Nvidia’s margins keep the bull case intact

Nvidia’s latest bull case hinges on gross margin, which held steady even as hardware revenue scaled sharply. In Q2 FY27, revenue was $96.22B, gross profit was $72.14B, and non-GAAP gross margin was 75.0%, with management attributing the stability to a similar product mix. Data center revenue reached $89.02B, up 117% YoY, underscoring the pricing power behind its AI compute platform.

The company expects some margin compression but still at elevated levels. Management guided Q3 gross margin to 74%, plus or minus 50 basis points, and fiscal 2028 to 72% to 73% as price increases work through memory costs. Vera Rubin is described as expanding the revenue opportunity to $40 billion per gigawatt, compared with Blackwell’s $25 billion and Hopper’s $18 billion, reinforcing the argument that customers are paying more for higher platform output.

Financial returns and ecosystem breadth strengthen the case. Return on invested capital is 92.2%, return on equity is 101.5%, debt-to-equity is 0.073, and interest coverage is 503.4x. Nvidia’s CUDA software, NVLink fabric, Spectrum-X networking, and Vera CPU are positioned as a wider moat than rival accelerators from Broadcom, AMD, Amazon, and Intel. Risks include China revenue exclusions, supply obligations of $279B, guarantee obligations of $108.5B, and days sales outstanding rising from 45 to 60 days.