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Nvidia's Fiscal 2028 Revenue Outlook Surprisingly Strong, Morgan Stanley Says

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Nvidia's Fiscal 2028 Revenue Outlook Surprisingly Strong, Morgan Stanley Says

Nvidia (NVDA) offered a surprisingly strong fiscal 2028 revenue outlook, while its gross margin guidance provided clarity amid rising memory costs, Morgan Stanley said in a note emailed Thursday.

The technology bellwether expects fiscal 2028 revenue to grow about 70% year-over-year, Nvidia Chief Financial Officer Colette Kress said during the earnings call Wednesday, according to a FactSet transcript. "Although we will work to close the supply-demand gap, we expect supply to remain a bottleneck at least through the end of fiscal year 2028," Kress said.

The brokerage said the revenue outlook exceeded its estimate that called for 52% growth and Wall Street's 40% consensus view.

For the fiscal third quarter, Nvidia expects gross margins of 74%, plus or minus 50 basis points, with margins bottoming in the fourth quarter, Kress told analysts. Margins should settle at 72% to 73% in fiscal 2028 as price increases take effect, she added.

"We remain impressed by short-term numbers, given supply constraints, but the incremental surprise was the (calendar year 2027) revenue commentary, and a reset to gross margins, both of which are positives," Morgan Stanley said.

The 70% projected growth in a supply-constrained environment "is a remarkable figure, and to the extent possible we would expect Nvidia to continue to knock down barriers to higher growth," the investment firm added.

The gross margin commentary clears up what was becoming an overhang on the stock amid rising memory prices, according to the brokerage.

Morgan Stanley raised the price target on Nvidia's stock to $300 from $288 and reiterated its overweight rating, citing "a compelling product cycle, exceptional growth, and valuation below peers."

Shares of the chip giant were up 7.6% intraday Thursday, and have gained 21% this year.

Late Wednesday, Nvidia reported fiscal second-quarter results that more than doubled from a year ago and topped Wall Street expectations, driven by record data center sales.

Morgan Stanley said the upcoming Vera Rubin ramp is set to reshape market share narrative. Vera Rubin is Nvidia's next-generation AI supercomputing platform.

"Allocation of Vera Rubin is going to be central to AI outcomes in the coming months, which should quiet competitive concerns," Morgan Stanley said.

Price: $225.45, Change: $+15.79, Percent Change: +7.53%

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