Nvidia Share Price: Why Its P/E Halved as Profits Doubled

The Nvidia share price has a puzzle attached to it. The company keeps doubling its profit. The stock does not keep doubling with it.

Its latest results, out on August 26, 2026, make the gap plain. Sales more than doubled. Profit more than doubled. The stock is up just 12.4% in 2026 so far. Something has shifted in how the market values this business.

What Nvidia reported

Nvidia beat on both sales and profit in the second quarter of its fiscal 2027.

Note the two profit lines. The adjusted figure strips out some costs. The reported figure does not. Mixing the two is an easy way to get the maths wrong.

The first year-ahead forecast in Nvidia's history

The bigger news came on the call. Finance chief Colette Kress guided to about 70% revenue growth in fiscal 2028. Analysts had penned in roughly 44%.

This was the first time Nvidia has given a full-year forecast this far ahead. That choice matters as much as the number. A firm facing doubt about how long its boom can last chose to put a figure on the year after next.

There is a catch, and it cuts the other way than usual. The 70% is capped by supply, not demand. Chief executive Jensen Huang said demand is running well above that mark and that the supply chain is broadly stretched. The company cannot build enough.

For the current quarter, Nvidia guided to $108 billion in revenue, give or take 2%. The street had looked for about $104.19 billion.

Margins are the soft spot

Growth is getting dearer to buy. This is where the results were weakest.

Gross margin was 75.0% in the quarter. Nvidia guided to 74.0% for the current quarter. It then expects margin to bottom at 71% to 72% in the fourth quarter, before it recovers to 72% to 73% in fiscal 2028.

The cause is memory. Nvidia flagged extreme pricing in memory chips, with costs rising faster than it had planned. The same AI build-out that drives its sales is also driving up what it pays for parts.

Running costs are climbing too. Operating expenses rose 55% to $8.41 billion, and the firm guided to about $9.2 billion next quarter. The margin recovery in fiscal 2028 rests on price rises sticking.

Why the Nvidia share price keeps lagging its profits

Here is the part most coverage skips, and it answers the question investors actually have.

A year ago Nvidia traded near $174 with trailing earnings of about $3.51 a share. That is a rating of close to 50 times past profit. Today the stock is near $210 with trailing earnings of $7.91. That is about 26.5 times.

So earnings rose about 125%. The stock rose about 20%. The rating almost halved.

That is the answer to what is priced in. The market is not paying a bubble price for Nvidia itself. It is doing the opposite. It is cutting the multiple faster than profits grow, because it doubts the pace can hold.

On a forward view the gap is starker still. The stock trades near 18.4 times expected earnings against guided growth of about 70%. The stock also sits about 11% below its 52-week high of $236.54.

What this means for Indian investors

Nvidia does not trade in India. Its results still move Indian screens, mainly through IT and AI-linked names.

The Nifty IT index has bounced hard off its low of 25,770 on July 1, 2026. It has gained about 17.5% from that trough and roughly 11% over two months. But the rally already peaked on August 11 at 31,823. The index now sits close to 4.9% below that mark, and is still down about 16% over 12 months.

So the move into IT is a bounce from a deep fall, not a new bull run. A strong Nvidia forecast could pull money back towards AI hardware and away from that trade. That risk is covered in more depth in this piece on what Nvidia's Q2 means for Indian IT stocks, and in this look at how far Nifty IT fell from its peak.

Mistakes investors make reading these results

• Mixing adjusted and reported profit. Adjusted net profit was $53.95 billion. Reported net profit was $59.69 billion. Comparing one year's adjusted figure with another year's reported figure gives a false growth rate.
• Reading a high price as a high rating. A $5 trillion market value sounds stretched. At about 26.5 times past earnings, the rating is lower than many steady Indian consumer names carry.
• Missing the supply cap. The 70% forecast is what Nvidia can build, not what buyers want. That is a very different signal from soft demand.
• Ignoring the margin path. Sales growth is only half the story. A drop from 75% to 71% gross margin is a real dent in profit growth.
• Treating a two-month bounce as a trend. Nifty IT is up over two months but still down about 16% over a year, and has already slipped from its August high.

The question that is left

Demand is settled for now. Data centre sales are still growing at triple-digit rates and the firm has put a number on the year after next.

What is not settled is the rest. Margins are falling before they recover. Costs are rising. Rivals are circling. And the huge sums going into AI have yet to prove they earn a matching return.

The market has already answered in its own way. It keeps paying less for each dollar of Nvidia's profit. For a wider view of the AI trade, see this read on the risks building into 2028 and this breakdown of Nvidia's last full-year results.

Sources: NVIDIA Q2 fiscal 2027 results release and earnings call, August 26, 2026; NVIDIA investor relations outlook for Q3 fiscal 2027; NSE index data for Nifty IT as of August 27, 2026; market prices as of the August 26, 2026 close. Nvidia's fiscal year ends in January, so fiscal 2027 covers calendar 2026. Ratings and prices change daily.