NVIDIA CORP (NVDA)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections based on management’s beliefs and assumptions and on information currently available to management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended January 25, 2026 in greater detail under the heading “Risk Factors” of such reports. Given these risks, uncertainties, and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and understand that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

All references to “NVIDIA,” “we,” “us,” “our” or the “Company” mean NVIDIA Corporation and its subsidiaries.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

© 2026 NVIDIA Corporation. All rights reserved.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the risk factors set forth in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 25, 2026 and Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and our Condensed Consolidated Financial Statements and related Notes thereto, as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC, before deciding to purchase, hold, or sell our securities.

Overview

Our Company and Our Businesses

NVIDIA pioneered accelerated computing to help solve the most challenging computational problems. Since our original focus on PC graphics, we have expanded to several other large and important computationally intensive fields. Fueled by the sustained demand for exceptional 3D graphics and the scale of the gaming market, NVIDIA has leveraged its GPU architecture to create platforms for scientific computing, AI, data science, autonomous vehicles, robotics, and digital twin applications. NVIDIA is now a data center-scale AI infrastructure company reshaping all industries.

Our two operating segments are “Compute & Networking” and “Graphics.” Refer to Note 13 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998.

Recent Developments, Future Objectives and Challenges

Revenue growth in the second quarter and the first half of fiscal year 2027 was driven by data center products for accelerated computing and AI solutions. Blackwell continued to account for the majority of our system shipments.

Our next-generation Data Center architecture, Vera Rubin, began production shipments in the third quarter of fiscal year 2027. We will be shipping both Blackwell and Rubin systems in the future and are currently experiencing certain supply constraints. Demand estimates for our products can be inaccurate and create volatility in our revenue or supply levels. To secure inventory and capacity to meet demand for the next several years, we have entered into significant commitments and may continue to enter into manufacturing and supply agreements for both current and future products, and we continue to expand our supplier base. The scale and size of our production needs and the complexity of producing our data center systems has caused and could in the future cause delays in production, challenges in managing supply and demand, revenue volatility, quality issues, increased inventory provisions, decreases in product yields, higher material

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costs, and increased warranty costs. We have significantly increased our supply and capacity commitments from $119 billion last quarter to $279 billion as of July 26, 2026 to meet future demand. Refer to Note 10 of the Notes to Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q. Customers may postpone purchasing new architectures due to the lack of availability of data center infrastructure to deploy our products, constraints on capital to have sufficient funding to purchase our products, or may adopt new technologies more gradually than anticipated, affecting our revenue timing and supply chain expenses.

The availability of land, power, shell, and capital is crucial to support the buildout of a full data center inclusive of NVIDIA AI infrastructure by our customers and partners, and any shortage of these or other necessary resources could impact our future revenue and financial performance. Expanding land, power, shell, and energy needs to meet demand is a complex, multi-year process that involves significant regulatory, technical, and construction challenges. In addition, access to capital can be particularly constrained for less-capitalized companies, which may face difficulties securing financing for large-scale infrastructure projects. We believe AI clouds and AI model makers have significant demand for training and inference compute and currently lack the ability to secure long-term infrastructure contracts and investment-grade financing capacity to secure the AI infrastructure necessary to grow. These limitations could delay customer and partner deployments or reduce the scale of accelerated computing and AI adoption and may impact the growth of our revenue. We have undertaken initiatives to address these challenges including securing and providing guarantees of land, power, shell, and capacity of select data center infrastructure that customers require to deploy our products. We expect to focus our data center infrastructure initiatives on exceptional sites and apply the same discipline to these initiatives as we do to our supply-chain management by securing critical inputs when we have visibility into customer demand and when doing so enables long-term productive capacity. We expect our large cloud service provider customers and investment grade enterprises to continue to secure land, power, and shell commitments independently. Our land, power, and shell commitments and guarantees may impact our financial results and are dependent on the performance of our customers and partners.

In August 2026, we entered into guarantees with SB Energy Corp. to provide credit support on the land, power, and shell buildout at SB Energy’s PORTS Technology Campus in Pike County, Ohio, covering leases for approximately 4.25 gigawatts of IT load. The campus will exclusively host our compute under 20-year leases to OpenAI, subject to limited exceptions, with our obligation capped at $105 billion in the aggregate, subject to certain conditions including SB Energy, the lessor, satisfying applicable ready-for-service conditions. Each guarantee generally becomes effective upon commencement of the applicable lease, with corresponding guarantee amounts increasing as each of nine data centers is placed in service, which is expected to begin in fiscal year 2029. Our exposure declines as OpenAI fulfills its lease payments. Our guarantees are limited to defined portions of lease and power payments and not the full cost of the site or all of the tenant’s obligations. The guarantees terminate upon certain events, including OpenAI achieving a satisfactory credit rating or after each respective lease term has completed. We also hold an option, exercisable in our sole discretion, to provide additional credit support in phases for approximately 3.8 additional gigawatts as the site scales. Refer to Note 10 of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

We have made, and may continue to make, investments and commitments in our ecosystem to enhance our growth opportunities, cultivate our ecosystem, and strengthen our competitive position. These include equity investments of $99 billion and equity investment commitments of $25 billion as of July 26, 2026.

In the second quarter of fiscal year 2027, we introduced a new business model with certain select AI cloud partners, to enable broader access to our data center infrastructure products to serve AI startups, model builders, enterprises, research organizations, and sovereign customers. We believe these AI cloud partners have strong customer demand and robust sales pipelines but are constrained by the large-scale infrastructure that is required to meet that demand. Through this model, we expect our AI cloud partners will be able to deploy incremental NVIDIA AI infrastructure, enabling them to serve a broader set of customers and address expanding demand for AI compute. Under these agreements, AI clouds procure our data center infrastructure products and we commit to cloud service agreements, which the AI clouds can unilaterally stop providing to us and sell to third-party customers at more advantageous rates. Our commitments, which are typically six years in duration, totaled $36 billion as of July 26, 2026, and decrease as capacity is used by third-party customers or by us for our research and development efforts. If certain criteria are met, we will participate in revenue share generated by the AI clouds from third-party customers, which may contribute to revenue in the future. If market conditions change, it may negatively impact our financial results. Refer to Note 10 of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

In August 2026, we entered into memorandums of understanding with several large capital providers to establish independent financing platforms designed to mobilize more than $500 billion of third-party capital over time to support the deployment of AI infrastructure. These and other preliminary arrangements may not lead to definitive agreements. These arrangements are designed for our

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Overview

Our Company and Our Businesses

NVIDIA pioneered accelerated computing to help solve the most challenging computational problems. Since our original focus on PC graphics, we have expanded to several other large and important computationally intensive fields. Fueled by the sustained demand for exceptional 3D graphics and the scale of the gaming market, NVIDIA has leveraged its GPU architecture to create platforms for scientific computing, AI, data science, autonomous vehicles, robotics, and digital twin applications. NVIDIA is now a data center scale AI infrastructure company reshaping all industries.

Our two operating segments are "Compute & Networking" and "Graphics." Refer to Note 16 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.

Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998.

Recent Developments, Future Objectives and Challenges

Revenue growth in fiscal year 2026 was driven by data center compute and networking platforms for accelerated computing and AI solutions. Our Blackwell architectures represented the majority of our Data Center revenue.

The availability of data centers, energy, and capital to support the buildout of NVIDIA AI infrastructure by our customers and partners is crucial, and any shortage of these or other necessary resources could impact our future revenue and financial performance. Expanding energy capacity to meet demand is a complex, multi-year process that involves significant regulatory, technical, and construction challenges. In addition, access to capital can be particularly constrained for less-capitalized companies, which may face difficulties securing financing for large-scale infrastructure projects. These limitations could delay customer and partner deployments or reduce the scale of accelerated computing and AI adoption.

We continue to execute Data Center compute product introductions, bringing new advanced architectures on a one-year product cadence, including our Rubin platform. We began shipping production units of our new Blackwell Ultra platforms including GB300 in the second quarter of fiscal year 2026. The complexity of our product transitions and sophisticated system configurations has and may in the future cause delays in production and create challenges in managing supply and demand. This could further result in revenue volatility, quality issues, increased inventory provisions, decreases in product yields and higher material costs, and/or increased warranty costs. Customers may postpone purchasing new architectures or may adopt new technologies more gradually than anticipated, affecting our revenue timing and supply chain expenses.

In April 2025, the USG informed us that a license is required for exports of our H20 product into the China market. As a result of these requirements, we incurred a $4.5 billion charge in the first quarter of fiscal year 2026 associated with H20 for excess inventory and purchase obligations, as the demand for H20 diminished. In August 2025, the USG granted licenses that would allow us to ship certain H20 products to certain China-based customers. We generated approximately $60 million in H20 revenue under those licenses.

In February 2026, the USG granted a license that would allow us to ship small amounts of H200 products to specific China-based customers. To date, we have not generated any revenue under the H200 licensing program, and do not yet know whether any imports will be allowed into China. The license requires that the H200s go through an inspection process in the United States prior to any shipment to the customer. As a result, any H200 shipped under the new licensing program will be subject to a 25% tariff upon importation into the United States.

The recent rise in high-quality open-source foundation models is making advanced AI capabilities broadly accessible. Open-source AI is dependent on developer adoption and if deployed on our competitors’ platforms, it could reduce demand for our products and services.

While currently our supply chain is mainly concentrated in Asia, we are expanding into the U.S. and Latin America. These moves are expected to strengthen our supply chain, add resiliency and redundancy, and meet the growing demand for AI infrastructure. Our ability to increase manufacturing capabilities will depend on the local region's manufacturing ecosystem's capacity to ramp production supply to the required volume and on a timely basis.

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We have made, and expect to continue making, investments that support our technology roadmap and the broader AI ecosystem. In fiscal year 2026, we made the following investments:

•We invested $17.5 billion in private companies and infrastructure funds, primarily to support early‑stage startups. These investments include AI model makers that purchase our products directly or through CSPs. Many of these investments are illiquid and non‑marketable. The related early-stage startups may not become profitable in the near term, or at all, and there can be no assurance that we will realize a return on our investments.

•We made investments in publicly-held equity securities where the value may fluctuate significantly due to changes in stock prices and could adversely affect our financial results.

•To support the build-out of complex datacenter infrastructures, we enter into commercial arrangements, including guarantees with partners. We provided $3.5 billion in land, power, and shell guarantees to early‑stage companies, generally over multi‑year periods. If the escrow and the partners' operating activities are not sufficient to cover an event of default under these guarantees, we may elect to assume the underlying leases for internal use or sublease them to third parties.

Macroeconomic factors, including tariffs, inflation, interest rate changes, capital market volatility, global supply chain constraints, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations, particularly demand for our products. While difficult to isolate and quantify, these macroeconomic factors impact our supply chain and manufacturing costs, employee wages, costs for capital equipment, the value of our investments, revenue and competitive position. Our product and solution pricing generally does not fluctuate with short-term changes in our costs. Within our supply chain, we continuously manage product availability and costs with our vendors.

Refer to “Item 1A. Risk Factors – Risks Related to Regulatory, Legal, Our Stock and Other Matters” for a further discussion of the potential impact of these factors on our business.

Fiscal Year 2026 Summary

Revenue for fiscal year 2026 was $215.9 billion, up 65% from a year ago.

Data Center revenue for fiscal year 2026 was up 68% from a year ago. The strong year-on-year growth was driven by the major platform shifts – accelerated computing and AI.

Gaming revenue for fiscal year 2026 was up 41% from a year ago, driven by strong Blackwell demand. We expect supply constraints to be a headwind to Gaming in the first quarter of fiscal 2027 and beyond.

Professional Visualization revenue for fiscal year 2026 was up 70% from a year ago, driven by exceptional demand for Blackwell as well as the launch of our new DGX Spark.

Automotive revenue for fiscal year 2026 was up 39% from a year ago, driven by continued adoption of our self-driving platforms.

Gross margin decreased in fiscal year 2026 as our business model transitioned from offering Hopper HGX systems to Blackwell full-scale datacenter solutions. The gross margin decrease was also impacted by a $4.5 billion charge associated with H20 excess inventory and purchase obligations.

Operating expenses for fiscal year 2026 were up 41% from a year ago, driven by higher compensation and benefits expenses due to employee growth and compute and infrastructure costs.

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Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, cost of revenue, expenses and related disclosure of contingencies. Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and could have a material impact on our financial condition or results of operations. We have critical accounting estimates in the areas of inventories, income taxes, non-marketable equity securities, and revenue recognition. Refer to Note 1 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for a summary of significant accounting policies.

Inventories

We charge cost of sales for inventory provisions to write-down our inventory to the lower of cost or net realizable value or for obsolete or excess inventory, and for excess product purchase commitments. Most of our inventory provisions relate to excess quantities of products or components, based on our inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions, which requires management judgment.

Situations that may result in excess or obsolete inventory or excess product purchase commitments include changes in business and economic conditions, changes in market conditions, sudden and significant decreases in demand for our products, including potential cancellation or deferral of customer purchase orders, inventory obsolescence because of changing technology and customer requirements, new product introductions resulting in less demand for existing products or inconsistent spikes in demand, failure to estimate customer demand properly, ordering in advance of historical lead-times, government regulations and the impact of changes in future demand, or increase in demand for competitive products, including competitive actions.

The net effect on our gross margin from inventory provisions and sales of items previously written down was an unfavorable impact of 2.6% in fiscal year 2026 and 2.3% in fiscal year 2025. Our inventory and capacity purchase commitments are based on forecasts of future customer demand and consider our third-party manufacturers' lead times and constraints. Our manufacturing lead times can be and have been long, and in some cases, extended beyond twelve months for some products. We may place non-cancellable inventory orders for certain product components in advance of our historical lead times, pay premiums and provide deposits to secure future supply and capacity. We also adjust to other market factors, such as product offerings and pricing actions by our competitors, new product transitions, and macroeconomic conditions - all of which may impact demand for our products.

Refer to the Gross Profit and Gross Margin discussion below in this Management's Discussion and Analysis for further discussion.

Income Taxes

We are subject to income taxes in the U.S. and foreign jurisdictions. Our calculation of deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing wit

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