Nvidia’s Gross Margin to Fall Due to Memory Chip Price Hikes
By Business Desk
Nvidia forecasts a dip in gross margin to 71-72% by Q4 due to soaring memory chip costs, despite strong Q2 revenue of $96 billion.
Nvidia faces its most significant margin reduction in the coming quarters, with gross margin projected to fall to 71-72% by the December quarter. This downturn is primarily attributed to an unexpected and substantial increase in memory chip prices, a critical component for Nvidia’s advanced AI processors.
Key Financial Insights
- Gross margin expected to decline to 71-72% by the December quarter.
- Second-quarter total revenue reached $96 billion, more than double the prior year.
- Shares jumped 4.71% in extended trading following Q2 performance.
- Third-quarter fiscal 2027 revenue forecast: $108 billion.
- Margins projected to recover to 72-73% only by fiscal 2028.
Despite these margin pressures, Nvidia reported a robust second quarter, achieving total revenue of $96 billion. This figure represents more than double the revenue from the previous year, underscoring strong demand for its products.
Navigating Cost Pressures
Nvidia’s Chief Financial Officer, Colette Kress, noted that the tight memory supply directly stems from the same surge in demand that is propelling the company’s growth. Kress also indicated that further price increases for memory components are anticipated next year.
The company’s strategy for margin recovery hinges significantly on customer acceptance of already implemented price increases. Should customers absorb these costs without reducing their purchases, margins are projected to rebound to 72-73% by fiscal 2028.
Future Outlook and Recovery Path
For the third quarter of fiscal 2027, Nvidia forecasts revenue of $108 billion. This projection, alongside the strong Q2 performance, saw the company’s shares climb 4.71% in extended trading.
The current scenario illustrates a critical dynamic: while demand for AI processors remains exceptionally high, it simultaneously drives up the cost of essential inputs like memory chips. Nvidia’s ability to maintain its growth trajectory and restore margins depends on its customers’ willingness to continue investing despite rising prices.