NVIDIA (NVDA) Reports Record Q3 Earnings with Data Centers Driving Growth

by MarketNewsData

Key Points

  • Revenue: $57.0B (vs. est. $55.09B), +22% Q/Q, +62% Y/Y.
  • EPS: $1.30 (GAAP and non-GAAP), beating est. $1.26.
  • Gross Margin: 73.4% GAAP (up 1 pt Q/Q).
  • Data Center Revenue: Record $51.2B, +25% Q/Q, +66% Y/Y.
  • Q4 FY26 Guidance: Revenue $65B ±2%, margins ~75%.
  • Capital Return: $37B returned YTD; $62.2B buyback authorization remaining.

Quarter Highlights

Data Center Continues to Dominate

Data Center is now the core of the business.
The press release shows $51.2B for the segment, while the 10-Q provides deeper detail:

  • Compute & Networking revenue: $50.9B, +64% Y/Y.
  • Compute: $43.0B, +56% Y/Y, +27% Q/Q.
  • Networking: $8.2B, +162% Y/Y, +13% Q/Q.
  • Graphics: $6.1B, +51% Y/Y.

The mix shows NVIDIA is increasingly a full AI systems provider—not just a GPU vendor. Networking is becoming a second major growth engine as customers build large-scale AI clusters.

Management Commentary

CEO Jensen Huang described demand as “accelerating and compounding,” noting that Blackwell sales are “off the charts” and cloud GPUs are sold out.
He framed the industry as entering a “virtuous cycle of AI,” with more model makers, startups, and enterprises across every sector.

Guidance Signals Continued Acceleration

NVIDIA expects Q4 revenue of $65B ±2%, implying strong sequential growth.
Gross margins should trend higher toward 74.8% GAAP / 75.0% non-GAAP, while operating expenses rise modestly as the company ramps compute, engineering, and infrastructure.

What the 10-Q Adds

1. Inventories and Purchase Obligations Are Surging

  • Inventories more than doubled to $19.8B from $10.1B at FY start.
  • Excess purchase obligations rose to $2.8B.
    These increases reflect heavy build for Blackwell and networking systems.
    This also introduces risk if demand or export rules shift.

2. Gross Margin Headwinds from Product Mix + H20 Charges

  • Margin pressure Y/Y tied to transition from Hopper to Blackwell systems.
  • Net inventory/purchase-obligation charges for FY26 YTD: $6.7B charges, $1.3B releases.
    The 10-Q ties the earlier $4.5B H20 charge directly to U.S. export restrictions.

3. Customer Concentration

Four customers make up 65% of accounts receivable.
This underscores hyperscaler dependence—positive during growth cycles, but a risk if any major buyer slows.

4. Explicit China Risk Statement

NVIDIA states it is “effectively foreclosed” from competing in China’s data center compute market under current export rules.
China’s antitrust regulator also raised concerns related to Mellanox networking commitments.

5. R&D and Infrastructure Spend Rising Fast

R&D is up over 40% YTD, driven by compute infrastructure and workforce expansion.
This supports NVIDIA’s rapid architecture cadence (Blackwell → Blackwell Ultra → Rubin).

Capital Return

  • 70M shares repurchased ($12.6B) in Q3 alone.
  • 262M shares repurchased ($36.7B) YTD.
  • $62.2B buyback authorization remains.
  • Quarterly dividend is unchanged at $0.01, payable Dec. 26.

Final Takeaways

NVIDIA delivered another strong beat with Data Center powering nearly all of the incremental upside. The shift toward full AI systems—compute plus networking—is accelerating and boosting scale. Margins remain strong despite increasing inventory costs, and Q4 guidance implies demand is still building.

The 10-Q adds important context: rising inventories, hyperscaler concentration, and explicit China market loss remain structural risks. Even with those factors, the numbers point to sustained AI infrastructure demand and a business still expanding at multi-decade scale.

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