It looks like chipmaking giant Nvidia may be in trouble. Nvidia’s latest earnings report for the second quarter of fiscal year 2026, ending July 27, 2025, reinforces its dominant position in the AI and data center markets, while also highlighting several underlying risks.
The company posted record revenue of $46.7 billion, marking a 6% increase quarter-over-quarter and a 56% surge year-over-year. This growth continues to be driven primarily by its data center segment, which generated $41.1 billion, representing 88% of total revenue.
A standout contributor to this success was the Blackwell-based data center products, which saw a 17% sequential rise. Nvidia’s gross margin also remained strong, reported at 72.4% (GAAP) and 72.7% (non-GAAP). However, these margins were slightly inflated due to a $180 million inventory release related to its H20 chips—products that were originally meant for Chinese markets but were instead redirected elsewhere amid regulatory restrictions. Importantly, no H20 sales were made to Chinese customers this quarter.
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Despite the strong top-line and margin performance, investor concerns remain. One key issue is revenue concentration: according to SEC filings, just two customers accounted for nearly 40% of Nvidia’s total sales. This poses a potential risk if either client reduces spending or shifts to competitors. Geopolitical uncertainty, particularly U.S.-China tech tensions, continues to cloud Nvidia’s long-term sales strategy, especially in emerging AI markets
To bolster shareholder value, Nvidia announced an additional $60 billion stock buyback program, signaling confidence in its future earnings potential. This move brings its total buyback capacity to nearly $75 billion, including previously unspent funds.
Nvidia’s Q2 FY2026 results solidify its position as the undisputed leader in the AI hardware and data center markets. The company’s massive revenue growth, driven largely by demand for Blackwell-based AI accelerators, highlights its central role in powering the global AI boom. With gross margins exceeding 72% and continued profitability, Nvidia is operating from a position of financial strength.
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However, the report also underscores growing risks. The fact that nearly 40% of revenue came from just two customers signals a potential overreliance that could impact future stability. Additionally, the absence of H20 chip sales to China, due to U.S. export restrictions, points to ongoing geopolitical hurdles that could limit market access and growth in key regions.
The approval of a $60 billion share buyback reflects strong confidence in the company’s future and an effort to return value to shareholders. Yet, as growth expectations remain sky-high, Nvidia must continue to innovate while diversifying both its customer base and geographic footprint.
Also, NVIDIA’s ability to scale responsibly will be tested as global demand for AI infrastructure intensifies. Power consumption, supply chain constraints, and sustainability concerns are becoming increasingly important for large-scale deployments. Partnerships with cloud providers, sovereign AI initiatives, and enterprise AI adoption will play a crucial role in expanding its addressable market.