One number in Nvidia’s earnings report worries some analysts: gross profit margin. The chipmaker fell 3% on Thursday despite reporting second-quarter earnings that beat Wall Street expectations and issuing stronger-than-expected guidance for the quarter. Many analysts attributed the post-print move to subpar forecasts that failed to meet higher investor expectations and a decline in gross margin (from 78.4% to 75.1%) as the company launched new data center products. . “We expect the stock to likely remain range-bound over the next two quarters before Blackwell drives a turning point in 4-Q sales and gross margins,” Citi’s Atif Malik wrote, blaming H200 chip costs for the pressure. rise. Needham’s Quinn Bolton said the problems are likely to continue into the first quarter of fiscal 2026 as the company ramps up Blackwell wafer production. He expects gross margins to recover in the second fiscal quarter of 2027 and then decline again as Rubin wafer production begins. NVDA 1D Hill Nvidia shares fall after earnings Lower gross margins could curb earnings growth in the near term, according to Stifel’s Ruben Roy. Meanwhile, Morgan Stanley’s Joseph Moore revised his 2025 gross margin forecast to 74%. However, he emphasized the profit pressure warning Nvidia issued when it first announced Blackwell. “We expect gross margins to improve next year on higher volumes and improved cost absorption,” said J.P. Morgan’s Harlan Suhr. “Most importantly, the team has strong performance with its silicon/hardware/software platform and a strong ecosystem to continue to stay 1-2 steps ahead of competitors.” The disappointing margin news reinforces some of the reasons for a wait-and-see approach to Nvidia. Deutsche Bank’s Ross Seymore reiterated his Hold rating and $115 share price, while DA Davidson’s Gil Luria maintained a Neutral rating and $90 price target on the stock, noting that more new data center products could limit Nvidia’s profitability. Luria’s price target is down 28% from Wednesday’s close. “Over the next 3-5 quarters, we continue to believe that declining demand for NVIDIA computing is inevitable as end customers become more cautious when it comes to ROI for AI computing,” Luria wrote. “
