside potential given the conservative assumptions, it is not normal for the world's second-largest market to be completely excluded from the earnings model. The volatility indicated by a beta of 2.22 must also be taken into account.
Stories outside the data
What I spent the longest time looking at during this presentation was not the revenue or the guidance, but a single line regarding accounts receivable in the cash flow statement. It is not the numbers themselves that bother me, but the context in which they are situated. The company has acquired stakes in client companies, partnered with Wall Street to raise funds for those purchases, and has yet to receive payment for those sales. These three elements are listed side by side in the same quarterly report. Individually, each is explainable, and the company's explanation is indeed valid. However, this structure is also one that has been repeatedly observed in the latter stages of boom periods. I do not conclude that this is a sign of crisis. However, going forward, I have decided to look at the cash flow statement before the income statement when examining this company.
What was impressive on the other side was the story regarding memory. While most companies talk about defending margins amidst skyrocketing component prices, Jensen Huang stated that the FY2028 outlook would have been much higher had there been no supply constraints, and the company announced it would raise prices next year. Few companies can openly say they will pass on cost increases to customers. When viewed together, a forward multiple of 16x and this bargaining power do not seem to go well together. Either the market is wrong, or I am missing something the market knows. I place a little more weight on the former, but I believe it is correct to weigh it only in proportion to the magnitude of that conviction.
NVIDIA (NVDA) Investment Opinion Conclusion
The investment opinion is Buy (Medium confidence), the 12-month basic target price is $300 (approx. 415,500 won)all.
The structure of the judgment is as follows. The forward P/E of 15.97x represents a discount of approximately 201 TP3T from the fair value of 20x, and the probability-weighted expected return of +34.71 TP3T significantly exceeds the Buy threshold of +121 TP3T. Fundamentals have also not been compromised. Revenue growth of 1,061 TP3T, gross profit margin of 751 TP3T, and return on equity of 1,141 TP3T have been projected, along with guidance for FY2028 revenue growth of 701 TP3T. When undervaluation signals and expected returns point in the same direction, maintaining a Buy rating is a consistent approach.
The reason for lowering the confidence level from High to Medium is the quality of earnings. Operating cash flow amounted to only 401 TP3T of net income, 131 TP3T of GAAP earnings consisted of gains on equity securities valuation, and a portion of demand relies on financing structures created by the company itself. These three factors are items that become problematic simultaneously the moment growth stalls.
From an execution perspective, it can be summarized as follows. If entering a new position, it is better to wait for the after-hours surge to be absorbed and approach in installments. If holding the position, based on the Q3 earnings... Increase in accounts receivable과 Q4 Gross Profit Margin Guidance Two points should serve as verification points. If the growth in accounts receivable normalizes to below $10 billion and margin guidance maintains 741 TP 3 T, it provides grounds to raise the confidence level to High. Conversely, if both indicators deteriorate together, the probability of a bearish scenario should be increased and recalculated.
Frequently Asked Questions
What is the 12-month target price for NVIDIA (NVDA)?
The baseline target price is $300 (approx. 415,500 KRW). It is bullish at $380 (approx. 526,300 KRW) and bearish at $150 (approx. 207,750 KRW); the 50/25/25 weighted expected value is $282.5, and the expected return is +34.71 TP3T relative to the regular session closing price of $209.66. The average target price of 58 analysts is $305.79, with a median of $300, which is similar to this analysis.
Why did operating cash flow decrease even though sales increased by 1,061 TP3T?
This is due to working capital. In the second quarter, $28.1 billion flowed out of cash as accounts receivable increased by $22.346 billion and inventory by $5.784 billion. As a result, net income of $59.688 billion fell to operating cash flow of $24.077 billion. However, since this figure represents an increase of 571% compared to the operating cash flow of $15.365 billion in the same quarter a year ago, it is more accurate to view this as the pace of growth outpacing the pace of payment collection rather than cash generation being impaired.
Is a forward P/E of 16x a valuation where it is safe to buy now?
Based solely on the indicators, the stock is indeed in an undervalued range. Applying an appropriate multiple of 20x to a business with a gross profit margin of 751 TP3T and a return on equity of 1141 TP3T, the current multiple of 15.97x represents a discount of approximately 201 TP3T. However, this discount also implies that the market doubts the sustainability of the FY2028 earnings estimates. Until the two variables of memory costs and accounts receivable collection are resolved, I believe a phased approach is more reasonable than buying all at once.
source
- NVIDIA Q2 FY2027 Earnings Press Release (SEC Form 8-K)
- NVIDIA Investor Relations — CFO Commentary
- TheStreet — Conference Call: FY2028 Guidance and Memory Supply Constraints
This article was written for the purpose of organizing and sharing information. It does not recommend buying or selling any specific stocks. AI tools handling public disclosures and market data were used to draft the document, and the author verified each number and logic individually prior to publication. The cited stock prices, exchange rates, and estimates are based on values as of August 27, 2026, and are subject to change thereafter; any profits or losses arising from the investment are entirely the investor's responsibility.