Nvidia Earnings Report "In the Spotlight": Rubin Cycle, Cyclical Financing, and Forward Market Share

Nvidia will release its quarterly earnings for the period ending in July next week. Based on the patterns of recent quarters, the market is already familiar with "better-than-expected performance and raised guidance"; what truly determines share price flexibility are three longer-term questions: Can Rubin successfully succeed Blackwell, does AI demand remain significantly greater than supply, and how much financing and balance sheet responsibility will Nvidia need to take on to secure future demand?

According to brokerage expectations, fundamentals remain strong. According to Trading Desk reports, this week Jefferies released a forward-looking report estimating Nvidia's revenue for the July quarter will reach $95 billion, higher than the market consensus of around $91.9 billion; the guidance for the October quarter is expected to reach $108 billion, also above market expectations of about $103.7 billion.

Morgan Stanley's report is relatively conservative, projecting July quarter revenue of about $91.2 billion, and October quarter revenue of about $102.3 billion, but also believes the recent trend will continue, with quarterly revenues possibly continuing to increase by about $10 billion in magnitude sequentially.

In other words, the core of the current market debate is whether, after delivering strong results, the growth curve for 2027 and 2028 can continue to be revised upward.

In the short term, Blackwell demand remains robust. Microsoft's and Amazon’s cloud businesses have seen clearer improvements this quarter, while long-term commitments from OpenAI, SpaceX, and others to computing power continue to support market confidence in Nvidia’s data center revenues.

Morgan Stanley points out that even though Rubin has not yet made a substantial contribution, Nvidia's current growth is already quite strong; a larger acceleration may come after the January quarter next year.

Rubin is one of the most important keywords for this earnings call.

Jefferies believes that Rubin’s ramp-up speed may be significantly faster than that of early Blackwell. This is because Rubin continues the 72-GPU Oberon NVL72 rack architecture, allowing it to reuse the liquid-cooling data center deployment and manufacturing infrastructure accumulated with GB200 and GB300.

At the same time, the new generation design reduces a large amount of manual wiring and pipeline installation. Management previously mentioned that the assembly time for computing trays could be reduced from about 2 hours to 5 minutes.

The significance here is that Nvidia is upgrading AI chips into a replicable and scalable "AI factory system".

Jefferies projects that the share of VR/R200 in Nvidia’s GPU revenue will reach about 12% in the third quarter of fiscal year 2027, rise to over 40% in the fourth quarter, and become the dominant revenue source in the first quarter of fiscal year 2028.

If this timeline materializes, the market’s valuation logic for Nvidia will shift from “how long the Blackwell cycle can last” to “whether Rubin can unlock the next round of higher base growth.”

In addition to GPUs, Vera CPU is also an incremental worth watching in this earnings release.

Jefferies estimates that Nvidia’s CPU revenue could reach $20 billion in fiscal year 2027, including Grace and Vera; their calculations show that CPU revenue accompanying GPU sales would be about $8.65 billion, independent Vera CPU revenue about $11.35 billion, with annualized exit revenue by Q4 possibly approaching $32 billion.

In absolute terms, CPUs still cannot compare to Nvidia's AI GPU business and are more like a “nice addition.” However, their strategic significance is substantial: Vera CPU, with low-power LPDDR5X and consistent NVLink connection with the Rubin domain, strengthens Nvidia’s control in AI server and AI factory architectures.

This will also create new pressure for AMD and Intel. Especially as large customers increasingly prefer purchasing complete cabinets and systems, Nvidia is selling a full computing power platform from GPU, CPU, and networking to software.

More closely watched by the market are Nvidia's long-term compute arrangements related to OpenAI.

According to Jefferies' analysis, Nvidia has reached an arrangement with SB Energy under which SB Energy will build, own, and operate the PORTS-Pike Technology Campus in Ohio, and provide it to OpenAI under a 20-year lease, with Nvidia as the exclusive compute power supplier.

Nvidia will provide credit support for the first 4.25GW IT capacity, and has the option for the remaining 3.75GW, totalling up to 8GW, while also investing $1.5 billion in SB Energy.

Nvidia stated that each system deployment of this base could use about 1.5 million GPUs, resulting in $150–200 billion in revenue; OpenAI's existing and planned commitments total about 12GW, expandable to 16GW, representing about $600 billion in Nvidia compute power procurement before 2030.

This undoubtedly provides a clearer anchor for Nvidia's long-term order book. But the market will also ask: exactly how much of this demand is organic customer capex, and how much requires Nvidia to support through credit, investment, or revenue sharing?

Morgan Stanley believes that financing, market share, and gross margin are currently the three most concerning issues for investors. Nvidia’s management is likely to emphasize that these structures help accelerate AI infrastructure buildout, but investors need clearer accounting disclosures, including contingent liabilities, lease and power payment support, residual value commitments, and more.

This will determine whether the market ultimately views this as “locked-in future revenue” or worries that it is “growth bought by the balance sheet.”

Nvidia’s high gross margins have always been an important basis for its valuation premium. Morgan Stanley expects the company will continue to maintain its guidance of “mid-70% gross margin” for fiscal year 2027.

But the pressure is not absent. Costs in HBM, DRAM, advanced packaging, substrates, and front-end wafers are still rising; new products in ramp-up also typically face yield, testing, and supply chain coordination challenges.

Morgan Stanley cautions that the consensus expectation for a marked recovery in gross margin in the second half of fiscal 2028 may be slightly optimistic.

This means, if Nvidia provides more cautious mid-to-long-term gross margin commentary on the call, it could trigger short-term volatility; but if management can articulate cost controls, pricing power, and system-level sales structure, it may serve as an “expectation reset.”

The further AI capital expenditure advances, the more likely power becomes the most realistic constraint.

Jefferies points out that the gap between projected chip demand and grid supply capability is widening.

Large cloud providers are increasingly building dedicated gas power plants and transmission facilities with utilities, while cutting-edge AI labs and new cloud providers are increasingly using “behind-the-meter” solutions to bridge the timing mismatch between grid access and compute deployment.

This does not mean AI infrastructure expansion will halt, but the pace of converting orders to revenue will become less linear.

Gas turbines, backup power, and fuel cell solutions are all advancing, but equipment delivery cycles, grid approval, local regulation, and community acceptance all affect data center construction progress. Nuclear and small modular reactors are likely variables only after 2030.

Therefore, Nvidia’s core challenge in the coming years is whether clients’ data centers, power, and funding can keep pace in sync.

Morgan Stanley maintains its “Overweight” and Top Pick outlook for Nvidia, with a price target of $288, and notes Nvidia’s current about 17x FY28 price-to-earnings ratio is not expensive relative to its historical, semiconductor peers, and the overall market.

But low valuation alone does not necessarily drive an immediate rally. Over the past four quarters, even with strong results, Nvidia’s stock price has repeatedly reacted negatively the next day, indicating the market already takes “beating expectations” as the default scenario. What will truly drive valuation recovery going forward is whether management can clearly answer these four questions:

1. In addition to the October quarter guidance, will the January quarter accelerate significantly due to Rubin;
2. Will Rubin’s ramp-up go smoothly enough to maintain product leadership;
3. How large are the financing commitments behind long-term agreements with OpenAI, etc.;
4. Will power, regulation, and cost pressures impact delivery pace after 2027.

Overall, this Nvidia earnings release is still highly likely to show strong performance. But the market has entered the next phase: it is no longer satisfied with just seeing demand, but wants to see how demand is realized together with supply, electricity, financing, and profitability.

Nvidia’s story remains compelling and short-term results are also supportive; it’s just that as AI infrastructure investment heads toward a trillion-dollar scale, investors must assess whether an entire AI industrial ecosystem can sustain continuous operation.