If You Recognize What This Number Means Then You Are Likely An NVIDIA Bull
One number buried in NVIDIA's latest earnings report tells you everything about whether this company has real pricing power or just a lucky streak, and most investors scroll right past it.
I keep hitting the buy button on NVIDIA (NASDAQ:NVDA | NVDA Price Prediction) because of one number that most casual readers scroll past: 75%. That is the non-GAAP gross margin the company just printed in Q2 FY27, and it is the tell.
Companies with pricing power hold gross margins as they scale. NVIDIA is doing exactly that at a size that used to be considered structurally impossible for a hardware business. Revenue reached $96.22 billion in a single quarter, up 105.85% year over year, and the margin held. CFO Colette Kress even conceded memory costs are rising and “headed even higher into next year”, yet management still guided “74%, plus or minus 50 basis points” for Q3 and told analysts gross margins settle at “72% to 73% in fiscal year 28 as executed price increases take effect”. Executed price increases. That is what pricing power sounds like on a conference call.
Three Reasons I Keep Adding to My Position
First, the Data Center engine. Segment revenue hit $89.02B, up 117% year over year, with Networking growing 138%. Jensen Huang said “NVIDIA Compute is fully utilized across every cloud we serve”, and the top five hyperscalers are lining up “nearly 800 billion in 2026” and “1.3 trillion in 2027” in capex behind that demand. All of that spend has to be powered, cooled, and networked by somebody, and we profiled seven of those non-chipmaker suppliers in a free report.
Second, the balance sheet does the talking. Return on invested capital of 92.2%, debt-to-equity of 0.073, and free cash flow of $21.34B in one quarter. Management returned $26.0B to shareholders in Q2 and still sits on roughly $99.0B of remaining buyback authorization.
Third, forward visibility I can price. Supply obligations climbed to $279.0B, most of it memory for Vera Rubin, and Kress called those commitments “essential for the raising of Vera Rubin today, as well as all next year”. Management guided “approximately 70% in fiscal 2028” revenue growth and said that number is constrained only by supply.
How NVIDIA Stacks Up Against AMD and Intel
The two names retirement-focused readers reach for in AI and semis are Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC). My money keeps going to NVIDIA because the receipts here are on a different plane: a 60.38% operating margin, 75.4% return on assets, and a fully-utilized installed base across every major cloud are the outputs of a durable platform advantage that transcends any single product cycle. Huang put it plainly: “NVIDIA’s architecture runs every model”. Until a rival can show comparable operating economics at this scale, my capital stays here.
One Risk I Am Watching Closely
The thing that could actually hurt me is the flip side of that $279.0B supply commitment. If hyperscaler capex softens, NVIDIA is on the hook for memory it has already agreed to buy. I hold the position because Kress described the platform as “fungible and durable and can be redeployed to support other customers”, and because “Cloud industry backlog now greater than 2 trillion” sits behind the order book. Real risk, priced in, thesis intact.
What Keeps the Buy Button Active
At $228.45, a P/E of 46, and a company compounding free cash flow at this rate, I keep buying because compute is now revenue, and NVIDIA sells the compute.
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Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
