Earnings Call Becomes Key to Stock Reversal After Results Announcement
NVIDIA reported adjusted earnings per share of $2.22 for the second quarter of fiscal year 2027, more than doubling year-over-year; revenue reached $96.2 billion, a 106% increase. After-hours trading post-earnings was initially cautious, but as the conference call revealed details on demand and supply, the stock price turned to rise approximately 4.4%.
When discussing the expectation of about 70% revenue growth for the next fiscal year, Jensen Huang stated: "We have the supply to support 70% growth, but our demand significantly exceeds that level." He also noted that the company is working with suppliers to try and meet customer needs as much as possible, but bottlenecks in areas like memory must be transparently disclosed to investors.
AI is Generating Profitable Tokens
Jensen Huang emphasized two points on the call: AI is already useful, and AI is generating profitable tokens. According to NVIDIA's assessment, if customers have more computing power, they can generate more tokens that bring profit. This indicates that the current demand for computing power isn't solely driven by the model training race but also stems from inference and application workloads that are already generating revenue.
He also mentioned that competition isn't entirely negative for NVIDIA. Many custom XPUs serve only one specific cloud platform or one type of service, whereas NVIDIA's infrastructure covers the full AI lifecycle and can run open or closed models across different cloud platforms. As long as models are successful, the training and inference demands will ultimately drive NVIDIA's sales.
Why Strong Earnings Initially Might Still Lead to Decline
Investors previously worried that even if NVIDIA beat the publicly stated analyst expectations, it might not surpass the market's higher "whisper numbers." NVIDIA has seen situations in past quarters where earnings exceeded expectations but the stock price still fell because investors had already priced in strong growth ahead of time.
The eventual strengthening of this rally was due to management providing forward-looking signals more important than the quarterly numbers: the high growth for the next fiscal year isn't due to a lack of orders but is constrained by supply; new platforms are entering production; AI inference is forming verifiable commercial returns. This information shifted the market's focus from "Has growth peaked?" back to "Can supply catch up with demand?"
What Investors Should Watch Next
First, whether the supply chain can provide sufficient memory, networking equipment, and system capacity. If demand is strong but cannot be fulfilled, revenue growth may still be constrained. Second, the third-quarter gross margin guidance is approximately 74%, slightly down from 75% in the second quarter, necessitating observation of whether new platform ramps and rising costs will continue to squeeze margins. Third, whether customer capital expenditures can continue growing in 2027 will determine if the approximately 70% revenue growth rate can be realized.
The post-earnings gain of over 4% indicates the market accepted the "demand exceeds supply" explanation. However, high-valuation stocks are very sensitive to changes in expectations: if subsequent orders, deliveries, and gross margins are all realized, the stock price will still have fundamental support; if supply constraints translate into revenue losses, or if AI customer returns fall short of expectations, volatility will significantly increase.
