Episode Details

NVIDIA (NVDA) Q2 FY2027 — Shares gapped 6.3% ABOVE the prior close and closed 1.1% under their own session high at $227.98, +8.74% on the day - the best session of the twelve months on 2.6x the thirty session median volume. One session later they sit at $217.55, +3.76% against the pre-print close, with 57% of the move handed back. NVIDIA reported Q2 FY2027 revenue of $96.2B, +106% year on year, at a gross margin of 75.0%, and beat the bar with adjusted EPS of $2.22 against $2.09. We dispute none of it. What changed is the FUNDING of that quarter. Operating cash was $24.1B against $59.7B of net income - 40 cents per dollar of profit, from 58 cents a year ago - because receivables absorbed $22.3B, or 23% of everything sold. Days sales outstanding went 45 to 60 on terms the 10-Q says run to ONE YEAR for investment-grade buyers, and five customers now owe 70% of a $63.1B book. NVIDIA issued $24.9B of senior notes and disclosed $108.5B of guarantees, $105B of it on twenty-year leases at one Ohio campus. We rate NVDA a HOLD at $190.48 against $217.55. THE CALL: HOLD (3 / 5/5, MODERATE) — base-case value ~$190.48 vs ~$217.55 today. KEY METRICS: - Revenue $96.2B, +106% YoY and +18% QoQ; data center $89.0B (+117%), edge computing $7.2B (+27%) - Adjusted EPS $2.22 vs a $2.09 bar (a 6.2% beat) - and the bar was RAISED into this print, from $1.76 for the April quarter - Reported EPS $2.46 is ABOVE adjusted $2.22 - the adjusted figure REMOVES $7.8B of gains on equity stakes NVIDIA holds in other companies - Operating cash $24.1B on $59.7B of net income = 40 cents per profit dollar, from 58 cents a year ago and 86 cents last quarter - Free cash flow $21.3B, -56% QoQ and only +59% YoY against revenue +106%; FCF margin 22% vs 29% a year ago - Accounts receivable $63.1B from $38.5B in January; DSO 45 to 60; terms disclosed at 90 days up to ONE YEAR for investment-grade buyers - Five direct customers hold 22/14/13/11/10 = 70% of the receivable book (three at 25/18/13 = 56% in January) - Supply and capacity commitments $119B to $279B in one quarter ($160B added, primarily memory); total commitments $422B - Guarantees $108.5B: $105B on the SB Energy PORTS-Pike campus in Ohio, leased 20 years to OpenAI, plus $3.5B for other AI clouds - 47% of shareholders equity - Issued $24.9B of senior notes ($33.5B outstanding) while returning $25.8B to shareholders and buying $15.8B of equity stakes on $24.1B of operating cash - Q3 FY2027 guide $108B (+12% QoQ) with NO China data center compute assumed; gross margin guided DOWN to 74.0% from 75.0% - Fair value $190.48: cash-flow route $170.74, earnings route $219.93, exit-multiple route $180.78, weighted equally; bear $108.91, bull $304.43 - Five targets published the morning after: $300 to $465, median $315 - our bull case sits within $4.43 of the LOWEST of them What to watch: Days sales outstanding holding at 60 or coming back toward 50, operating cash conversion back above 60 cents on the profit dollar (it was 40 cents this quarter), or the Ohio phases entering service with the leases paid, would each move this call Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.