NVIDIA (NVDA) Excluded China Data Center Compute Revenue from its $108B Outlook. Can Growth Stay Exceptional Without It?

NVIDIA Corporation (NASDAQ: NVDA ) showed in its fiscal second quarter that near-term growth no longer depends on a material contribution from China Data Center compute revenue. The chipmaker generated $96.2 billion of revenue, up 18% sequentially and 106% from a year earlier. Data Center revenue reached $89.0 billion, rising 117% year over year.

Both GAAP and company-defined non-GAAP gross margins came in at 75.0%. NVIDIA Corporation (NASDAQ:NVDA) calculates the latter by adjusting GAAP cost of revenue to exclude acquisition-related and other costs.

The next test is even larger. NVIDIA Corporation (NASDAQ:NVDA) guided for $108.0 billion of fiscal third-quarter revenue, plus or minus 2%, without assuming any Data Center compute revenue from China. The midpoint implies another $11.8 billion of sequential growth, or roughly 12%, after revenue had already doubled from the prior-year period.

The China exclusion sounds like a major handicap, but the latest quarter shows how little those sales currently contribute. Shipments of older Hopper Data Center products to China accounted for less than 1% of Data Center revenue. NVIDIA Corporation (NASDAQ:NVDA) had also excluded China Data Center compute revenue from its $91.0 billion second-quarter outlook, yet actual revenue exceeded that midpoint by $5.2 billion.

The strongest support for the $108 billion outlook is the growth across NVIDIA's Data Center customer categories. Hyperscale revenue reached $48.7 billion, up 102% from a year earlier and 13% sequentially. Revenue from AI clouds, industrial and enterprise customers, or ACIE, increased 138% year over year and 25% sequentially to $40.3 billion.

ACIE now represents roughly 45% of Data Center revenue. The category includes hyperscalers using AI clouds as well as AI-native companies, enterprises and sovereign customers. Its faster growth therefore signals broader end-demand, although some of it still originates with large cloud providers. The Vera Rubin platform is also ramping into full production, supporting another infrastructure-upgrade cycle.

A 75% gross margin alongside triple-digit revenue growth remains an extraordinary sign of pricing power. However, management guided both GAAP and company-defined non-GAAP gross margins down to 74.0%, plus or minus 50 basis points, for the third quarter.

During the earnings call, NVIDIA Corporation (NASDAQ:NVDA) said rising memory costs could push gross margin to 71% to 72% in the fourth quarter before it settles at 72% to 73% in fiscal 2028. Planned price increases may offset part of that pressure, but they will also test how much of the higher component cost customers will absorb.