There’s one figure in Nvidia ‘s earnings report that has some analysts worried: gross margins. The chipmaker fell 3% on Thursday even after topping Wall Street’s fiscal second-quarter estimates and issuing stronger-than-expected current-quarter guidance. Many analysts attributed the post-print move to a subpar forecast that failed to please elevated investor expectations , and a decline in gross margins (75.1% from 78.4%) as the company ramps new data center products. “We expect the stock to likely remain range bound through the next two quarters before Blackwell driven Y/Y sales and gross margin inflection in the Apr-Q,” wrote Citi’s Atif Malik, attributing the pressure to heightened H200 chip costs. These problems will likely persist through the first quarter of fiscal 2026 as the company ramps up Blackwell chip production, said Needham’s Quinn Bolton. He expects gross margins to recover through the second fiscal quarter of 2027, before dipping again as production begins on its Rubin chips. NVDA 1D mountain Nvidia shares fall after earnings Lower gross margins could temper earnings growth in the near term, according to Stifel’s Ruben Roy. Morgan Stanley’s Joseph Moore, meanwhile, adjusted his gross margin estimate to 74% for the 2025 calendar year. But, he highlighted previous margin pressure warnings from Nvidia when it first announced Blackwell. “We expect gross margins to improve throughout next year on improving yields and better cost absorption,” said JPMorgan’s Harlan Sur. “Bottom line, the team continues to maintain a 1- 2 step lead ahead of competitors with its silicon/hardware/software platforms, and a strong ecosystem.” The disappointing margin news helped strengthen some cases for keeping to the sidelines regarding Nvidia. Deutsche Bank’s Ross Seymore reiterated his hold rating and $115 price, while D.A. Davidson’s Gil Luria maintained his neutral rating and $90 price target on the stock, noting that more new data center products could constrain Nvidia’s profitability. Luria’s price target reflects 28% downside from Wednesday’s close. “Over the next 3-5 quarters, we still believe a decline in demand for NVIDIA compute is inevitable, as end customers are going to become more scrupulous when it comes to the ROI on their AI compute,” Luria wrote.
