Jensen Huang announced that Nvidia will reset its gross margin guidance to 72–73% next year, down from the 75% the company delivered in its fiscal second quarter, as the chip giant absorbs rising memory costs and reprices its products to maintain profitability amid intense demand for AI accelerators.
“This quarter we decided that we would rip the Band-Aid off, reset expectations about our gross margins, and just explain to people that in fact, we have now absorbed the cost increases,” Huang said during an interview with Fox Business. “We have also repriced our products in the marketplace, and based on that, our margins are going to come down from 75%. But it will be between 72% and 73% next year.”
The margin reset reflects the mounting pressure from soaring memory costs, particularly high-bandwidth memory (HBM) components that are essential to Nvidia’s AI chips. Industry reports indicate that HBM and broader memory prices have climbed sharply in 2026, forcing even the world’s most profitable chipmaker to pass some costs to customers. Nvidia’s repricing strategy aims to offset these component expenses while sustaining the company’s competitive position in the accelerating race for AI infrastructure.
The announcement came as part of Nvidia’s blowout fiscal second-quarter earnings report. Nvidia beat Q2 earnings with $96.2B revenue, guides Q3 to $108B, according to the company’s earnings disclosure. The chip giant also delivered a strong forward outlook, projecting roughly 70% revenue growth for fiscal 2028—a milestone that underscores the sustained demand from hyperscalers and enterprises building out AI infrastructure.
Huang emphasized that despite the margin compression, the margin reset removes investor anxiety about the company’s profitability trajectory. The 72–73% range, while lower than the elevated levels of recent quarters, still represents exceptional profitability compared to most semiconductor peers. The company expects margins to trough at 71–72% in the fourth fiscal quarter before stabilizing at the 72–73% level in fiscal 2028 as previously implemented price increases take effect.
The move signals Nvidia’s willingness to trade near-term margin expansion for market share and sustained growth in the AI era. By transparently communicating the margin reset and its underlying drivers, Huang aims to reset market expectations and demonstrate that Nvidia can maintain strong returns even as component costs rise. This strategy reflects the company’s confidence in the durability of AI demand and its ability to grow revenue at a scale that justifies the margin compression.
Sources
- Fox Business — Jensen Huang’s direct statement on the margin reset, the absorption of cost increases, and product repricing strategy
- Nvidia earnings disclosure — Q2 revenue of $96.2B, Q3 guidance of $108B, and fiscal 2028 revenue growth forecast of 70%
- Seeking Alpha — Nvidia’s gross margin reset outlook to 72%–73% and the fiscal 2028 growth guidance
- Reuters — Nvidia’s Q3 revenue forecast and the company’s signaling of sustained AI spending
- The Globe and Mail — Nvidia’s gross margin trajectory, including the Q4 trough and fiscal 2028 stabilization range
