NVIDIA designs accelerated computing platforms — GPUs, CPUs, networking, systems and software — and has them built entirely by third parties: wafers from TSMC and Samsung, memory from SK Hynix, Micron and Samsung, assembly and test from contractors including Hon Hai, Wistron and Fabrinet. The product is increasingly sold as rack-scale systems rather than chips. Revenue is recognised when control transfers and payment is generally due shortly after delivery. Two segments are reported, Compute & Networking and Graphics, but the end-market split is where the year sits: Data Center is 89.7% of revenue. About 42,000 people work there, 31,000 of them in research and development, with turnover of 3.7%.
The business in one page
Revenue was $215,938 million, up 65.5% after 114.2% the year before. Within Data Center, networking grew 141.5% against 58.9% for compute, reversing the previous year. Operating expenses fell from 18.60% to 10.69% of revenue in two years and operating income rose 60.1% to $130,387 million. Free cash flow was $96,676 million, three years of it total $184,550 million, no debt was issued, and net cash stands at $51,144 million against $8,468 million of fixed-rate notes whose interest takes 0.2% of operating income. Return on invested capital was 145.4% on year-end capital and 188.7% on average capital.
Three things sit against that. The gross margin fell from 74.99% to 71.07% — 73.15% without the $4.5 billion H20 charge — as cost of revenue grew 91.4% against revenue at 65.5%. Inventory more than doubled to $21,403 million, 124.7 days, while supply and capacity commitments reached $95.2 billion, 1.52 times a year's cost of revenue and substantially all falling due within FY2027, against customer orders that the filing says can generally be cancelled without penalty. And the money moves in a circle whose size the filing does not give: two direct customers are 36% of revenue and three are 56% of receivables, while $17,502 million went into private companies that the company says include AI model makers which buy its products, alongside $27 billion of cloud purchase commitments and $3.5 billion of guarantees on partners' leases.
Figures for 3 fiscal years, taken from the Key Metrics tables of each annual report. When a later filing restates a figure, we use the figure reported for that year's own filing.
Key metrics
| Metric | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Revenue | $60.9B | $130.5B | $215.9B |
| Gross margin | 72.7% | 75.0% | 71.1% |
| Operating margin | 54.1% | 62.4% | 60.4% |
| Net margin (GAAP) | 48.8% | 55.8% | 55.6% |
| Operating cash flow | $28.1B | $64.1B | $102.7B |
| Capex | $1.07B | $3.24B | $6.04B |
| Free cash flow | $27.0B | $60.9B | $96.7B |
| Stock-based compensation | $3.55B | $4.74B | $6.39B |
| Dividends + buybacks | $9.93B | $34.5B | $41.1B |
| Net cash | – | $34.7B | $51.1B |
| Total debt | – | $8.46B | $11.4B |
| Shareholders’ equity | $43.0B | $79.3B | $157.3B |
| Effective tax rate | 12.0% | 13.3% | 15.1% |
| Our construction: NOPAT on year-end invested capital (188.7% on average capital) | – | 171.5% | 145.4% |
How NVIDIA makes money
Competitive advantage
Research and development reached $18,497 million, up 43.2% after 48.9%, so spending was not cut while the margin compressed. The three years in this filing account for $40,086 million of the $76.7 billion the company says it has invested since inception.
Three facts are consistent with demand exceeding supply in FY2026: lead times in some cases beyond twelve months, $9.0 billion of customer advances received during the year, and an expectation that supply constraints will weigh on Gaming into FY2027.
The software claims — 7.5 million developers, 6,000 supported applications, CUDA as one of the deepest moats the company has created — are the company's own, and the moat quotation comes from a shareholder letter dated after the filing.
The filing also records the limit: its competitor list names Alphabet, Amazon and Microsoft for their in-house accelerators, and cloud providers of that kind are among the largest customers. Whether the advantage is widening or narrowing cannot be established from the document.
Pricing power
The filing gives no selling prices and no unit volumes, so pricing power cannot be documented.
The gross margin fell from 74.99% to 71.07%, which the company attributes to the shift from Hopper HGX systems to Blackwell full-scale datacentre solutions and to the H20 charge.
Without the $4.5 billion H20 charge the margin would have been 73.15%.
A lower margin is consistent with selling more of the system around the GPU, but the document does not separate mix from price.
Transparency of growth
Growth is essentially organic: acquisitions net of cash were $1,535 million.
Groq brought no customer contracts, existing products or equity interests, and no pro forma was presented because the effect was not material.
The geographic basis changed in the third quarter of FY2026 to the location of the direct customer's headquarters, with prior years recast, so the geographic series is comparable inside this filing but not with earlier ones.
The company estimates that 76% of FY2026 Data Center revenue from Taiwan-headquartered customers was attributed to end customers in the United States and Europe, which is an estimate, not a measured split.
Scalability
Against revenue growth of 65.5%, cost of revenue grew 91.4%, research 43.2% and selling, general and administrative 31.2%.
Operating expenses fell from 12.57% to 10.69% of revenue, and from 18.60% two years earlier.
Operating income rose 60.1%, slower than revenue, because the cost of goods outgrew sales.
The company shows operating leverage on fixed costs and the opposite on product cost: the margin that matters for the next filing is the gross margin, which carries both the system mix and the provisions.
Catalysts identified in the filing
- The Rubin platform
Expected to commence production shipments in the second half of FY2027. The claimed up-to-tenfold reduction in cost per token against Blackwell is a company claim, not a measured result.
- Networking
Revenue of $31,376 million, up 141.5%, now 16.2% of Data Center revenue, driven by NVLink for GB200 and GB300 systems and by Ethernet and InfiniBand.
- Groq technology in products
If incorporated as the company intends, it would begin to generate revenue against the $14.4 billion of goodwill and the intangible recorded for it.
- The H200 licence for China
Granted in February 2026 for small amounts to specific China-based customers, in a market where China-headquartered revenue was $25,048 million in FY2025. No revenue has been generated under it and the company does not know whether any imports will be allowed.
- Capacity and capital returns
The company expects to increase capital expenditure in FY2027 and is expanding manufacturing into the United States and Latin America. $58.5 billion of repurchase authorisation remains.
Financial analysis
Click any line to chart it.
| Income statement · US$ millions | FY2024 | FY2025 | FY2026 | Where in the filing |
|---|---|---|---|---|
| Revenue | 60,922 | 130,497 | 215,938 | IS, Revenue |
| % change year on year | – | 114.2% | 65.5% | computed |
| Cost of revenue | 16,621 | 32,639 | 62,475 | IS, Cost of revenue |
| Gross profit | 44,301 | 97,858 | 153,463 | IS, Gross profit |
| % gross margin | 72.7% | 75.0% | 71.1% | computed |
| Research and development | 8,675 | 12,914 | 18,497 | IS |
| Sales, general and administrative | 2,654 | 3,491 | 4,579 | IS |
| Total operating expenses | 11,329 | 16,405 | 23,076 | IS |
| Operating income | 32,972 | 81,453 | 130,387 | IS |
| % operating margin | 54.1% | 62.4% | 60.4% | computed |
| Interest income | 866 | 1,786 | 2,300 | IS |
| Interest expense | (257) | (247) | (259) | IS |
| Other income, net | 237 | 1,034 | 9,022 | IS |
| Total other income, net | 846 | 2,573 | 11,063 | IS |
| Income before income tax | 33,818 | 84,026 | 141,450 | IS |
| Income tax expense | 4,058 | 11,146 | 21,383 | IS |
| Net income (no minority interests) | 29,760 | 72,880 | 120,067 | IS |
| % net margin | 48.8% | 55.8% | 55.6% | computed |
| EPS basic ($) | 1 | 3 | 5 | IS |
| EPS diluted ($) | 1 | 3 | 5 | IS |
| Weighted avg. shares, basic (mn) | 24,690 | 24,555 | 24,359 | IS; Note 4 |
| Weighted avg. shares, diluted (mn) | 24,940 | 24,804 | 24,514 | IS; Note 4 |
| Anti-dilutive awards excluded (mn) | 150 | 51 | 41 | Note 4 |
| Balance sheet · US$ millions | FY2025 | FY2026 | Where in the filing |
|---|---|---|---|
| Cash and cash equivalents | 8,589 | 10,605 | BS |
| Marketable securities | 34,621 | 51,951 | BS |
| Cash, equivalents and marketable securities | 43,210 | 62,556 | MD&A, Liquidity |
| Accounts receivable, net | 23,065 | 38,466 | BS |
| Inventories | 10,080 | 21,403 | BS |
| Prepaid expenses and other current assets | 3,771 | 3,180 | BS |
| Total current assets | 80,126 | 125,605 | BS |
| Property and equipment, net | 6,283 | 10,383 | BS |
| Operating lease assets | 1,793 | 2,867 | BS |
| Goodwill | 5,188 | 20,832 | BS |
| Intangible assets, net | 807 | 3,306 | BS |
| Deferred income tax assets | 10,979 | 13,258 | BS |
| Non-marketable equity securities | 3,387 | 22,251 | BS (reclassified out of other assets for both years, Note 1) |
| Other assets | 3,038 | 8,301 | BS |
| Total assets | 111,601 | 206,803 | BS |
| Accounts payable | 6,310 | 9,812 | BS |
| Accrued and other current liabilities | 11,737 | 21,352 | BS |
| Short-term debt | – | 999 | BS |
| Total current liabilities | 18,047 | 32,163 | BS |
| Long-term debt | 8,463 | 7,469 | BS |
| Long-term operating lease liabilities | 1,519 | 2,572 | BS |
| Other long-term liabilities | 4,245 | 7,306 | BS |
| Total liabilities | 32,274 | 49,510 | BS |
| Common stock | 24 | 24 | BS |
| Additional paid-in capital | 11,237 | 10,118 | BS |
| Accumulated other comprehensive income | 28 | 178 | BS |
| Retained earnings | 68,038 | 146,973 | BS |
| Total shareholders' equity (no minority interests) | 79,327 | 157,293 | BS |
| Shares issued and outstanding (mn) | 24,477 | 24,304 | BS; SE |
| Shares outstanding at cover date | – | 24.3 billion (Feb 20, 2026) | Cover page |
| Shareholders' equity, Jan 28, 2024 | 42,978 (FY2024 close) | – | SE |
| Gross debt | |||
| Senior notes, net carrying amount | 8,463 | 8,468 | Note 11 |
| of which short-term | – | 999 | Note 11 |
| of which long-term | 8,463 | 7,469 | Note 11 |
| Operating lease liabilities, present value | not available (short-term portion not disclosed for FY2025) | 2,944 | Note 17 |
| of which short-term (in accrued liabilities) | not available | 372 | Note 17 |
| Gross debt including leases | not available | 11,412 | Note 11 + Note 17 |
| Commercial paper outstanding | 0 | 0 | Note 11 |
| Cash flow statement · US$ millions | FY2024 | FY2025 | FY2026 | Where in the filing |
|---|---|---|---|---|
| Net income | 29,760 | 72,880 | 120,067 | CF |
| Stock-based compensation | 3,549 | 4,737 | 6,386 | CF |
| Depreciation and amortization | 1,508 | 1,864 | 2,843 | CF |
| Gains on equity securities, net | (238) | (1,030) | (8,918) | CF |
| Deferred income taxes | (2,489) | (4,477) | (1,424) | CF |
| Other | (278) | (502) | (287) | CF |
| Accounts receivable | (6,172) | (13,063) | (15,399) | CF |
| Inventories | (98) | (4,781) | (11,324) | CF |
| Prepaid expenses and other assets | (1,522) | (395) | 577 | CF |
| Accounts payable | 1,531 | 3,357 | 3,096 | CF |
| Accrued and other current liabilities | 2,025 | 4,278 | 5,257 | CF |
| Other long-term liabilities | 514 | 1,221 | 1,844 | CF |
| Change in working capital (sum of the six lines) | (3,722) | (9,383) | (15,949) | CF, computed |
| Net cash from operating activities | 28,090 | 64,089 | 102,718 | CF |
| Purchases of property, equipment and intangibles (capex) | (1,069) | (3,236) | (6,042) | CF |
| Free cash flow (CFO − capex) | 27,021 | 60,853 | 96,676 | computed |
| Acquisitions, net of cash acquired | (83) | (1,007) | (1,535) | CF |
| Groq, Inc. | – | – | (13,000) | CF; Note 2 |
| Purchases of non-marketable equity securities | (862) | (1,486) | (17,502) | CF |
| Proceeds from sales of non-marketable equity securities | 1 | 171 | 84 | CF |
| Purchases of marketable securities | (18,211) | (26,575) | (40,616) | CF |
| Proceeds from sales of marketable securities | 50 | 495 | 15,157 | CF |
| Proceeds from maturities of marketable securities | 9,732 | 11,195 | 11,226 | CF |
| Other investing | (124) | 22 | – | CF |
| Net cash used in investing | (10,566) | (20,421) | (52,228) | CF |
| Proceeds from employee stock plans | 403 | 490 | 644 | CF |
| Payments for repurchases of common stock (cash basis) | (9,533) | (33,706) | (40,086) | CF |
| Payments for employee stock plan taxes | (2,783) | (6,930) | (7,948) | CF |
| Dividends paid | (395) | (834) | (974) | CF |
| Principal payments on property, equipment and intangibles | (74) | (129) | (101) | CF |
| Repayment of debt | (1,250) | (1,250) | – | CF |
| Other financing | (1) | – | (9) | CF |
| Net cash used in financing | (13,633) | (42,359) | (48,474) | CF |
| Change in cash and cash equivalents | 3,891 | 1,309 | 2,016 | CF |
| Cash paid for income taxes, net | 6,549 | 15,118 | 20,288 | CF, supplemental |
| Debt issued | 0 | 0 | 0 | CF (no issuance line) |
| Per share · US$ per diluted share | FY2024 | FY2025 | FY2026 | Where in the filing |
|---|---|---|---|---|
| Revenue | 2.44 | 5.26 | 8.81 | computed |
| Net income | 1.19 | 2.94 | 4.90 | computed |
| Free cash flow | 1.08 | 2.45 | 3.94 | computed |
| Shareholders' equity | 1.72 | 3.20 | 6.42 | computed |
Computed on weighted average diluted shares: 24,940 million in FY2024, 24,804 million in FY2025 and 24,514 million in FY2026, as restated by the company for the ten-for-one split of June 2024.
| Ratios · percent | FY2024 | FY2025 | FY2026 | Where in the filing |
|---|---|---|---|---|
| Returns and margins | ||||
| Revenue growth | – | 114.2% | 65.5% | computed |
| Gross margin | 72.7% | 75.0% | 71.1% | from the statements |
| Operating margin | 54.1% | 62.4% | 60.4% | from the statements |
| Net margin | 48.8% | 55.8% | 55.6% | from the statements |
| Our construction: NOPAT on year-end invested capital (188.7% on average capital) | – | 171.5% | 145.4% | our construction |
| Effective tax rate | 12.0% | 13.3% | 15.1% | from the statements |
| Cash | ||||
| Operating cash flow / revenue | 46.1% | 49.1% | 47.6% | computed |
| Capital expenditure / revenue | 1.8% | 2.5% | 2.8% | computed |
| Free cash flow / revenue | 44.4% | 46.6% | 44.8% | computed |
| Stock-based compensation / revenue | 5.8% | 3.6% | 3.0% | computed |
| Dividends and buybacks / free cash flow | 36.7% | 56.8% | 42.5% | computed |
| Balance sheet | ||||
| Total debt / equity | – | 10.7% | 7.3% | computed |
| Net cash / equity | – | 43.8% | 32.5% | computed |
Every ratio is computed from the figures in the statements on the left; none is a target or a benchmark.
The three statements as the filing presents them, with the note or schedule each line comes from. Percentage rows are computed from the lines above them; nothing is restated. Negative figures are the ones the filing itself signs as negative.
Operating measures
| Measure | FY2026 | FY2025 | Change / detail | Where in the filing |
|---|---|---|---|---|
| Data Center revenue | $193,737M | $115,186M | +68.2% | Note 16 |
| — of which networking | $31,376M | $12,990M | +141.5% | Note 16 |
| Gaming revenue | $16,042M | $11,350M | +41.3% | Note 16 |
| China (incl. Hong Kong) revenue | $19,677M | $25,048M | −21.4% | Note 16; customer-headquarters basis, prior years recast |
| Supply and capacity commitments | $95.2B | not in this filing | 1.52x cost of revenue | Note 14 |
| Excess inventory purchase obligations | $2,739M | not disclosed | Note 14; MD&A | |
| Inventory days | 124.7 | 112.4 | +12.3 days | computed on cost of revenue |
| Receivable days | 64.8 | not comparable | computed on revenue | |
| Research and development / revenue | 8.6% | 9.9% | R&D +43.2% | IS |
| Two largest direct customers | 36% of revenue | 23% | 22% and 14% individually | Note 16 |
| Three largest receivable balances | 56% of receivables | 33% | 25%, 18% and 13% | Note 9 |
| Non-marketable equity securities | $22,251M | $3,387M | purchases $17,502M in the year | BS; CF |
| Employees | ~42,000 | not disclosed here | 31,000 in R&D; turnover 3.7% | Item 1 |
Documents behind these figures: Form 10-K for the fiscal year ended January 25, 2026 — FY2024-FY2026 · 2026 Proxy Statement, bound in the same Annual Review volume — compensation, ownership, governance
Key risks
The main weaknesses and risks identified in the latest annual report, in the order the report presents them.
- Commitments of $95.2 billion against orders that can be cancelled
Supply and capacity commitments equal 1.52 times cost of revenue and 4.4 times year-end inventory, and substantially all fall due within FY2027. Supply agreements can be adjusted only in certain instances and changes may cost more; customer orders can generally be cancelled, changed or delayed with little notice and without penalty. The filing does not say what share of the commitments is firm.
- Inventory doubled and the cash cycle lengthened
Inventory rose to $21,403 million, 124.7 days against 112.4, on a product cadence the company describes as one new architecture a year. The cash conversion cycle lengthened by 26 days and cash conversion fell from 94.4% to 85.6% of net income. Inventory valuation is the auditor's only Critical Audit Matter.
- Concentration on both sides of the balance sheet
Two direct customers are 22% and 14% of revenue, 36% together against 23% for the largest two a year earlier; three customers are 25%, 18% and 13% of receivables, 56% together, against an allowance of $4 million. The competitor list names Alphabet, Amazon and Microsoft for their in-house accelerators — cloud providers of the kind that are also among the largest customers.
- A circular exposure the filing does not size
$17,502 million was spent on non-marketable equity in private companies and infrastructure funds that the company says include AI model makers buying its products directly or through cloud providers, alongside $27 billion committed to buy cloud services and $3.5 billion guaranteeing partners' leases. Revenue from investees and from the cloud providers it buys from is not disclosed.
- Capital deployed at undisclosed returns
$16.9 billion for Groq, of which $14.4 billion is goodwill and which brought no customer contracts, existing products or equity interests; and $101.8 billion of repurchases over three years for a share count 1.45% lower, the FY2026 tranche priced at 36.3 times free cash flow per share. Earnings also contain $8,918 million of non-cash gains on equity securities.
Open questions the filing does not answer
- How much revenue came from investees, and from the cloud providers NVIDIA itself buys from? It is the largest figure the filing does not give.
- How much of the $95.2 billion of commitments can be cancelled, and what was the total a year earlier? The prior-year figure is not in this document.
- How large are supplier prepayments and deposits? They are mentioned in the risk factors but not separated in the balance sheet.
- How much of receivables is insured or on extended terms, against a $4 million allowance on $38,466 million?
- What is inside the $19,677 million of revenue from China-headquartered customers, in a year the company says it was effectively foreclosed from that data centre market?
- What headroom did the goodwill test show on $20,832 million of goodwill, $14.4 billion of it recognised this year?
At $187.67 the market capitalises NVIDIA at $4,560.4 billion: 38.3 times diluted earnings, 40.9 times earnings excluding equity gains, 47.2 times free cash flow for a yield of 2.12%, and 2.89% of enterprise value in pre-tax operating income. That price treats FY2026 cash generation as a base from which growth continues. The returns themselves are not in question — 188.7% on average capital, growth explained by reinvestment at current returns without leverage or one-off items — but the business can absorb only about a third of its profit at those returns. The rest is collected rather than compounded: 41.1% of net income went out through buybacks, share-settlement taxes and dividends, and the remainder into securities and private stakes.
The filing documents the exposure precisely and the demand not at all. Commitments equal to 1.52 times cost of revenue fall due in FY2027 while customers can cancel; the $4.5 billion H20 charge is the document's own demonstration of what happens when demand disappears. The reading holds if FY2027 revenue absorbs those commitments without the excess purchase obligation liability growing, and if receivable days stay where they are; it fails if inventory days and that liability rise together, or if receivables lengthen while the private stakes are impaired. The revenue generated by investees and by the cloud providers NVIDIA buys from is the most important figure the filing does not give.
Strengths
- Returns that reinvestment alone explains
Return on invested capital of 188.7% on average capital and 114.6% on incremental capital. Reinvestment of 30.4% of NOPAT at that return implies 57.4% growth in operating profit against the 60.1% actually recorded, so the year is explained without leverage or one-off items.
- Net cash and debt that costs almost nothing
Net cash of $51,144 million against $8,468 million of fixed-rate unsecured notes with non-financial covenants. Interest expense takes 0.2% of operating income, coverage is 503 times, and the notes equal about 23 days of net income. The commercial paper programme was raised to $25 billion in January 2026 with nothing outstanding.
- Three years financed entirely from inside
Cumulative free cash flow of $184,550 million, equity transactions absorbing $99,449 million net, debt repayments of $2,500 million and no debt issued at all.
- Operating leverage on fixed costs
Operating expenses fell from 18.60% to 10.69% of revenue in two years. Against revenue growth of 65.5%, research grew 43.2% and selling, general and administrative 31.2%.
- Research sustained while the margin compressed
Research and development reached $18,497 million, up 43.2% after 48.9%, in the year the gross margin fell nearly four points. The three years in this filing account for $40,086 million of the $76.7 billion the company says it has invested since inception.
Last year’s watch-list, checked against this filing
| What we flagged | What happened | Result |
|---|---|---|
| Compensation goals set in March 2025 (proxy statement) | Results exceeded the original stretch goals by 13.6% and 14.4%, even after an export restriction the plan had anticipated and priced at $30 billion of revenue. | DONE - exceeded, per the proxy statement |
| Prior-year guidance on margin, capital expenditure and buybacks | The previous 10-K is not attached and this filing does not restate prior-year guidance, so the comparison cannot be made. | NOT VERIFIABLE - no earlier filing attached |
| Rubin production shipments in the second half of FY2027 | Stated in this filing; no revenue is attributed to it. | TO BE CHECKED NEXT YEAR |
| Higher capital expenditure in FY2027 and manufacturing expansion into the US and Latin America | Stated in this filing. Capex rose from 0.71 to 2.13 times depreciation and is 4.6% of cumulative net income. | TO BE CHECKED NEXT YEAR |
| Repurchase authorisation | $40,086 million of cash repurchases in FY2026 and $58.5 billion of authorisation remaining; the share count fell 0.71% in the year. | IN PROGRESS - authorisation open |
What to watch in the next filing
- Excess inventory purchase obligations, $2,739 million, and inventory, $21,403 million at 124.7 days. Most commitments fall due in FY2027, so provisions and inventory will show whether they were sold through.
- Non-marketable equity securities, $22,251 million, and their impairment line, $101 million. Whether early-stage holdings keep their value when the investees need new money, and whether the filing starts to quantify revenue from them.
- Accounts receivable, $38,466 million at 64.8 days, and their concentration. Lengthening would be the first sign of sales financed through payment terms.
- Shares outstanding, 24,304 million, against repurchase spending. Whether buybacks shrink the count or mainly absorb share-based pay: $101.8 billion over three years bought a 1.45% lower count.
- Groq goodwill, $14.4 billion of a $16.9 billion transaction. Whether products using the licensed technology are identified, since until then the asset rests on a qualitative test. FY2027 also has 53 weeks, which lifts reported growth by an amount the filing does not quantify.
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