Nvidia Earnings Show No Signs Of AI Data Center Boom Slowing

Nvidia’s share price dropped more than 6% after the release of its second-quarter earnings Wednesday, but the results show little evidence that demand for artificial intelligence computing power — and, therefore, demand for new data centers — is slowing anytime soon.

The AI chipmaker reported robust profit and sales numbers that more than doubled year-over-year. Quarterly revenue of more than $30B was up 122% year-over-year and 15% from the prior quarter, while profits increased to $16.6B.

Data center sales accounted for the bulk of earnings, with the segment’s $26.3B in revenue up a record 16% from the prior quarter and 154% over Q2 of last year. Nvidia expects revenue will grow again to $32.5B in Q3. 

“We're seeing momentum of generative AI accelerating,” Nvidia CEO Jensen Huang said on Nvidia’s earnings call Wednesday evening. “Data centers worldwide are in full steam to modernize the entire computing stack with accelerated computing and generative AI.”

Nvidia’s quarterly numbers were highly anticipated on Wall Street, with some Manhattan watering holes even throwing watch parties for the firm’s earnings. Investors widely view the chipmaking giant as a bellwether for the durability of an AI investment boom that has buoyed public markets. Fears that the market could be approaching the end of an AI bubble only boosted the intrigue around Nvidia’s results. 

Nvidia has been arguably the largest beneficiary of Big Tech’s AI arms race. The company is by far the largest supplier of the graphics processing units needed for AI computing. The billions that companies like Amazon, Microsoft and Google are spending on GPUs has boosted Nvidia from an obscure gaming hardware firm to one of the most valuable companies in the world in months. 

While Nvidia’s results surpassed Wall Street's forecasts, it didn't beat projections by as large a margin as in recent quarters. For the prior year and a half, Nvidia's earnings per share had beaten projections by 9% or more every quarter, but this quarter it was under 5%, CNBC Senior Markets Commentator Mike Santoli said on the network shortly after the earnings dropped, calling it a “deceleration.”

With investors accustomed to heady results in recent quarters, shares of the company dropped following the earnings release and were down by 6% as of 3:30 p.m. ET Thursday.

Still, despite the dip in share price, there is little to suggest that analysts and investors are worried about the near-term trajectory of Nvidia or the larger AI landscape.

Nvidia’s leadership largely allayed concerns about the impact of unexpected production delays for the firm’s advanced Blackwell series of processors and information technology equipment that emerged earlier this month.

While the delay had raised red flags, Nvidia’s leadership said there was little meaningful impact on the firm’s bottom line. This led analyst C.J. Muse of Cantor Fitzgerald to conclude that the production hiccup “appeared to be a nothingburger.” Muse told The Street he saw nothing to support the idea that the broader AI ecosystem is headed toward an economic cliff — or even a slowdown. 

“We do not see any change to the AI story underpinning Nvidia, and think (today’s) potential pullback is simply another buying opportunity,” he said.

Nvidia’s chip sales are viewed as a leading indicator for data center demand and development, as AI computing from the major cloud and social media providers has driven an unprecedented building boom. Concerns have emerged in some quarters that Big Tech could temper what has been a record wave of spending on chips and data centers if these investments fail to generate meaningful short-term returns. 

Although Nvidia’s revenue grew by less than 200% for the first time in three quarters — with year-over-year data center revenue up 154%, down from 427% growth last quarter — Huang remained bullish that data center demand for the company’s GPUs and other IT equipment would continue to accelerate into 2026. 

“Next year is going to be a great year,” Huang said on Wednesday’s earnings call.  “We expect to grow our data center business quite significantly next year.”

The world’s largest tech companies are in an arms race to build and train the next generation of AI models that will require 10 to 20 times as much computing power as their existing products, Huang said, ensuring that demand for GPUs and the data centers to house them will continue to grow. 

Huang also pushed back on the idea that tech firms aren’t seeing short-term returns on their AI capex. While attention-grabbing consumer-facing AI tools like chatbots may not have clear pathways to profitability, cloud and social media giants are using AI to improve returns from some of their most important revenue drivers, like recommender systems and search engines, Huang said.

Huang also pointed to the efficiency advantages high-performance GPUs offer over the traditional central processing unit-based computing infrastructure filling most of the world’s data centers, even when used for non-AI applications. Presented with the ability to get as much as five times more computing power per megawatt, Huang said companies will be motivated to shift their legacy computing and data center infrastructure to these high-performance systems.   

“We are at the beginning of our journey to modernize a trillion dollars worth of data centers from general-purpose computing to accelerated computing,” he said.

While cloud service providers represented roughly 45% of Nvidia’s data center revenue, a growing share of data center sales is coming from enterprise customers, with that segment driving quarter-over-quarter revenue growth. Nvidia’s leadership indicated enterprise demand has shot up in recent months, with the firm now working with the majority of Fortune 500 companies on AI initiatives. 

Corporate AI adoption has trailed behind the major tech companies. But a wave of enterprise AI spending would be good news for colocation data center providers, many of whom have positioned themselves to be the beneficiaries of corporate AI demand that has been slow to materialize. 

“The enterprise AI wave has started,” Nvidia Chief Financial Officer Colette Kress said on the earnings call. “A range of applications are fueling our growth, including AI-powered chatbots, generative AI co-pilots and agents to build new monetizable business applications and enhance employee productivity.”

UPDATE, AUG. 29, 3:30 P.M. ET This story has been updated to add more context and commentary on Nvidia's earnings.