Nvidia (NVDA
The AI chip darling returned a record $26 billion to shareholders in its second fiscal quarter, $20 billion through share repurchases and $6 billion by way of a $0.25 a share quarterly dividend. Relative to its plan to return 50% or more of free cash flow to shareholders, Nvidia has returned 60% year to date.
Executives said the company intends to increase capital returns going forward.
“We forecast Nvidia to return $115 billion in cash to shareholders in 2026 and $230b billion in 2027, which we expect will translate to P/E multiple expansion, similar to what happened to Apple in 2015,” Evercore ISI analyst Mark Lipacis wrote in a note on Thursday.
Lipacis pointed out in the chart below that after five years of compression, Apple’s price-to-earnings ratio began expanding with increases in its capital returns program.
Nvidia is certainly putting up the financial results to back up giving more cash back to shareholders.
Shares of Nvidia rose 6% on the company’s second quarter results and upbeat outlook. Prior to the earnings report, Nvidia shares had slightly underperformed the S&P 500’s year-to-date gain of about 14%.
Nvidia saw adjusted earnings per share of $2.22 on revenue of $96.2 billion. These were better than the $2.09 a share the Street had expected and revenue of $92.3 billion.
Nvidia’s Data Center revenue, which includes Hyperscalers and AI Clouds, Industrial, and Enterprise (ACIE), came in at $89 billion versus a projected $85.8 billion.
Edge Computing, which includes Nvidia’s other businesses, such as physical AI and gaming, brought in $7.2 billion. Analysts were expecting $6.6 billion.
Nvidia projected fiscal third quarter revenue of between $105.8 billion and $110.1 billion. Wall Street was calling for $105.1 billion.
This would be the first quarter above $100 billion in revenue for Nvidia, said Stifel analyst Ruben Roy.
Nvidia said it sees 70% revenue growth for fiscal year 2028. This was above analyst forecasts for 45% growth. The sales gain would be larger if not for memory chip shortages, Nvidia CEO Jensen Huang said.
“We see a clear path to $1 trillion revenue in fiscal year, supported by robust AI infrastructure demand and higher revenue per GW with Rubin. Despite gross margin reset to 72.5%, supply commitments increasing to $279 billion further strengthen our confidence in NVDA’s visibility and ability to support the next phase of AI infrastructure deployments,” Jefferies analyst Blayne Curtis said.