Nvidia Stock (NASDAQ:NVDA) Dips Despite Q2 Earnings Beat. Is It Undervalued Now?
Nvidia (NASDAQ:NVDA) just announced its Q2-2025 earnings results, which beat both earnings and revenue expectations. Here are the highlights (and later on, we also provide an updated valuation to help you determine if the stock is undervalued or not):
non-GAAP EPS of $0.68 vs. $0.645 expected — up 152% year-over-year and 11% quarter-over-quarter. Last year’s Q2 EPS was $0.27 (split-adjusted)
Revenue of $30 billion vs. $28.737B expected — up 122% year-over-year and 15% quarter-over-quarter. Last year’s Q2 revenue was $13.51 billion.
Non-GAAP Gross margin of 75.7% vs. 71.2% the year earlier.
Q3 revenue outlook of $32.5B, plus or minus 2%.
Free cash flow rose from $6.05B to $13.483B.
TTM free cash flow of approximately $46.8 billion
Nvidia’s Q3 Outlook
For the third quarter of fiscal 2025, NVIDIA projects:
Revenue: Approximately $32.5 billion, plus or minus 2%, as stated above.
Gross Margins: GAAP gross margin of 74.4% and non-GAAP gross margin of 75% (plus or minus 0.5% for both these figures).
Operating Expenses: GAAP operating expenses of $4.3 billion and non-GAAP operating expenses of $3 billion. For the full-year, operating expenses are expected to grow by the “mid-to upper-40% range".
Tax Rates: GAAP and non-GAAP tax rates of 17%, plus or minus 1 percentage point, excluding discrete items.
How Did Each Sector Perform?
Data Center
Second-quarter revenue reached a record $26.3 billion, up 16% from the previous quarter and up 154% from a year ago. Notable developments included the launch of NVIDIA H200 Tensor Core processors, a collaboration with CoreWeave, and the introduction of NVIDIA Spectrum-X™ Ethernet networking platform. Japan also advanced its AI capabilities with the integration of H200 GPUs.
Gaming and AI PC
Second-quarter Gaming revenue was $2.9 billion, up 9% from the previous quarter and 16% year-over-year. Key highlights were the announcement of NVIDIA ACE for digital humans, the introduction of Project G-Assist, and the expansion of GeForce NOW to over 2,000 games.
Professional Visualization
Second-quarter revenue was $454 million, up 6% from the previous quarter and 20% year-over-year. Significant developments included the introduction of AI models and microservices for OpenUSD, and new workflows for autonomous factories.
Automotive and Robotics
Second-quarter Automotive revenue was $346 million, up 5% from the previous quarter and 37% year-over-year. The segment saw advancements with the Isaac robotics platform, the unveiling of Omniverse Cloud Sensor RTX™, and winning the Autonomous Grand Challenge for AI-driven autonomous vehicle development.
Below, you can see a breakdown of NVDA’s Q2-2025 income statement, courtesy of @EconomyApp on X:
Source: @EconomyApp on X
Is NVDA Stock Undervalued?
Let’s do some calculations to see if Nvidia stock is undervalued. Here are the inputs:
TTM free cash flow of approximately $46.8B
TTM FCF per share of $1.88
Discount rate (cost of equity) of 10%
Terminal growth rate of 3%
Current after-hours price of $121.50
Using our reverse DCF calculator, the market is pricing NVDA to grow its free cash flow per share by 23.046% annually for the next 10 years and then by 3% every year after that. See the image below.
Essentially, if you think NVDA can surpass this growth rate, then it's underpriced, and vice versa.
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