NVIDIA Corporation (NVDA) Q3 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlighted record revenue growth, strong data center and networking performance, and positive market reception to AI advancements. Despite geopolitical and tax challenges, management's confident outlook on meeting demand, strategic investments, and shareholder returns support a positive sentiment. The Q&A confirmed robust planning and partnerships to sustain growth, with no critical concerns raised by analysts. Overall, the strong financial metrics, optimistic guidance, and strategic initiatives suggest a positive stock price movement over the next two weeks.

Key Financial Performance

Revenue $57 billion, up 62% year-over-year and a record sequential revenue growth of $10 billion or 22%. The growth was driven by platform shifts in accelerated computing, AI models, and agentic applications.

Data Center Revenue $51.2 billion, increased 66% year-over-year. Growth driven by the GB300 ramp and networking growth due to NVLink scale-up and Spectrum-X Ethernet and Quantum-X InfiniBand.

Networking Business Revenue $8.2 billion, up 162% year-over-year. Growth attributed to NVLink, InfiniBand, and Spectrum-X Ethernet.

Gaming Revenue $4.3 billion, up 30% year-over-year. Growth driven by strong demand and Blackwell momentum.

Professional Visualization Revenue $760 million, up 56% year-over-year. Growth driven by DGX Spark, the world's smallest AI supercomputer.

Automotive Revenue $592 million, up 32% year-over-year. Growth driven by self-driving solutions.

Gross Margins GAAP gross margins were 73.4% and non-GAAP gross margins were 73.6%, exceeding outlook. Increase due to data center mix, improved cycle time, and cost structure.

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Operating Highlights

Blackwell and Rubin revenue visibility: $0.5 trillion in revenue visibility from the start of this year through the end of 2026.

GB300 ramp: Compute grew 56% year-over-year, driven by the GB300 ramp.

New AI factory and infrastructure projects: Announced projects amounting to an aggregate of 5 million GPUs, including xAI's Colossus 2 and Lilly's AI Factory for drug discovery.

Rubin platform: On track to ramp in the second half of 2026, delivering significant performance improvements.

AI infrastructure demand: Demand continues to exceed expectations, with clouds sold out and GPU installed base fully utilized.

Hyperscalers and CSPs CapEx: Aggregate CapEx for 2026 increased to $600 billion, $200 billion higher than earlier estimates.

Strategic partnerships: Collaborations with OpenAI, Anthropic, and others to optimize models and scale infrastructure.

Networking business growth: Generated $8.2 billion in revenue, up 162% year-over-year, driven by NVLink, InfiniBand, and Spectrum-X Ethernet.

Supply chain resilience: Celebrated the first Blackwell wafer produced on U.S. soil and expanded partnerships with Foxconn, Wistron, and others.

Gross margins: GAAP gross margins at 73.4% and non-GAAP gross margins at 73.6%, exceeding outlook.

Transition to accelerated computing: Shift from CPU to GPU accelerated computing as Moore's Law slows.

Generative AI adoption: Transforming existing applications and enabling new ones, with significant revenue gains for hyperscalers.

Agentic AI systems: Emerging systems capable of reasoning, planning, and using tools, marking the next frontier of computing.

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Risk or Challenges

Geopolitical Issues: Sizable purchase orders for H20 sales did not materialize in Q3 due to geopolitical issues and the increasingly competitive market in China. This has impacted the ability to ship competitive data center compute products to China.

Supply Chain Challenges: Inventory grew 32% quarter-over-quarter, while supply commitments increased 63% sequentially. The company is preparing for significant growth but faces challenges in maintaining resiliency and redundancy in its global supply chain.

Rising Input Costs: Input costs are on the rise, which could impact gross margins. The company is working to hold gross margins in the mid-70s for fiscal year 2027.

Regulatory and Competitive Pressures in China: The company is not assuming any data center compute revenue from China for the fourth quarter due to regulatory and competitive pressures, which could limit growth opportunities in this market.

Tax Rate Increases: Non-GAAP effective tax rate for the third quarter was higher than guidance due to strong U.S. revenue, which could impact net income.

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Guidance & Outlook

Revenue Outlook for Q4 FY2026: Total revenue is expected to be $65 billion, plus or minus 2%, implying 14% sequential growth driven by continued momentum in the Blackwell architecture.

Gross Margins: GAAP and non-GAAP gross margins are expected to be 74.8% and 75%, respectively, plus or minus 50 basis points. For FY2027, gross margins are expected to remain in the mid-70s despite rising input costs.

Data Center Revenue: No data center compute revenue from China is assumed for Q4 FY2026. However, demand for AI infrastructure continues to exceed expectations globally.

Capital Expenditures by Hyperscalers: Aggregate CapEx for top CSPs and hyperscalers in 2026 is projected to reach $600 billion, $200 billion higher than earlier estimates.

AI Infrastructure Build: NVIDIA estimates $3 trillion to $4 trillion in annual AI infrastructure build by the end of the decade, with visibility to $0.5 trillion in Blackwell and Rubin revenue through the end of 2026.

Rubin Platform Launch: The Rubin platform is on track to ramp in the second half of 2026, delivering significant performance improvements and compatibility with existing systems.

Strategic Partnerships: NVIDIA is working on a strategic partnership with OpenAI to build and deploy at least 10 gigawatts of AI data centers. Additionally, a deep technology partnership with Anthropic includes up to 1 gigawatt of compute capacity.

Networking Business Growth: NVIDIA's networking business, driven by NVLink, InfiniBand, and Spectrum-X Ethernet, is expected to continue its growth trajectory, with significant contributions from AI deployments.

Physical AI and Robotics: Physical AI is projected to address a multitrillion-dollar opportunity, with leading manufacturers and robotics innovators leveraging NVIDIA's platforms for AI-driven manufacturing and automation.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you update us on the $500 billion revenue forecast for Blackwell plus Rubin in '25 and '26?

A:Yes, the $500 billion forecast is on track. $150 billion has already been shipped, and $50 billion was shipped this quarter. Additional orders are expected, including agreements with KSA for 400,000 to 600,000 GPUs over 3 years and new opportunities with Anthropic.

Q:Do you see a realistic path for supply to catch up with demand over the next 12 to 18 months?

A:NVIDIA has done extensive planning with its supply chain, including TSMC, memory vendors, and system ODMs. The demand for AI applications like generative AI and agentic AI is growing exponentially, and NVIDIA GPUs are central to these transitions. Supply chain planning and partnerships are in place to meet demand.

Q:What assumptions are you making on NVIDIA content per gigawatt in the $500 billion forecast?

A:Each generation of NVIDIA products increases its share of the data center. For example, Hopper generation was 20-25, Blackwell is 30+, and Rubin is expected to be higher. Energy efficiency per watt is critical, and NVIDIA's architecture is optimized for performance per watt and TCO.

Q:What are your plans for the $0.5 trillion in free cash flow over the next couple of years?

A:NVIDIA plans to use cash to fund growth, secure a resilient supply chain, and continue stock buybacks. Investments in companies like OpenAI and Anthropic are aimed at expanding the CUDA ecosystem and supporting their growth, with expectations of significant returns.

Q:What percentage of shipments tied to AI inference do you expect next year, and what is the role of Rubin CPX?

A:Inference is expected to grow significantly as AI applications expand. Rubin CPX is designed for long-context workloads and offers excellent performance per dollar and watt. NVIDIA's leadership in inference is strong, with products like Grace Blackwell providing significant advantages.

Q:What is the single biggest bottleneck that could constrain NVIDIA's growth?

A:Constraints include power, financing, memory, and foundry. However, NVIDIA has strong supply chain management and partnerships to address these challenges. The architecture's performance per watt and TCO are key to driving growth.

Q:What are the biggest cost increases affecting margins, and how is NVIDIA addressing them?

A:Input prices, including memory, are increasing. NVIDIA is working on cost improvements, cycle time, and mix to maintain gross margins in the mid-70s. The company has secured supply chain agreements well in advance to manage costs.

Q:What is NVIDIA's view on the role of AI ASICs or dedicated XPUs in architecture build-outs?

A:NVIDIA believes its GPU architecture is superior due to its ability to handle diverse AI models, phases of AI, and deployment environments. The ecosystem's breadth and the architecture's versatility make it the best choice for customers.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the specific percentage of shipments tied to AI inference next year, instead providing a general discussion on the growth of inference and the capabilities of Rubin CPX. Additionally, while Jensen Huang discussed constraints like power and financing, he did not specify which is the single biggest bottleneck, instead emphasizing NVIDIA's ability to manage these challenges.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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