NVIDIA reported record-breaking Q2 FY26 earnings of $46.7 billion.
Introduction NVIDIA Q2 earnings Record-Breaking Performance and a Big Question
On August 27, 2025, NVIDIA Corporation (NASDAQ: NVDA) announced its second quarter Q2 FY26 financial results. The company reported revenue of $46.7 billion but that represents a massive 56% increase compared to the same period last year and a 6% increase compared to the previous quarter. Also, this was the eighth consecutive quarter where NVIDIA recorded sequential revenue growth. The data center business which accounts for 88% of the company’s total revenue. Earned revenue of $41.1 billion which is a 56% increase year-over-year. But amidst these spectacular figures, a fact came to light that caught the attention of investors and analysts that 39% of NVIDIA’s total revenue came from just two mysterious customers.
According to a filing with the SEC, Customer A contributed 23% of the total revenue and Customer B contributed 16%. This is a significant increase compared to the same quarter last year. When the top two customers contributed only 14% and 11% respectively
NVIDIA Q2 FY26 Earnings Report
Revenue details by segment Data Center – 88% of total revenue – continues to be NVIDIA’s largest and fastest-growing segment. Revenue of $41.1 billion includes Compute ($33.84B) and Networking ($7.25B). The explosive 98% year-over-year growth in Networking revenue reflects strong demand for NVIDIA’s Ethernet and NVLink solutions for AI clusters. and Gaming – 9% of total revenue The Gaming segment also performed strongly with $4.29 billion, up 49% year-over-year, led by the popularity of NVIDIA’s new Blackwell-powered GeForce RTX 5060 GPUs and DLSS 4 technology available in over 175 games and apps. and Professional Visualization (Professional Visualization – 1% This segment recorded revenue of $601 million, up 32% from last year. Automotive Automotive segment saw significant growth of 69% year-over-year with $586 million, reflecting the growing deployment of the NVIDIA DRIVE platform.
Cash Flow and Returns to Shareholders
NVIDIA recorded $15.4 billion in operating cash flow and $13.5 billion in free cash flow. This strong cash generating capability enabled the company to return revenue to shareholders. In the first half of FY26, NVIDIA returned $24.3 billion to shareholders in the form of share buybacks and cash dividends. But the company had $14.7 billion remaining under its share buyback authorization and the board has increased it further by approving an additional $60 billion.
Also, the next quarterly cash dividend of $0.01 per share will be on October 2, payable in 2025. Also the impact of the H20 inventory release, which importantly increased Q2 gross margin to 72.4% from 60.5% in the previous quarter. Part of this increase was due to the release of $180 million of previously reserved inventory** associated with U.S. export restrictions on sales of H20 chips to China-based customers and the release of approximately $650 million of unrestricted H20 sales to a customer outside of China. And without this release, the non-GAAP gross margin would have been 72.3%.
Speaking of familiar speculation
On the surface the answer seems simple. Big hyperscalers like Amazon Web Services Microsoft (Azure) Google (Google Cloud) and Meta Facebook. But ultimately CFO Colette Kress herself said that large cloud service providers made up about 50% of data center revenue which in turn is 88% of total revenue. And that means cloud providers overall Customer A (Direct) 23% (~$10.75B) Foxconn Quanta or a major integrator (such as Super Micro) Up from 14% last year. Ultimately supplies to a major hyperscaler or AI firm. Also Customer A and Customer B are direct customers. According to NVIDIA, direct customers include original equipment manufacturers (OEMs), original design manufacturers (ODMs), system integrators, and distributors. These are companies that buy chips directly from NVIDIA and then build them into complete systems and circuit boards that they sell to end-users like data centers and cloud providers.
Summarizes NVIDIA’s customer concentration patterns.
Customer Type Revenue Contribution Potential Identification Comment But Customer A (Direct) 23% ($10.75B) Foxconn Quanta or a major integrator (such as Super Micro) Up from 14% last year. Ultimately supplies to a major hyperscaler or AI firm. Also Customer B (Direct) 16% ($7.48B) Another major ODM/Distributor Up from 11% last year. Customer A Same. Other 4 Direct Customers 14%, 11%, 11%, 10% Various OEMs ODMs Integrators Four customers contributed a combined 46% which makes the top 6 customers 85% of total revenue. And 2 major Indirect customers each >10% Amazon (AWS) Microsoft (Azure) Google Cloud Meta etc. buy through direct customers.
Source NVIDIA’s SEC Filing and Analysis
Another interesting disclosure NVIDIA also mentioned that an AI research and development company contributed a meaningful share of revenue through both direct and indirect customers. This directly points to companies like OpenAI or Google DeepMind, which use massive amounts of compute power to train and run their AI models. Also fluctuations in Nachfrage if one of these If a major customer such as Meta or Microsoft decides to reduce its capital expenditure and scale back its AI ambitions, or faces an economic downturn, this could have an immediate and substantial negative impact on NVIDIA’s revenue.
Strengths: NVIDIA Q2 earnings
Deep pockets Despite the risks, these customers have plenty of cash, generate massive amounts of free cash flow, and are expected to spend lavishly on data centers over the next few years, said Dave Novosel, analyst at Gimme Credit. Also, the AI arms race is still in the early stages, and every major player is forced to build as much AI infrastructure as possible to remain competitive. With leading technology, NVIDIA is currently the dominant player in the AI accelerator market with more than 90% share. Its GPUs and software ecosystem (CUDA) are the industry standard. And no competitor has yet been able to match NVIDIA’s comprehensive platform in terms of performance efficiency and software support. So, even if customers are making their own chips, they will not be able to fully replace NVIDIA’s hardware in the next few years.
H20 Chip and China Market
Last year, NVIDIA developed a toned-down AI chip called H20 specifically for the China market so that it could compete in this important market while still complying with U.S. export restrictions. But in April 2025, the U.S. government tightened export licensing requirements, which led to NVIDIA incurring a $4.5 billion charge for H20 inventory in Q1 FY26 and no H20 sales to China-based customers during Q2 FY26. The company profited from unrestricted H20 sales of about $650 million to a customer (probably a global system integrator) outside China. This sale enabled the release of $180 million of previously reserved inventory, benefiting gross margins
Future Outlook NVIDIA Q2 earnings
In July 2025, the U.S. government allowed NVIDIA to resume limited sales of H20 chips to China, but the company has ordered 300,000 H20 chips from TSMC. NVIDIA’s Q3 FY26 outlook still does not include any H20 shipments to China, indicating that the regulatory approval process is still ongoing or shipments have not yet begun. But this uncertainty has been a cause of pressure on NVIDIA’s stock price, as China has historically been a major market for the company. A return to the China market, once fully resolved, could provide a significant tailwind for NVIDIA’s revenue, with estimates indicating a potential addition of $2-$5 billion to annual revenue.
Guidance and Analyst Expectations
NVIDIA Q2 earnings forecast revenue of $54.0 billion (±2%) for Q3 FY26. This forecast reflects strong sequential growth compared to the previous quarter and continued confidence in the ramp-up of the company’s Blackwell platform. But some analysts had predicted even higher numbers, such as $60 billion. Any slight deceleration from the beat-and-raise pattern that the market now expects from NVIDIA can often trigger short-term stock price volatility. Additionally, the sequential growth rate of Data Center revenue slowed from 21% in Q1 to 5% in Q2, leaving some investors wondering whether the growth rate of AI infrastructure spending is peaking.
Leading the AI Revolution and Its Challenges
NVIDIA’s Q2 FY26 earnings report paints a complex picture. On the one hand, it reflects the company’s incredible financial and technological dominance. NVIDIA is at the epicenter of a historic technological shift. Quarterly revenue of $46.7 billion, gross margins of over 72%, and net income of $26.4 billion are numbers that have gone down in corporate history. But on the other hand, the report also highlights vulnerabilities in NVIDIA’s growth. Its dependence of 39% of revenue on two mysterious customers is a significant concentration risk. While these customers (potentially manufacturers working for giants like Microsoft, Amazon, Google, Meta and OpenAI) have ample resources to spend right now.
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