Goldman Sachs: Nvidia's 2027 guidance far exceeds expectations, gross margin uncertainty resolved, target price raised to $300

Nvidia delivered a strong quarterly report, and Goldman Sachs believes that three major catalysts will continue to drive its stock to outperform the market.

Nvidia reported Q2 revenue of $96.2 billion, beating Wall Street expectations. Management then issued a full-year outlook for 70% revenue growth in calendar year 2027, far exceeding Goldman’s previous estimate of 55% and the market consensus of 44%. Boosted by this, Nvidia’s stock price rose about 4% in after-hours trading.

According to Trading Desk, Goldman Sachs reiterated its “Buy” rating on Nvidia in its latest research report, and raised its 12-month price target from $285 to $300, implying a potential total return of about 38% from the current price. The team led by Goldman analyst James Schneider believes that the 2027 revenue guidance is in line with the most optimistic buy-side expectations, and greater clarity on gross margin outlook as well as management's disclosure of customer financial commitments will jointly provide stronger support for valuation.

Nvidia’s overall Q2 performance surpassed both Goldman Sachs and market expectations. Revenue was $96.2 billion, above Goldman’s estimate of $93.1 billion and the market’s $92.4 billion, representing a 106% year-on-year increase. Data center revenue hit $89 billion, beating Goldman’s estimate of $86.5 billion; edge computing revenue reached $7.2 billion, also above both Goldman’s and the market’s estimate of $6.5 billion.

Profitability was similarly robust. Non-GAAP gross margin was 75.0%, in line with Goldman’s forecast and slightly above the market’s 74.8%; operating margin was 66.5%, slightly exceeding both Goldman’s and market expectations; non-GAAP EPS was $2.22, higher than Goldman’s estimate of $2.12 and the market’s $2.09.

On the inventory front, Q2 inventory rose to $31.6 billion, up 22% quarter-over-quarter, with inventory days at 120 days, up by 4 days, due to the company building up stock ahead of mass production shipments for the Q3 Rubin products. Accounts receivable surged 55% quarter-over-quarter to $63.1 billion, with days sales outstanding extended to 60 days, reflecting longer payment terms in procurement agreements with some major clients.

The most market-impactful information this quarter came from management’s forecast for fiscal year 2027 (calendar year 2027). Nvidia expects revenue to grow by 70%, far above Goldman’s prior estimate of 55% and the market consensus of 44%. Management also noted that, in the absence of supply constraints, actual demand could exceed 100% growth, but supply bottlenecks will continue to restrict shipment pace over the next 18 months.

According to Goldman’s calculations, this raised guidance means Nvidia’s previously stated goal of a cumulative $1 trillion revenue from Blackwell, Blackwell Ultra, and Rubin products between 2025 and 2027 has increased by another $250 billion.

The ramp-up of Rubin products is a key driver of the guidance increase. Management expects Q3 Rubin shipments to contribute about 20% of projected revenue. Goldman believes that this demand outlook reflects rapidly expanding procurement needs among new customer groups such as AI labs, “neoclouds” (emerging cloud providers), and sovereign clients, not just hyperscale cloud companies.

In addition, demand for Nvidia’s Vera CPU standalone racks is also strong, partly driven by agent-type AI applications. The company maintains its forecast of $20 billion in CPU-related revenue for calendar 2026 and expects CPU shipment growth to exceed 100% in 2027.

Gross margin trends were among the highest areas of market focus this quarter. Nvidia gave Q3 non-GAAP gross margin guidance of 74.0%, below both Goldman’s and the market’s estimate of about 74.9%, with the main pressure coming from rising HBM memory costs and the ramp up of Rubin products.

Management further said that gross margin will bottom out in Q4 in the range of 71% to 72%, then recover and stabilize at 72% to 73% in fiscal 2027. This level is lower than the market’s previous 75.1% forecast for fiscal 2027, but Goldman believes the guidance is overall consistent with market expectations and may even be higher than some pessimistic forecasts.

Goldman clearly stated in its research that, given the market’s previous concerns about gross margin, the delivery of this guidance is likely to remove the core uncertainty and serve as a “clearing event” for the stock price. The company has also taken pricing actions to partially offset the cost pressure from HBM memory price increases.

Nvidia also provided detailed disclosure of its various client financial commitments this time. Management revealed the company’s total financial commitments amount to $366 billion, including supply and capacity commitments ($279 billion, mainly memory), cloud services agreements ($29 billion), data center leases ($25 billion), equity investments ($25 billion) and capital expenditures ($5 billion). In addition, data center land, power, and infrastructure guarantees related to SoftBank Energy and AI Cloud add another $108.5 billion.

At the same time, Nvidia disclosed the $500 billion financing platform announced on August 10 with financial partners, aimed at supporting infrastructure construction for AI labs, enterprises, and AI cloud providers at competitive interest rates. Nvidia can provide a residual value support guarantee of up to 25% for specific projects, assessed on a project-by-project basis.

Goldman believes these disclosures help investors better assess the company’s financial risk exposure, while management reaffirms that over 50% of excess free cash flow will be returned to shareholders, sustainable even in downside scenarios.

Based on better-than-expected results and raised guidance, Goldman increased Nvidia’s 2027 and 2028 EPS estimates to $16.70 and $23.00, with an average increase of about 9%, mainly reflecting a higher revenue base, partially offset by lower gross margin guidance.

The price target was raised from $285 to $300, corresponding to a 30x P/E (unchanged multiple) on a normalized EPS estimate of $10.00 (up from previous $9.50). Goldman also provided a bull case valuation of $424 (35x P/E, EPS $12.10) and a bear case of $175 (25x P/E, EPS $7.00).

Goldman points out that Nvidia’s Q3 revenue guidance midpoint is $108 billion, below Goldman’s forecast of $110.7 billion but above the market’s $104.6 billion; implied non-GAAP EPS is $2.43, above the market’s $2.32. Goldman believes this guidance also demonstrates overall strength in AI infrastructure spending, sending positive signals for semiconductor names such as Broadcom, AMD, Marvell, ARM, and Intel.