REVENUEBeat +4.0%
EPSBeat +6.2%
Actuals vs. estimates
| Metric | Actual | Consensus | Surprise |
|---|---|---|---|
| RevenueTotal revenue | $96.00B | $92.27B | ▲ Beat +4.0% |
| EPS(provider-reported) | $2.22 | $2.09 | ▲ Beat +6.2% |
Revenue — API Ninjas actual does not reconcile with a unique Quartr consolidated revenue
EPS — actual sourced from API Ninjas, not the company release
Verdict
- Revenue of $96bn beat the estimate by 4.0% and more than doubled year over year; provider-reported EPS of $2.22 beat by 6.2%.
- Data centre revenue of $89bn rose 18% sequentially, with the ACIE sub-segment at $40bn up 138% year over year now growing far faster than hyperscale at $49bn.
- Q3 revenue is guided to $108bn plus or minus 2%, and FY28 revenue growth to approximately 70% -- a figure management calls supply-constrained rather than demand-led.
- Gross margin is being reset lower: 75% this quarter, 74% guided for Q3, bottoming at 71%-72% in Q4 before settling at 72%-73% in FY28 on memory pricing.
Guidance & KPIs
| Item | New guidance | Prior guidance |
|---|---|---|
| Q3 FY2027 total revenue | $108 billion ±2% | — |
| Q3 FY2027 GAAP and non-GAAP gross margin | 74% ±50 basis points | — |
| Q4 FY2027 gross margin | bottoming in the 71%-72% range | — |
| FY2028 gross margin | 72%-73% | — |
| FY2028 revenue growth | approximately 70% year-over-year, supply-constrained | — |
| China data center compute revenue in forward outlook | none | — |
Management commentary
- CFO Colette Kress said supply will remain a bottleneck at least through the end of fiscal 2028, which is why the FY28 growth guide is roughly 70% rather than the doubling customer forecasts imply.
- On using the balance sheet to support AI labs, Kress said "we know some will call this circular financing. We see it differently", pointing to the fungibility and durability of the compute platform.
- Partnerships with six infrastructure capital providers are intended to raise over $500bn of third-party capital for frontier lab build-outs.
- AWS will deploy an additional 2 million GPUs from this quarter through the second quarter of fiscal 2029, alongside Vera CPUs.
- Preliminary expectation is for CPU revenue to more than double in fiscal 2028 against roughly $20bn of total server CPU demand.
Quality of earnings
- Days sales outstanding rose to 60 days on extended payment terms for large investment-grade customers shipping over multiple quarters, while inventory built to $32bn ahead of the Vera Rubin launch.
- Management expects demand from the AI labs it supports with its own balance sheet -- nearly $50bn invested to date -- to be roughly a quarter of next year's business.
Gotchas & watch items
- There is no China data centre compute revenue in the forward outlook; Hopper 200 shipments to China were under 1% of data centre revenue this quarter and dilutive to gross margin.
- Gross margin bottoms at 71%-72% in Q4, about four points below the 75% just reported, because memory price increases exceeded prior expectations and are heading higher.
- Full-year operating expenses are now guided to grow in the low 50s percent, with Q3 GAAP operating expenses of approximately $9.2bn.
- Vera Rubin accounts for only about 20% of Q3 data centre revenue, so the hyperscale re-acceleration management describes lands in Q4 and beyond.