NVIDIA’s Epic Earnings vs. Stock Plunge

On February 25, 2026 (EST), NVIDIA released what can only be described as an "epic" earnings report for the fourth quarter and full fiscal year of 2026. However, despite both revenue and profit crushing expectations, the stock price suffered a significant plunge during after-hours and the following day’s trading session.

The market logic behind this "god-tier" financial report reflects the deep-seated anxiety among investors as the AI craze enters its middle-to-late stages.

Signs of "Market Fatigue" as Early as Q3

Looking at the data alone, NVIDIA’s performance was impeccable: Q4 FY2026 revenue reached $68.1 billion, a staggering 73% year-over-year surge. Full-year net profit broke the $120 billion mark—a figure exceeding the GDP of many sovereign nations. During the earnings call, a high-spirited Jensen Huang declared that the AI Industrial Revolution is accelerating from the cloud to sovereign AI, factories, and edge devices; the era of "omnipresent AI" has arrived.

Yet, the market response was icy: NVIDIA’s stock price fell 5.46% on February 26, dragging down the Philadelphia Semiconductor Index (SOX).

In fact, signs of negative market feedback surfaced as early as the Q3 FY2026 report. At that time, revenue hit $57 billion (up 64.6%), far exceeding the market guidance of $54 billion. However, the stock price gapped up but closed lower, ending the day down 3.15%—an early warning signal of investor concerns regarding the AI sector.

Running Out of Cash to Burn

It is well-known that the "Big Four" tech giants—Amazon, Google, Microsoft, and Meta—are NVIDIA’s largest customers, currently locked in an unprecedented AI arms race. Their investment in AI infrastructure is equivalent to launching several "Apollo Moon Landings" in a single year. While the shadow of ROIC (Return on Invested Capital) is faintly visible in cloud business growth, it remains far from enough to offset such colossal expenditures.

If investors' previous concerns about the sustainability of cloud providers' AI data center spending were at the level of "whether ROIC can cover costs," the current concern is more direct: the cloud giants are running out of cash to burn.

According to the 2026 capital expenditure (CapEx) guidance released by the Big Four, their combined spending is expected to exceed $640 billion, a 67% spike compared to 2025. In contrast, their total net operating cash flow for 2025 was only $556.2 billion. Even accounting for natural growth in operating cash flow for FY2026, the available funds will barely cover the massive CapEx, leaving almost no buffer.

(Source: eefocus)

This implies that if top-tier cloud providers want to maintain a balance between operating cash flow and capital expenditure, their 2027 CapEx growth rate must align with their own revenue growth. In other words, the probability of these giants maintaining their current CapEx growth rate in 2027 is very low.

NVIDIA’s growth is highly dependent on the capital expenditures of these top cloud providers. As they tighten their "purse strings" and decelerate spending, the impact will eventually trickle up to NVIDIA, forming an invisible ceiling on its high growth. The AI arms race must eventually return to rationality; cash flow support, after all, is the fundamental bedrock for the industry’s sustainable development.