Brief Overview
NVIDIA delivered 2Q27 results within expectations, with data centre revenue surging 117% year-on-year to US$89bn. The company guided FY28e revenue growth of about 70% year-on-year, though this is constrained by supply factors. Phillip Securities Research maintains a BUY rating with a raised target price of US$300.
Investment Positives
Hyperscale revenue showed significant acceleration in 2Q27, growing 102% year-on-year to US$48.7bn, compared to 93% growth in 1Q27. This acceleration was driven by hyperscalers increasing capital expenditure spending on GPU capacity, particularly for Blackwell Ultra. The top four hyperscalers – Google, Amazon, Microsoft, and Meta – increased their 2026e capital expenditure guidance by 5% this quarter to US$748bn, representing 97% year-on-year growth. NVIDIA expects their total capital expenditure to reach US$1.3tn in 2027e, reflecting 74% year-on-year growth.
Amazon is deploying an additional 2 million of NVIDIA’s GPUs until 2Q29e, whilst Microsoft announced plans to modernise its infrastructure with NVIDIA’s Vera Rubin, which commenced shipments in August.
The AI Clouds, Industrial & Enterprise (ACIE) segment recorded the fastest growth, with 2Q27 revenue spiking 138% year-on-year, overtaking hyperscale growth rates. This growth was supported by significant contract wins, including AI startups Reflection and Cohere signing multi-year contracts worth US$1bn or more with Nebius for AI workloads running on NVIDIA-powered infrastructure.
Sovereign AI revenue more than tripled year-on-year, with substantial partnerships announced. NVIDIA partnered with Noetra, Japan’s national AI company, to deploy 13,750 Vera CPUs and 27,500 Rubin GPUs delivering 140MW of AI compute for physical AI. South Korea committed to invest at least US$3bn for NVIDIA and Hyundai to deploy 50,000 Blackwell GPUs for AI model training and deployment.
Investment Negatives
The report indicates that rising memory costs present a headwind to NVIDIA’s margins, which prompted the analyst to raise the weighted average cost of capital to 8.4% from 7.9%.
Supply constraints including land, power, shell, and cooling are limiting NVIDIA’s revenue growth potential. Without these constraints, demand could grow more than 100% in FY28e, compared to the guided 70% growth.
Outlook
Global semiconductor spending surged 108% year-on-year in 1H2026 to US$675bn, driven by hyperscaler, enterprise, and sovereign nations’ AI buildout. The analyst raised FY27e revenue and PATMI forecasts by 11% due to stronger expected growth from the ACIE segment and rapid Vera Rubin ramp in 2H27e.
Recommendation & Target Price
Phillip Securities Research maintains a BUY recommendation with a raised target price of US$300, increased from the previous US$285. NVIDIA trades at a FY27e price-to-earnings ratio of 24x, representing a 32% discount to peers’ average of 35x.
Frequently Asked Questions
Q: What drove NVIDIA's data centre revenue growth in 2Q27?
A: Data centre revenue surged 117% year-on-year to US$89bn, driven by hyperscalers' sustained AI spending on Blackwell Ultra and acceleration of ACIE revenue as sovereign AI revenue more than tripled year-on-year.
Q: How did hyperscaler spending contribute to NVIDIA's performance?
A: Hyperscale revenue accelerated 102% year-on-year to US$48.7bn. The top four hyperscalers increased their 2026e capital expenditure guidance by 5% to US$748bn, with NVIDIA expecting their total capital expenditure to reach US$1.3tn in 2027e.
Q: What is driving growth in the ACIE segment?
A: ACIE revenue spiked 138% year-on-year, driven by AI startups signing multi-year contracts worth US$1bn or more and sovereign AI revenue more than tripling year-on-year.
Q: What supply constraints is NVIDIA facing?
A: NVIDIA's FY28e revenue growth guidance of 70% year-on-year is constrained by supply factors including land, power, shell, and cooling. Without these constraints, demand could grow more than 100%.
Q: What are the key risks to NVIDIA's margins?
A: Rising memory costs present a headwind to NVIDIA's margins, which led to the analyst raising the weighted average cost of capital to 8.4% from 7.9%.
Q: What major partnerships has NVIDIA announced?
A: NVIDIA partnered with Noetra in Japan to deploy 13,750 Vera CPUs and 27,500 Rubin GPUs, and with South Korea for a US$3bn investment to deploy 50,000 Blackwell GPUs.
Q: How does NVIDIA's valuation compare to peers?
A: NVIDIA trades at a FY27e price-to-earnings ratio of 24x, representing a 32% discount to peers' average of 35x.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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