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Nvidia delivered stronger-than-expected quarterly results and forecast 70 percent sales growth next year, helped by rising demand from cloud providers and AI laboratories. The company is also facing questions about guarantees, investments and extended payment terms that support customer purchases of its chips.
Nvidia has raised its outlook for artificial intelligence chip sales, reinforcing investor confidence in the rapid expansion of AI infrastructure while also facing growing scrutiny over the financial support it provides to customers.
The company reported quarterly revenue of 96.2 billion dollars for the period ending in July and forecast current-quarter sales of approximately 108 billion dollars, exceeding Wall Street expectations. Chief financial officer Colette Kress said Nvidia expects revenue to rise by about 70 percent next year. She added that customer demand could double, although the company's ability to convert that demand into sales would be restricted by supply limitations.
The forecast, combined with news that Amazon Web Services plans to deploy an additional two million of Nvidia's newest graphics processing units during the current quarter, sent Nvidia shares more than 7 percent higher in premarket trading. The results arrived as investors examined Nvidia's increasingly active role in financing the construction of AI data centres.
The company has agreed to provide partial guarantees to a group of Wall Street investors arranging as much as 500 billion dollars in chip financing for customers. It has also committed to a backstop exceeding 100 billion dollars in another arrangement. These initiatives supplement Nvidia's investments in several major customers, as well as revenue-sharing agreements and other financial guarantees connected to chip purchases.
Critics have described the arrangements as circular financing, arguing that Nvidia may be helping customers buy its products and thereby supporting demand that could prove weaker if enthusiasm for AI fades. Kress rejected that interpretation, saying the company viewed the measures as a way to support an expanding market and believed the investments carried limited risk because demand for computing capacity remained strong. Analysts have nevertheless called for greater transparency around the agreements.
Their concern is that Nvidia could become exposed to an oversupply of hardware if AI companies fail to generate the expected returns from their investments. Nvidia is a major investor in OpenAI and Anthropic, and Kress said demand from AI laboratories supported by the company's balance sheet could account for roughly one quarter of its business next year. The company's financial performance is closely watched because its advanced processors are central to the training and operation of many AI models.
Data centre revenue, which represents the core of Nvidia's AI chip business, reached 89 billion dollars in the latest quarter, an increase of 117 percent from a year earlier. Chief executive Jensen Huang said demand was broadening beyond a single group of leading AI laboratories. He pointed to the emergence of numerous new research organisations and start-ups, alongside spending by major cloud providers such as Amazon and Google.
These hyperscalers account for about half of Nvidia's revenue and are leading an investment programme in AI infrastructure that is expected to exceed one trillion dollars. Huang defended the company's use of its balance sheet, saying the businesses building this generation of AI systems could become some of the most important technology companies in history. Nvidia also warned that profit margins would come under pressure as data centre demand contributed to an industry-wide shortage of memory chips.
Gross margin stood at 75 percent in the quarter, but the company expects it could decline to approximately 71 percent by early next year before recovering. Commitments to suppliers increased sharply to 279 billion dollars from 119 billion dollars in the previous quarter, mainly because of memory procurement. Free cash flow fell to 21.3 billion dollars from 48.6 billion dollars in the preceding quarter, partly because some customers were taking longer to pay.
Accounts receivable rose to 63.1 billion dollars from 40.7 billion dollars after Nvidia extended payment terms for certain large, multi-quarter agreements with investment-grade customers. Net income reached 59.7 billion dollars, helped by paper gains on equity investments, including the company's stake in SpaceX. Despite its strong performance, Nvidia remains largely excluded from China's market because of strict United States export controls and resistance from Beijing to its products
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