Nvidia reported highly positive results for its second quarter of fiscal 2027, which concluded on July 26. The company’s impressive revenue and earnings growth reinforce its dominant position within the lucrative artificial intelligence (AI) chip sector. The massive 106% year-over-year jump in Nvidia’s revenue last quarter reached $96.2 billion, driven primarily by a substantial increase in data center revenue.
Specifically, data center revenue climbed 117% year-over-year during the quarter, totaling $89 billion. This surge reflects robust demand for Nvidia’s graphics processing units (GPUs) originating from major hyperscale cloud providers, AI research facilities, and neocloud services.
Expansion into the Server CPU Sector
While maintaining its dominance in GPUs, Nvidia also indicated an aggressive intent to significantly penetrate the server central processing unit (CPU) market—a domain traditionally controlled by Intel and Advanced Micro Devices (AMD). Previously, Nvidia had introduced its Grace server CPU in 2021, noting that the trailing-twelve-month revenue generated by Grace CPUs surpassed $5 billion. However, the company is now expanding its reach by making its Vera server CPU available as a standalone product.
During the latest earnings call, Nvidia CFO Colette Kress provided detailed projections regarding the Vera CPU. Kress stated that the chip would expand the company’s total addressable market (TAM) and is anticipated to gain significant market acceptance due to its superior performance compared to other data center CPUs. She added:
We expect Vera to be deployed by every major hyperscaler, neocloud, AI lab, and system OEM, with shipments already underway to our lead partners, including OCI, SpaceXAI, and starting this quarter, AWS. We continue to see demand for approximately $20 billion in total server CPUs.
These projections are highly significant: Nvidia estimates that the Vera server CPU could generate $20 billion in revenue by 2026. Furthermore, the company projects that its server CPU revenue will surpass a doubling in fiscal 2028.
Comparison with Key Competitors
The revenue guidance from Nvidia suggests a rapid acceleration in the server CPU market, potentially outpacing the growth rates achieved by AMD and Intel, the established market leaders. While AMD’s data center segment (which includes both GPUs and server CPUs) reported a 107% year-over-year revenue increase of $6.7 billion in Q2, it has sold data center chips totaling $12.5 billion in the first half of 2026, equating to an annual run rate of $25 billion.
Similarly, Intel reported a 59% jump in its data center and AI (DCAI) segment revenue in Q2, reaching $6.3 billion. The DCAI segment stood at $11.4 billion for the first six months of 2026, suggesting an annual run rate nearing $23 billion. Investors should be aware that both Intel and AMD include sales of various other AI chips, such as custom AI processors and GPUs, within their respective data center segments, and do not isolate their pure server CPU revenue.
Despite the current figures, Nvidia’s forward-looking revenue forecasts for fiscal 2027 and fiscal 2028 indicate a growth trajectory in server CPUs that appears faster than the reported performance of its rivals. Notably, Nvidia’s overall data center growth rate exceeded the growth rates reported by both AMD and Intel in their data center segments during the previous quarter, despite operating from a much larger revenue base.
Architectural Shifts and Market Outlook
A critical technical distinction supporting Nvidia’s expansion is the architecture of its new product. Nvidia’s Vera server CPU is custom-designed using Arm Holdings’ v9.2-A architecture, whereas both Intel and AMD rely on the x86 architecture for their server CPUs. This architectural shift is influencing the broader market. According to reports from Tom’s Hardware, Arm-based server CPUs now constitute 45% of the data center market’s revenue. This growth is attributed to the superior energy efficiency and performance of Arm-based systems for inference and agentic AI workloads. Counterpoint Research anticipates that Arm-based server CPUs could capture 90% of the server CPU market by 2029.
The overall server CPU market is projected to reach $220 billion in 2030, according to AMD. This market expansion presents a favorable environment for Nvidia, which is strategically positioned to capitalize on the growing demand for Arm-based technology.
In summary, Nvidia’s successful entry and aggressive growth plans within the server CPU space signal a major challenge to Intel and AMD. This expansion gives Nvidia a more comprehensive and formidable standing in the AI chip sector, which is viewed positively by investors due to its strong growth prospects and attractive valuation relative to its competitors.
