Nvidia's Operating Profit Rose 19%, Net Profit 2%: Equity Gains Fell

Nvidia released its May-July results on August 26, twenty minutes after the US close.

Revenue came in at $96.2 billion, up 106% from a year earlier and 18% from the prior quarter. Data center alone contributed $89.0 billion, 92.5% of the total. Consensus was $92.2 billion; the company beat it by 4.3%.

No line missed. But two profit lines separated, and that is the story.

Operating profit went from $53.5 billion to $63.7 billion, a 19% gain in three months. Net profit went from $58.3 billion to $59.7 billion — 2%.

Same company, same quarter, two stories. What separates them is not chip sales.

Why Two Profit Lines Diverge

Operating profit sits near the top: sell the product, subtract manufacturing cost, research and overhead, and what remains is what the business earned.

Below it, non-operating items are added — interest income, currency effects and, decisive here, changes in the value of shares the company holds in other businesses.

Nvidia has made that bottom section large, taking equity stakes in some of the customers it sells chips to: cloud providers, AI labs, data center operators.

CNBC reported in May that these investments had passed $40 billion through 2026. Accounting rules require them to be marked to current value at period end, with the difference running through the income statement.

The gain is booked whether or not a share is sold: no cash in the bank, a line on the statement. The CFO commentary states it plainly: "Net gains from equity securities for the second quarter were $7.8 billion."

One quarter earlier the same sentence ended at $15.9 billion.

The $8.1 billion decline says nothing about the business; it says the portfolio rose less in one quarter than in the other. But on the net profit line it swallows most of what the chip business added.

The Arithmetic: Ten Billion Up, Eight Billion Down

Three growth rates come out of one set of accounts: revenue up 17.9%, adjusted profit up 18.5%, net profit up 2%. The first two measure how fast the business runs; the third measures the mood of a portfolio.

The split shows up in earnings per share too: reported diluted EPS $2.46 against adjusted EPS $2.22.

That order is normally reversed, because the adjusted figure adds back expenses such as stock-based compensation. At Nvidia the investment gains stripped out are larger than the expenses added back.

Booked Profit and Cash Received Are Not the Same Thing

On the cash side: Nvidia booked $59.7 billion of net profit while operations generated $24.1 billion — 40% of the reported figure. Part of the gap is inventory, which rose from $25.8 billion to $31.6 billion, putting $5.8 billion of cash onto shelves.

Much of the rest is appreciation of shares never sold: that $7.8 billion is profit on the income statement and nothing in the bank account.

Cash and marketable debt securities stood at $56.6 billion at quarter end. The company returned $26.0 billion through buybacks and dividends, and $99.0 billion remains under its repurchase authorization.

The after-hours reaction was still forming as this was written. Going in, 24/7 Wall St reported the options market pricing a move of roughly 5.4% on the print. At this size, that is about $280 billion swinging one way or the other.

Which way it went is not the point; which profit line it is set against is.

The Other Side

Choosing between them depends on how you view a supplier taking equity in its own customers — not a question the accounts can settle.

What Is Left: A $279 Billion Purchase Commitment

The line with the longest life is not on the income statement but in the notes. The CFO commentary reads: "Our commitments increased from $119 billion last quarter to $279 billion, primarily related to the procurement of memory."

A $160 billion increase in three months, most of it high-bandwidth memory — the stacks that feed AI chips. Against third-quarter revenue guidance of $108 billion, the commitment is roughly 2.6 times a quarter's sales.

Locking in capacity while memory prices rise shows up in the margin guidance. Gross margin was 75% this quarter, guided to 74% for the third, plus or minus 50 basis points.

On $108 billion of revenue, one point is about $1.08 billion a quarter — precisely where Micron, SK Hynix and Samsung collect.

Gabelli's Ryuta Makino said beforehand: "I think NVDA has the best relationships with the leading HBM vendors and should be able to get more favorable pricing versus the market". The guided one-point decline suggests those relationships did not fully absorb the increase.

China is effectively closed: per the CFO commentary, Hopper data center shipments to China were less than 1% of data center revenue in the quarter.

Jensen Huang, in the release: "AI has reached its inflection point; it's doing useful work, its tokens are productive and profitable. Now, compute is revenue."

This article is based on Nvidia's second-quarter results release of August 26, 2026, the CFO commentary published the same day, and the prior quarter's CFO commentary filed with the SEC. Consensus figures come from analyst averages compiled by Kiplinger and 24/7 Wall St; the pre-release share move is as reported by Axios. The after-hours price reaction had not yet formed at the time of writing and is not included here. This is not investment advice.

Correction (September 13, 2026): prose tightened for rhythm; figures and sources unchanged.