NVIDIA Corporation earned $192.9bn of net income in the twelve months to its second quarter of fiscal 2027, 122.7% more than in the prior-year period. Free cash flow over the same window was $127.0bn, up 76.3%. By any ordinary standard, both figures are remarkable. Set against each other, they pose a question: profits are compounding considerably faster than the cash that backs them, and the filings' structured data does not say why.
What the filings show
Every line of NVIDIA's cash story is growing at a pace few companies ever touch. Trailing-twelve-month revenue reached $303.0bn, up 83.4% year over year. That growth rate has itself been accelerating, rising 12.7 percentage points on the prior quarter's reading. Operating cash flow rose 74.4% to $134.4bn. Capital expenditure grew 46.7% to $7.4bn, which is still only 2.4% of revenue. Subtract capex from operating cash flow and free cash flow lands at $127.0bn.
| Measure | TTM to FY2027 Q2 | YoY growth |
|---|---|---|
| Revenue | $303.0bn | 83.4% |
| Net income | $192.9bn | 122.7% |
| Operating cash flow | $134.4bn | 74.4% |
| Capital expenditure | $7.4bn | 46.7% |
| Free cash flow | $127.0bn | 76.3% |
The divergence appears when the cash figures are set beside the income statement. Net income grew 122.7%, far ahead of the 74.4% growth in operating cash flow, so the gap opens before capex enters the picture at all. As a share of revenue, the two measures moved in opposite directions: net margin reached 63.7%, while free cash flow margin slipped 1.7 percentage points year over year to 41.9%.
Why profits and cash can part ways
Net income is an accrual measure: it books revenue when earned and costs when incurred, regardless of when money moves. Free cash flow counts only what actually arrives and leaves. The mundane ways the two diverge are familiar: customer receivables growing with, or faster than, revenue; inventory and supply commitments building ahead of expected demand; non-cash gains flattering the income statement; tax paid on a different schedule from tax accrued.
For a company whose revenue is growing 83.4%, some working-capital build is arithmetic rather than alarm: a business shipping vastly more product each quarter will, mechanically, be owed vastly more by customers at any given moment. But the structured XBRL data used here does not reveal which of these mechanisms is doing the work, or in what proportion. The management discussion in the latest 10-Q is the place to look before attributing a cause, and we flag that limit rather than guess past it.
A middling cash margin by NVIDIA's own standards
A free cash flow margin of 41.9% is, in absolute terms, an exceptionally high figure. Against NVIDIA's own recent record, it is unexceptional: the company's prior trailing-twelve-month history spans a minimum of 14.6% and a maximum of 49.9%, and the current reading sits below the middle of that distribution.
The contrast with accrual profitability is stark. Operating margin of 65.2%, up 7.1 percentage points year over year, is a 100th-percentile reading against the company's entire prior trailing-twelve-month history, the highest it has recorded. Gross margin stands at 74.7%. On the income statement, NVIDIA has never been more profitable; on the cash flow statement, its conversion of revenue into free cash is merely good by its own standards, and moving the wrong way.
What it means for value
In valuation terms the divergence matters less than the headline gap suggests. Our discounted-cash-flow model values NVIDIA on its free cash flow, not its net income, and the past year's 1.7 percentage point dip in free-cash-flow margin, if it persisted, would lower model value by only 3.8%. The far larger swing factor is growth: against a base case of 20.0% for five years, growth five points lower would cut model value by 23.8%. If the gap between profit and cash closes because cash catches up, the model value rises with it; if it closes because profit falls back, that is a growth story, and the model is far more sensitive to growth than to the margin dip. These are model values under stated assumptions, not a comparison with the share price.
The other reading
The benign interpretation is timing. A company compounding revenue at 83.4% (with growth that accelerated again in the latest quarter) invoices customers faster than it collects from them, and positions inventory ahead of demand it has good visibility into. On that reading, the cash has not gone missing; it is temporarily resident in the balance sheet, and the two growth rates converge once expansion normalises. It is worth noting that this divergence is a first flag in our data, not an established trend: one period of evidence deserves attention, not a verdict.
Two further details cut both ways. The filings show a steep year-over-year rise in long-term debt, though to a level that remains a modest fraction of total assets: inexpensive funding on one reading, a substitute for cash the business is not yet freeing up on another. And the diluted share count fell 1.0% year over year, consistent with cash also leaving through repurchases rather than accumulating idle.
The bottom line
The divergence is large and real, and on the structured data alone it is unexplained. The useful discipline is to watch whether it closes: if free cash flow growth converges toward net income growth over coming quarters, the timing explanation wins and the episode is a footnote. If the gap persists while operating margins sit at all-time records, the quality of those record margins becomes the live question, because profit that does not eventually arrive as cash is a claim, not a fact. Either way, the scale bears repeating: $127.0bn of annual free cash flow against capital expenditure of $7.4bn leaves NVIDIA with an exceptionally large cash engine, whichever explanation for the gap turns out to be right.
