Nvidia forecasts revenue above estimates, announces $80 billion share buyback
Nvidia’s Strong Financial Performance and Market Position
By Zaheer Kachwala, Stephen Nellis and Max A. Cherney
May 20 (Reuters) - Nvidia forecast second-quarter revenue above Wall Street expectations on Wednesday and announced an $80 billion share repurchase program.
Shares of the company were up 1.3% in extended trading.
Revenue Forecast and Market Expectations
The world's most valuable company expects revenue of $91 billion, plus or minus 2%, compared with estimates of $86.84 billion, according to data compiled by LSEG.
Nvidia's results are largely considered a barometer for the AI market's health, as its chips are used in virtually every major data center in the world, powering the largest and most advanced AI models.
Analyst Reactions and Investor Sentiment
"Nvidia delivered another beat, but at this point that's essentially priced in as it keeps beating quarter after quarter," said eMarketer analyst Jacob Bourne. "The lingering question is whether it can convince investors the AI buildout has durability into 2027 and 2028, especially as the narrative shifts toward inference workloads and competing silicon from Google, Amazon, AMD, and Intel."
Shareholder Returns and AI Infrastructure Spending
The company also said it would increase its quarterly cash dividend to 25 cents per share from 1 cent.
Spending on AI infrastructure continues to grow rapidly, with U.S. tech giants, including Alphabet, Amazon and Microsoft, expected to spend more than $700 billion on AI this year, a sharp jump from around $400 billion in 2025.
Rising Competition and Industry Dynamics
Rising Competition from Custom Chips
While heavily relying on Nvidia's expensive processors, the companies are also pouring funds into developing their own custom chips to run models, posing a risk to Nvidia's long-held dominance over the chip industry.
Those chips are targeted at inferencing - the process by which AI responds to user queries - which represents a much larger market than training.
Nvidia is facing competition not only from Big Tech but also from other chip rivals, including Intel and Advanced Micro Devices, which have touted a large revenue opportunity from the inference market.
Company Moves to Protect Position
The Santa Clara, California-based company has made moves to defend its position. It unveiled a new central processor and AI system built on technology from Groq - a chip startup specializing in inference - in March.
Supply Chain Strategies and Financial Results
The company is also spending heavily to ensure it does not hit supply-chain snags during a global memory chip crunch. Nvidia said on Wednesday that its supply rose to $119 billion in the fiscal first quarter, up from $95.2 billion the previous quarter.
Nvidia reported first-quarter revenue of $81.62 billion, beating analysts' average estimate of $78.86 billion, according to data compiled by LSEG.
Data center revenue in the quarter came in at $75.2 billion, compared with the average analyst estimate of $72.8 billion.
On an adjusted basis, the firm earned $1.87 per share, compared with market estimates of $1.76.
Cloud Computing Agreements and Future Outlook
Nvidia also disclosed $30 billion worth of cloud computing agreements, up sequentially from $27 billion, which it said were to help its research and development efforts. Seaport analyst Jay Goldberg said in a research note last year that such commitment likely represents “backstops” in which Nvidia agrees to pay cloud computing companies that buy its hardware for excess capacity from those companies running Nvidia systems.
(Reporting by Zaheer Kachwala and Anhata Rooprai in Bengaluru and Stephen Nellis and Max A. Cherney in San Francisco Editing by Shinjini Ganguli and Matthew Lewis)
