What happened
Nvidia's Q2 earnings beat Wall Street estimates, with revenue growing 106% to $106 billion in the quarter ended in August. The company now has a market cap approaching $5.5 trillion, making it the largest company in the world.
Why it matters
Nvidia is projecting 70% revenue growth next fiscal year (FY2028), which could put it on track to become the first company to generate $1 trillion in annual revenue. However, Amazon, at $775 billion in revenue, may reach that milestone first if it maintains 15% growth.
What to watch
Nvidia's revenue could reach $700 billion to $800 billion in FY2028 if it meets its 70% growth target. Amazon's sales grew 20% year over year last quarter, mainly due to AI demand, so Nvidia's pace may not be enough to beat it.
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Nvidia's latest earnings highlight its explosive growth, driven by insatiable demand from cloud providers and neoclouds, along with price increases. The company's market cap approaching $5.5 trillion and its projected 70% growth next fiscal year suggest it could approach $1 trillion in revenue within two years. However, Amazon's larger existing revenue base and steady growth mean it could reach that milestone first, even if Nvidia's growth rate is higher.
Nvidia's profitability is also notable, with an operating margin of 65% over the last 12 months, implying $650 billion in operating earnings if revenue reaches $1 trillion. Yet, the durability of this growth is uncertain, as a slowdown in AI spending could significantly reduce revenue. This makes the stock difficult to value, despite its current market cap appearing cheap relative to potential future earnings.
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