Aug 26 (Reuters) - Nvidia's quarterly revenue more than doubled and the chipmaker forecast third-quarter revenue above Wall Street estimates on Wednesday, signaling persistent demand for its AI chips.
The company also said it expects revenue to grow by about 70% in fiscal 2028, and announced an expansion of its partnership with Amazon's cloud computing unit, Amazon Web Services.
The pair will deploy an additional 2 million Nvidia GPUs across Amazon's global infrastructure in 2027 and 2028, Nvidia finance
chief Colette Kress said on an earnings call.
Shares of the company reversed course in after-hours trading to jump more than 4%, as investors cheered Nvidia's road map for growth.
As of Wednesday's close, Nvidia shares have gained 12.4% so far this year, while AMD and Intel have more than doubled.
Results from Nvidia, one of the world's most valuable firms, are considered a bellwether for the AI market as its chips power most of the major data centers and advanced AI models globally.
BIG TECH'S AI SPENDING SURGE
The report comes weeks after companies including Microsoft and Meta — two of Nvidia's biggest customers — reinforced expectations that Big Tech would spend more than $730 billion on AI infrastructure this year, an unprecedented sum that marks a big step up from last year's $400 billion outlay.
An increasing share of tech companies' slated spending, however, is now going toward in-house chip efforts that aim to reduce their reliance on Nvidia's costly and supply-constrained processors.
There is also mounting scrutiny of Nvidia's role in the AI boom's complex financing ecosystem after the company agreed to guarantee some deals under a new tie-up with six major financial institutions, which aims to raise more than $500 billion for AI infrastructure.
The company's margins are closely watched as analysts expect them to be pressured by the production ramp for its Rubin chips and higher memory prices plaguing the silicon supply chain.
Nvidia expects adjusted gross margin to be 74%, plus or minus 50 basis points, for the third quarter. Analysts were expecting 74.77%.
The company forecast third-quarter revenue of $108 billion, plus or minus 2%, compared with analysts' average estimate of $104.19 billion, according to data compiled by LSEG.
CHINA SALES UNCERTAINTY
Nvidia said it did not assume any data center chip sales from China in its outlook.
Its China business has been highly uncertain. In May, Washington cleared roughly 10 Chinese firms, including Alibaba, Tencent and ByteDance, to buy one of Nvidia's most powerful AI chips, the H200, though deliveries stalled for months.
Nvidia began pitching its new Vera CPU to Chinese clients in June, telling them the chip could be available by August, as China separately weighed allowing top AI firms limited H200 purchases.
Last month, a U.S. Commerce Department official said shipments had begun but remained "very few."
RISING COMPETITION THREAT
As AI is increasingly used to automate tasks and answer queries, Nvidia's graphics processors face growing competition from central processors and custom chips that are better suited to handle that process — known as inference.
The shift has prompted major technology companies to invest in their own silicon.
Meta plans to begin manufacturing its in-house "Iris" AI chip in September, Reuters exclusively reported, part of a four-generation custom silicon project designed to lower computing costs.
Alphabet has ordered over 3 million chips from Intel for 2028, the Information reported in June, adding that Nvidia is also evaluating the American chipmaker's manufacturing technology to make a processor that combines four GPUs into a single unit.
Rivals Intel and AMD are also targeting the inference market and several Chinese firms including Baidu already produce their own chips for such tasks.
Nvidia has taken notice.
In March, it unveiled a new central processor and AI system based on technology licensed from inference-focused startup Groq in a $17 billion deal, pairing Groq's chips with its upcoming Vera Rubin platform.
The company's dominance as the AI market leader was reinforced earlier this month when SpaceX CEO Elon Musk said the rocket firm would exclusively use Nvidia's hardware.
Nvidia has said the revenue opportunity for its AI chips could exceed $1 trillion through 2027, doubling from the $500 billion opportunity through 2026 that Nvidia cited for its Blackwell and Rubin chips.
Nvidia's second-quarter revenue more than doubled to $96.22 billion, beating estimates of $92.17 billion. Adjusted profit was $2.22 per share for the three months ended July 26, compared with estimates of $2.10.
Data center revenue also more than doubled to $89 billion, exceeding estimates of $85.08 billion.
The $5.16 trillion company has surged past Wall Street's sales expectations over the past 15 quarters, but the magnitude of the beats has narrowed.
(Reporting by Deborah Mary Sophia and Anhata Rooprai in Bengaluru and Max A. Cherney in San Francisco; Editing by Joyjeet Das, Sayantani Ghosh and Matthew Lewis)
