NVIDIA Quarterly Report: Q2 FY2025

Key insights

7 takeaways

01
NVIDIA reported strong financial growth for the first half of fiscal year 2026, with consolidated income before income tax reaching $53.1 billion, up from $36.5 billion in the same period of the prior year.
02
Operating income for the Compute & Networking segment was a primary driver of performance, though results were partially offset by a $4.5 billion charge in the first quarter related to excess H20 inventory and purchase obligations following China-market export restrictions.
03
Revenue concentration remains high, with two direct customers accounting for 23% and 16% of total revenue respectively during the second quarter of fiscal year 2026.
04
The company successfully transitioned to new architectures, beginning shipments of its Blackwell Ultra platforms, including the GB300, during the second quarter of fiscal year 2026.
05
Net cash provided by operating activities increased to $42.8 billion for the first half of fiscal year 2026, compared to $29.8 billion in the same period of the previous year.
06
The effective tax rate for the first half of fiscal year 2026 was 14.9%, lower than the 21% U.S. federal statutory rate due to research tax credits, foreign-derived deduction eligible income, and stock-based compensation benefits.
07
NVIDIA is currently under increased regulatory scrutiny regarding its AI market position, with information requests from authorities in the European Union, the United States, the United Kingdom, South Korea, Japan, and China.

Summary

NVIDIA's quarterly filing for the period ended July 27, 2025 (labeled Q2 FY2026 in the filing, though the title references FY2025) shows continued rapid growth driven by AI infrastructure demand. Revenue reached $46.7 billion, up 56% from $30.0 billion a year earlier and 6% sequentially. Net income was $26.4 billion, or $1.08 per diluted share versus $0.67. Data Center contributed $41.1 billion on the Blackwell ramp, with networking up 98% year over year, while Gaming grew 49% to $4.3 billion. Segment operating income rose 51% to $30.6 billion, led by Compute & Networking.

Margins and costs reflect product transition and export-control effects. Gross margin was 72.4%, down from 75.1% a year ago but recovered from 60.5% in the prior quarter, which absorbed a $4.5 billion H20 inventory and purchase-obligation charge. First-half gross margin fell to 66.6% from 76.6% as Blackwell full-scale systems replaced Hopper HGX. Operating expenses rose 38% to $5.4 billion, and the effective tax rate increased to 15.3%. Inventories grew to roughly $15.0 billion and receivables to $27.8 billion, with significant customer concentration: two direct customers made up 23% and 16% of revenue.

The balance sheet and capital returns remain strong. Total assets reached $140.7 billion, cash and securities about $56.5 billion, and first-half operating cash flow $42.8 billion. NVIDIA repurchased $9.7 billion of stock in the quarter ($24.2 billion year to date), paid $244 million in dividends, and added a $60 billion authorization, leaving $71.2 billion available. Net debt is about $8.5 billion, though purchase commitments total $45.8 billion and data center lease commitments $7.1 billion.

Risk disclosures center on geopolitics and regulation. China revenue fell to $2.8 billion from $3.7 billion, and newly granted H20 licenses have yet to produce shipments. The company cites shifting U.S. export rules, Chinese regulatory scrutiny, tariffs, antitrust interest across several jurisdictions, acquisition integration, and supply dependence on Taiwan and South Korea. Securities litigation over crypto-era disclosures continues with no accrued liability.