Should NVIDIA Stock Be in Your Portfolio Post Solid Q2 Earnings?

NVIDIA Corporation NVDA continues to raise the bar for AI-driven growth. Its second-quarter fiscal 2027 results showed triple-digit revenue and earnings growth, while strong third-quarter guidance points to another record quarter.

Demand for AI infrastructure remains robust across hyperscalers, enterprises, AI startups and sovereign customers. With new products expanding its opportunity, NVDA stock appears well-positioned for further gains despite supply constraints.

NVIDIA’s Q2 Performance Shows AI Demand Remains Strong

NVIDIA delivered another exceptional quarter, with second-quarter revenues jumping 106% year over year and 18% sequentially to $96.22 billion. Data Center revenues were particularly impressive, rising 117% year over year and 18% sequentially to $89.02 billion. The business benefited from continued strength in Blackwell and accelerating demand from both hyperscalers and its broader AI customer base.

Profitability also remained impressive. Non-GAAP gross margin increased to 75% from 72.5% a year earlier, while non-GAAP operating income surged 124% to $63.96 billion. Non-GAAP net income jumped 118% to $53.95 billion, and non-GAAP earnings per share increased 120% to $2.22.

NVIDIA Corporation Price, Consensus and EPS Surprise

NVIDIA Corporation price-consensus-eps-surprise-chart | NVIDIA Corporation Quote

In the second quarter, the company generated operating cash flow of $24.08 billion and free cash flow of $21.34 billion. This gives NVIDIA ample flexibility to invest in growth while returning capital to shareholders. It returned approximately $25.78 billion to shareholders through repurchases and dividends during the second quarter.

Strong Q3 Guidance Supports NVDA’s Bull Case

NVIDIA expects third-quarter revenues of $108 billion, plus or minus 2%, implying another sequential increase. The company expects non-GAAP gross margin of 74%, plus or minus 50 basis points. This outlook does not include any Data Center compute revenues from China, suggesting that current expectations are not dependent on a recovery in that market.

The outlook is supported by continued Blackwell demand and the rapid rollout of Vera Rubin. NVIDIA began production shipments of Vera Rubin in August, with major hyperscalers and AI infrastructure providers already adopting the platform. The company expects Vera Rubin to account for about 20% of Data Center revenues in the third quarter.

Multiple Growth Engines Strengthen NVIDIA's Long-Term Story

NVIDIA's opportunity extends well beyond selling graphics processing units. Its full-stack AI platform includes central processing units, networking, software and complete AI factory systems. The company forecasts that its revenue opportunity per gigawatt has expanded from about $18 billion with Hopper to $25 billion with Blackwell and $40 billion with Vera Rubin. This rising value per deployed gigawatt gives NVIDIA another avenue for growth as AI infrastructure expands.

The customer base is also becoming more diversified. Hyperscale revenues surged 117% year over year to $48.71 billion in the second quarter, while ACIE revenues — covering AI clouds, industrial and enterprise customers — jumped 138% to $40.31 billion. Amazon Web Services also announced plans to deploy an additional 2 million NVIDIA GPUs through the second quarter of fiscal 2029, highlighting sustained demand from major cloud providers.

NVIDIA expects fiscal 2028 revenues to grow approximately 70%. The company noted that revenue growth expectations for fiscal 2028 are a supply-constrained outlook, meaning demand could be even stronger if more capacity were available.

NVIDIA is also investing heavily to secure that supply. Supplier commitments rose to $279 billion at the end of the second quarter, primarily related to memory procurement. The company is further expanding its ecosystem through AI cloud partnerships, financing initiatives and strategic investments.

The Zacks Consensus Estimate for NVIDIA’s fiscal 2027 and 2028 revenues indicates year-over-year growth of 85.4% and 2.2%, respectively. The consensus mark for earnings calls for a year-over-year increase of 93.3% for fiscal 2027 and 60% for fiscal 2028. Analysts are also becoming optimistic about the company’s long-term prospects as reflected in their upward earnings estimate revisions over the past seven days.

NVIDIA Consensus Earnings Estimate Revision Trend

Image Source: Zacks Investment Research

NVDA Stock Is Available at a Relatively Attractive Valuation

Despite its leadership position in the AI chip space, NVIDIA stock has delivered relatively modest gains this year. Shares have rallied 26.7% over the past year, lagging the broader Zacks Computer and Technology sector’s 30.2% rise.

The stock has also significantly underperformed several semiconductor peers, including Intel Corporation INTC, Marvell Technology, Inc. MRVL and Advanced Micro Devices, Inc. AMD. Year to date, shares of Intel, Marvell Technology and Advanced Micro Devices have surged 267.9%, 237% and 189.1%, respectively.

NVIDIA One-Year Price Return Performance

Image Source: Zacks Investment Research

Nonetheless, the positive side of this underperformance is that NVDA stock trades at a discount to the sector’s average. The stock currently trades at a forward 12-month price-to-earnings (P/E) multiple of 17.75. This is below the sector average of 20.76. For a company delivering triple-digit revenue and earnings growth, this valuation gap makes the stock particularly interesting.

NVIDIA Forward 12-Month P/E Ratio

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NVIDIA’s valuation is also significantly lower than that of semiconductor peers such as Advanced Micro Devices, Marvell Technology and Intel. At present, Advanced Micro Devices, Marvell Technology and Intel trade at forward 12-month multiples of 38.56, 40.02 and 50.07, respectively.

A lower valuation multiple is notable because NVIDIA arguably possesses stronger growth prospects, higher profitability and a more dominant competitive position than many of its rivals. This suggests that investors are not paying an excessive premium for the company’s future earnings potential.

If NVIDIA continues delivering strong financial results, the current valuation could leave room for additional upside over the long term.

Conclusion: Buy NVIDIA Shares Right Now

The combination of explosive Data Center growth, strong third-quarter guidance, the Vera Rubin product cycle, rising AI infrastructure spending and expanding customer diversity provides a compelling long-term investment case. NVIDIA's supply constraint is a risk, but it is largely tied to the same powerful AI demand driving growth.

With NVDA trading below the broader tech sector's average forward P/E despite its superior growth profile, the stock looks worthy of consideration for investors seeking long-term exposure to the AI infrastructure boom.

NVIDIA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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