Nvidia NVDA
Decision memo for the August 26 Q2 print. Filed evidence supports staying flat; it does not yet support initiating a long or short.
Decision hinge
At $223.90, the base operating path clears through either an 8.6% WACC versus the explicit 10.7% build, or a +36.0% uniform revenue uplift. We have no evidence-grade basis to select either.
Filings, company guidance and the auditable DCF are sufficient to decline initiation. Missing broker revisions, channel work, positioning and portfolio evidence prevent a long or short recommendation.
What the tape must be underwriting
10.7%
4.65% Treasury + 1.35 beta × 4.50% ERP; debt weight is immaterial.
8.6%
Base operations, terminal ROIC and stake haircuts held constant.
+36.0%
Uniform revenue scale required at 10.7% WACC.
Spot needs a discount rate about 208bp below the explicit build or revenue scaled to $1,209bn by FY2032. These separate diagnostics identify the assumptions carrying the valuation.
Catalyst and estimate path
- Q1 FY2027 revenue: $81.6bn, +85% year over year.
- Data Center: $75.2bn; compute $60.4bn and networking $14.8bn under the prior sub-markets.
- Q2 revenue guide: $91.0bn ±2%, with no China Data Center compute revenue assumed.
- Q1 gross margin: 74.9%.
- FY2027 revenue: $380.9bn.
- After Q1 and Q2 midpoint: $208.3bn in H2, or $104.1bn per quarter.
- That run-rate is +14.4% versus Q2 guidance.
- Frozen FY2027 consensus: $393.7bn, range $364.4–$402.8bn, 40 estimates.
Quality of earnings and demand
Q1 cash-flow reconciliation reports $15.936bn of equity-security gains, equal to 22.8% of pretax income. The model excludes the gain from operating earning power.
Nvidia invested $18.6bn in private companies and infrastructure funds in Q1. The filing says some investees include AI model makers that may indirectly use Nvidia products. It does not support calling the entire $72.6bn equity portfolio customer financing.
Three direct customers were 21%, 17% and 16% of revenue; A/R concentration was 30%, 18% and 16%.
$119bn manufacturing and capacity, $30bn cloud service and $27bn contingent investment commitments.
$25.8bn at April 26. Read it with forward guidance, lead times and cancellation behavior, not alone.
Valuation and skew
Values are present values as of the August decision cut. FY2027 DCF cash flow subtracts reported Q1 CFO less capex from the full-year model, avoiding double counting with the April 26 balance sheet. States are unweighted because there is no evidence-grade probability set.
| State | Value/share | Vs spot | Revenue CAGR | FY32 EBIT margin | WACC | g | Terminal ROIC | TV / EV |
|---|---|---|---|---|---|---|---|---|
| Bear / digestion A digestion cycle, custom-silicon share gains and margin compression. | $57.23 | -74.4% | 7.6% | 44.7% | 11.9% | 2.0% | 25.0% | 47.7% |
| Base / fade Near-term demand holds; growth and cash margins fade as the base scales. | $165.41 | -26.1% | 26.6% | 51.6% | 10.7% | 3.0% | 30.0% | 66.2% |
| Bull / platform Rubin pricing, networking attach and platform share remain exceptional. | $377.69 | +68.7% | 42.1% | 55.1% | 10.0% | 3.5% | 35.0% | 76.2% |
Base forecast mechanics
| Fiscal year | Revenue | Growth | EBITDA margin | D&A | EBIT margin | Capex | DCF FCFF |
|---|---|---|---|---|---|---|---|
| FY2027 | $380.9bn | 76.4% | 64.5% | $4.0bn | 63.4% | $11.4bn | $128.0bn |
| FY2028 | $551.9bn | 44.9% | 62.5% | $5.4bn | 61.5% | $17.7bn | $252.6bn |
| FY2029 | $699.0bn | 26.7% | 60.0% | $7.7bn | 58.9% | $23.8bn | $312.9bn |
| FY2030 | $805.5bn | 15.2% | 57.5% | $10.7bn | 56.2% | $28.2bn | $348.6bn |
| FY2031 | $862.6bn | 7.1% | 55.0% | $14.1bn | 53.4% | $30.2bn | $362.3bn |
| FY2032 | $889.5bn | 3.1% | 53.5% | $17.1bn | 51.6% | $31.1bn | $366.3bn |
Equity bridge
The base bridge credits $50.3bn of cash and marketable debt securities at par, 85% of $30.2bn marketable equity, 50% of $42.3bn non-marketable equity and 50% of $1.0bn equity-method stakes, then deducts $8.5bn debt. The credited bridge is $89.2bn. Operating leases stay disclosed but are not deducted because the cash flows already include operating lease expense.
Downside and squeeze mechanics
Q2 or the guide misses the required path; the estimate tape rolls down; cash-flow duration shortens; and the discount rate widens. The bear state is $57.23, with customer concentration, commitments and inventory amplifying a digestion cycle.
A beat-and-raise confirms durable Rubin and networking demand; estimates move higher; and the duration premium compresses. The bull state is $377.69, while pre-print squeeze risk remains uncapped without borrow, options and crowding data.
Action rules and falsifiers
Q2 and guidance establish upside to a frozen broker panel, demand-quality work separates durable end demand from financed pull-forward, and net underwritten return clears 20% after hedge and event costs.
Reported demand or guidance breaks the base path, revisions follow, the implementation ledger caps squeeze and factor risk, and net downside clears 20% after costs.
Disconfirm the current wait: a clean earnings variant plus cleared demand and implementation gates. Disconfirm a future short: sustained estimate upgrades, durable lead times and a defensible lower discount rate. Disconfirm a future long: guide-downs, cancellations, working-capital deterioration or evidence that investment-linked demand is pulling revenue forward.
Evidence required before initiating a position
| Gate | Required evidence | Status |
|---|---|---|
| Variant | Freeze broker-level consensus, cohort and revision history around the next print. | MISSING |
| Catalyst | Freeze Q2 actuals, guidance and the estimate tape around the confirmed August 26 event. | MISSING |
| Demand quality | Quantify customer-financing exposure within investments and commitments. | MISSING |
| Channel | Obtain lead-time, backlog, cancellation and pull-forward evidence. | MISSING |
| Market | Refresh price, liquidity, options, short interest, borrow and crowding. | MISSING |
| Portfolio | Complete current exposure, risk budget, factor, hedge and drawdown ledger. | MISSING |
| Hurdle | Require an observable variant and at least 20% net underwritten return. | MISSING |
Sources and limits
| ID | Type | Source | Date | Use |
|---|---|---|---|---|
| S1 | Filed fact | Nvidia Q1 FY2027 Form 10-Q | 2026-05-20 | Financials, current disclosure, investments, commitments, concentration and D&A. |
| S2 | Company release | Nvidia Q1 FY2027 results | 2026-05-20 | Q1 revenue, current reporting framework, Data Center detail and Q2 guide. |
| S3 | Filed fact | Nvidia FY2026 Form 10-K | 2026-02-25 | FY2026 revenue and historical financial context. |
| S4 | Market fact | U.S. Treasury daily par yield curve | 2026-08-07 | 4.65% ten-year risk-free rate on August 7. |
| S5 | Market snapshot | Read-only Robinhood regular-hours snapshot | 2026-08-07 | $223.90 last trade; frozen reference, not an executable quote. |
| S6 | Aggregator snapshot | Frozen FMP annual consensus extract | 2026-08-07 | Revenue range and analyst count; provider metadata and revisions remain an open gate. |
| S7 | Analyst assumption | PM scenario and valuation assumptions | 2026-08-07 | Revenue paths, margins, beta, ERP, terminal ROIC, haircuts and action hurdles. |
| S8 | Company event | Nvidia Q2 FY2027 financial-results webcast | 2026-08-26 | Confirmed Q2 results event on August 26 at 2:00 p.m. Pacific. |
Method: the Python model and formula-linked workbook are independently recalculated, tied at headline and forecast-line level, and scanned for formula errors. Limits: no broker-level revision tape, channel checks, expert calls, alternative data, live options, current borrow/crowding or portfolio book context. The August price is a frozen regular-hours reference. Q2 has ended but was not filed at this cut. Scenario assumptions are analyst judgments. This memo is research, not investment advice or a solicitation.