To The Moon

Nvidia's $95B Supply Chain Bet: Inside a Record-Breaking Quarter

Global AI chip titan $NVIDIA(NVDA)$   released its highly anticipated FY26Q4 earnings after the bell, delivering financial metrics that crushed expectations across the board. Management provided guidance that soared past market consensus, yet the stock dipped in after-hours trading as investors stuck to the "sell-the-news" pattern seen in recent quarters. 

Let's unpack the true quality of this print.

Three Things to Watch

Networking Revenue Smashes the $10B Mark Early; NVLink Unlocks a New Growth Vector

Nvidia's networking revenue hit $10.98 billion this quarter, up 263% year-over-year. This milestone breaches the $10 billion mark two quarters ahead of consensus estimates. It is worth noting that since acquiring Mellanox, Nvidia has grown its networking revenue more than tenfold.

This quarter, Nvidia announced it will enable NVLink for AWS to integrate with $Amazon.com(AMZN)$  's proprietary chips, while momentum for Spectrum-X Ethernet continues to surge in both scale-up and scale-across deployments. Each rack features nine switch nodes, and each node contains two NVLink chips, with that number set to increase in the future. The switching volume per rack is staggering, confirming that NVLink has successfully opened another critical growth curve.

$95.2B Poured into Supply Chain Commitments (Up 89% QoQ) and Data Center Outlook Raised to $500B

The keynote from last year's GTCDC remains fresh in investors' minds. Starting from the FY26Q1 timeline (calendar Q1 2025) presented there, Nvidia's FY26 data center revenue totaled $193.7 billion. This includes Hopper architecture products, implying a potential remaining revenue space of $306.3 billion for the data center business starting in FY27. Management explicitly stated this quarter that current orders have already exceeded that prior $500 billion revenue roadmap. Since the dawn of ChatGPT, data center revenue has expanded nearly 13-fold, and the company expects sequential growth to continue throughout FY27.

To guarantee shipments for Blackwell and the subsequent Rubin series, total supply-related commitments reached a massive $95.2 billion this quarter. This represents an 89% sequential explosion. The capital is locking in capacity across the board, including wafers and CoWoS packaging from $Taiwan Semiconductor Manufacturing(TSM)$   , as well as HBM, DRAM, and NAND supply from Samsung, SK hynix, and $Micron Technology(MU)$   .

A Rare Move to Tighten Non-GAAP Standards by Reducing Profit Discrepancies

Nvidia has historically offered substantial stock-based compensation (SBC) to employees. The ratio of SBC to revenue far exceeds that of other semiconductor companies, and it constitutes a significant portion of operating expenses. Because SBC is typically excluded from Non-GAAP calculations, there has often been a wide gap between Nvidia's GAAP and Non-GAAP net income.

Value investors, including Warren Buffett, have frequently criticized Non-GAAP and EBITDA metrics, arguing that stock compensation is a real company expense that should be reflected in the P&L. Nvidia announced that starting next quarter, the company will no longer exclude SBC figures from its Non-GAAP reporting. This rare move to voluntarily tighten Non-GAAP standards signals management's supreme confidence in future profit growth.

FY26Q4 Key Financial Highlights

– Revenue: $68.1 billion, up 73% YoY and 20% QoQ. This handily beat the consensus estimate of $65.9 billion and the company's own guidance of $65.0 billion.

– Gross Margin: GAAP gross margin came in at 75%, up 2.0 percentage points YoY and 1.6 points QoQ, slightly above the consensus of 74.9% and guidance of 74.8%. Non-GAAP gross margin was 75.2%, up 1.7 points YoY and 1.6 points QoQ, edging out the consensus and guidance of 75%.

– Net Income: GAAP net income reached $43.0 billion, up 94% YoY and 35% QoQ, crushing the consensus of $36.3 billion and guidance of $35.21 billion. Non-GAAP net income was $39.0 billion, up 77% YoY and 26% QoQ, well ahead of the consensus of $37.5 billion and guidance of $36.73 billion.

FY26Q4 Revenue Breakdown by Platform

– Data Center: Revenue of $62.3 billion, up 75% YoY, accounting for 92% of total revenue. Within this, AI compute revenue was $51.3 billion (up 58% YoY) and networking revenue was $11.0 billion (up 263% YoY).

– Gaming: Revenue of $3.7 billion, up 47% YoY, accounting for 6% of total revenue. This segment represents desktop/laptop GPUs and Switch console chips.

– Professional Visualization: Revenue of $1.3 billion, up 159% YoY, accounting for 2% of total revenue. This covers workstation GPUs and AI software.

– Automotive: Revenue of $0.6 billion, up 6% YoY, accounting for 1% of total revenue. This includes autonomous driving chips and robotics edge AI chips.

FY27Q1 Guidance

Management expects FY27Q1 revenue to hit $78.0 billion (excluding China data center impact), far exceeding the market consensus of $72.8 billion. This represents a 77% YoY increase, driven primarily by the Blackwell volume ramp.

– GAAP Gross Margin: Expected at 74.9%, up 14.4 percentage points YoY and down 0.1 percentage point QoQ.

– Non-GAAP Gross Margin: Expected at 75%, up 14.2 percentage points YoY and down 0.1 percentage point QoQ.

– GAAP Net Income: Projected at $41.6 billion, up 122% YoY, beating the consensus of $40.1 billion.

– Non-GAAP Net Income: Projected at $41.8 billion, up 119% YoY, beating the consensus of $41.4 billion.

Summary

In short, this report once again refutes the "AI Bubble" narrative and directly addresses market concerns regarding legacy card depreciation and gross margin compression. While the results continue to underpin the broader US AI semiconductor thesis, the company itself remains a victim of sell-the-news sentiment for now.

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