Nvidia jolted investors on Wednesday by issuing its first-ever year-ahead forecast, projecting a 70% revenue explosion for the next fiscal year. The move appears designed to silence critics of an AI bubble and skeptics of the company's complex financing structures.

Revenue Projections Shatter Expectations

The 70% preliminary guidance implies fiscal 2028 revenue in the range of $690 billion to $700 billion. This figure is more than $100 billion above the $570 billion analysts had previously modeled. "We wanted to make sure that everybody has the same set of information," CEO Jensen Huang said on a conference call. "We’ve got a huge year coming up next year, and it’s going to be pretty extraordinary."

The announcement followed Q2 results that crushed expectations, with revenue hitting $96.2 billion—up 106% year-over-year—beating the projected $92.2 billion.

The Rise of Agentic AI and Supply Constraints

Huang attributed much of the rising demand to the emergence of "agentic AI." He explained that an AI agent consumes between 15 and 100 times more compute than a human user. Despite the massive demand, Nvidia is grappling with significant supply chain hurdles. "Our entire supply chain is challenged," Huang admitted, noting that while demand is growing at 100%, supply constraints limit the company’s ability to confidently forecast beyond 70% growth.

Defending 'Circular Financing'

CFO Colette Kress addressed concerns regarding "circular financing," where Nvidia invests in AI startups and infrastructure partners that subsequently purchase its hardware. The company disclosed a maximum gross guarantee exposure of $108.5 billion, largely linked to credit support for data centers hosting OpenAI's compute. Kress defended the strategy, calling the investments "low-risk, high-reward" and emphasizing that Nvidia's hardware is "fungible and durable," meaning it can be repurposed for other clients if a partner's demand shifts.

Memory Costs and Margin Pressure

One headwind identified was the rising cost of memory components. Nvidia's gross margin guidance for Q3 sits at 74%, down from 75% in Q2, with expectations to bottom out at 71-72% in Q4. To mitigate this, the company has been raising prices by approximately 15% to pass through memory-related inflation to its customers.