Expectations were high before NVIDIA‘S (NVDA -2.10%) Financial report for the second quarter of fiscal 2025. The company has become the de facto pioneer of the artificial intelligence (AI) revolution. Its graphics processing units (GPUs) provide the computing power needed to build the large language models (LLMs) that enable generative AI.

Rising demand for AI has driven Nvidia stock higher, with shares up more than 150% so far this year and more than 750% since the company accelerated its adoption of AI early last year (at the time of this writing).

In recent weeks, however, investors have become concerned that Nvidia has simply come too far, too fast, and they are wondering if the frenetic pace of artificial intelligence adoption can continue. Nvidia answered that question with a resounding “yes,” but given the stock’s parabolic gains, blockbuster results simply weren’t enough.

Nvidia’s GB200 Grace Blackwell AI superchip. Image source: Nvidia.

In numbers

In the second quarter, Nvidia reported record revenue of $30 billion, up 122% year over year and 15% quarter over quarter. This resulted in adjusted earnings per share (EPS) of $0.68. The results beat analyst consensus estimates of $28.6 billion in revenue and $0.64 in earnings per share. Revenue also exceeded management’s forecast of $28 billion.

Nvidia’s data center segment — which includes chips that use artificial intelligence — made headlines, with revenue of $26.3 billion growing 154% year-over-year and 16% quarter-over-quarter, driven by strong adoption of artificial intelligence among cloud computing and hyperscale data center operators.

It wasn’t just AI that drove Nvidia’s growth, although the data center segment outperformed the results of the company’s other segments (all segments posted year-over-year gains):

• The gaming segment grew by 16% to $2.9 billion.
• The professional visualization segment grew by 20% to $454 million.
• The auto segment grew 37% to $346 million.
• The original equipment manufacturer increased by 33% to 88 million US dollars

Nvidia’s gross margin of 75.1% was up from 70.1% in the year-ago quarter, largely due to the company’s tremendous pricing power. However, the figure declined slightly from the previous quarter’s 78.4% in the first quarter. The company had previously indicated that margins would weaken later in the year. CFO Colette Kress attributed the decline to inventory provisions for its Blackwell chips and product mix.

What the future holds

CEO Jensen Huang noted that demand for its current Hopper chip “remains strong” and called the anticipation for the next-generation Blackwell architecture “incredible.” He further noted that Nvidia’s Hopper H200 and Blackwell B200 chips “outperformed” MLPerf benchmark results for AI inference in recent industry tests. Despite the best efforts of competitors, Nvidia chips remain the gold standard for AI processing.

According to media reports, there could be delays of up to three months in the release of the new Blackwell chips due to design flaws, but Nvidia has allayed these fears. “We shipped customer samples of our Blackwell architecture in the second quarter. We made a change to the Blackwell GPU mask to improve production yield. Blackwell production ramp-up is expected to begin in the fourth quarter and continue into fiscal 2026.”

Another byproduct of Nvidia’s growth trajectory is the massive amount of cash the company is generating, as free cash flow has more than doubled to $13.5 billion. As a result, Nvidia is increasing its return to shareholders. The board authorized an additional $50 billion worth of share repurchases on top of the $7.5 billion remaining in its existing authorization.

These factors combined to produce a robust third-quarter forecast. Management is expecting revenue of $32.5 billion, which would represent 80% year-over-year growth. That’s a slowdown from the triple-digit growth Nvidia has delivered in each of the past five quarters — but investors have long known that growth of this magnitude can’t continue indefinitely. But the numbers show that investors were apparently disappointed.

Nvidia stock lost about 7% in after-hours trading (at the time of this writing), but it’s too early to say what will happen tomorrow. Taking a step back, the company’s results continue to defy expectations, but a slowdown in its parabolic growth rate was inevitable. Nvidia’s star still shines brightly and the long-term investment thesis is intact.

Taken together, Nvidia’s enduring competitive advantage, strong results and robust outlook demonstrate that the company still has plenty of growth potential.