Nvidia is bracing for its steepest margin decline in upcoming quarters due to the infamous memory chip supply crunch in the driving seat. The chipmaker reported a 75% gross margin for the June quarter, unchanged from the prior quarter. Chief Financial Officer Colette Kress told investors on the post-earnings analyst call that margins will slide from here.
Nvidia expects a 74% gross margin for the September quarter. It expects margins to bottom out at 71% to 72% in the following quarter. Margins are projected to recover to 72% to 73% only in fiscal 2028, once price increases Nvidia has already implemented start showing up in results.
Kress said Nvidia is facing "extreme pricing conditions" in the memory chip market. She said the scale of the price increase has exceeded the company's own expectations, and further increases are expected next year. Memory chips are a core input for Nvidia's AI processors, and rising costs affect profitability on every unit the company sells.
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Rather than treat the shortage as a simple cost overrun, Kress framed it as tied to NVIDIA's own success, calling tight memory supply "a symptom of the same demand surge" fueling the company's growth. She said NVIDIA holds "long-standing deep relationships with all three major memory suppliers" and is working with them to expand capacity.
The margin warning came alongside a strong quarter. NVIDIA's total revenue reached $96 billion in the June quarter, more than double the year-ago period. The company forecast $108 billion in revenue for the September quarter, plus or minus 2%.
NVIDIA's four-quarter margin guidance marks a sharper compression than the company has signaled in recent quarters. Its projected recovery depends on customers absorbing price increases already rolled out without slowing their purchases.
Nvidia Q2 Earnings
Nvidia reported revenue of $96.2 billion for the second quarter ended July 26, 2026, up 18% from the previous quarter and 106% from a year ago.
GAAP and non-GAAP gross margins stood at 75%. GAAP earnings per diluted share came in at $2.46, while non-GAAP EPS was $2.22.
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For the third quarter of fiscal 2027, Nvidia expects revenue of $108 billion, plus or minus 2%. The company said its outlook does not assume any Data Center compute revenue from China.
Nvidia expects GAAP and non-GAAP gross margins of 74%, plus or minus 50 basis points. GAAP operating expenses are expected to be around $9.2 billion, while non-GAAP operating expenses are projected at approximately $9 billion.
Stock Movement
Nvidia will pay its next quarterly cash dividend of $0.25 per share on October 1, 2026, to shareholders of record as of September 10.
Nvidia shares jumped 4.71% in extended trading on Wednesday to $219.53 after the strong second-quarter performance. The stock had settled 1.59% lower at $209.66 during regular trading hours. It opened at $212.64, touched an intraday high of $213.60 and fell to a low of $209.23.
Nvidia shares have gained nearly 7% over the past month, around 13% in the last six months and a little over 15% over the past year.
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