How NVDA (NVIDIA) Makes Money in 2025: A Deep-Dive With Income Statement

Welcome to the Value Sense Blog, your resource for insights on the stock market! At Value Sense, we focus on intrinsic value tools and offer stock ideas with undervalued companies. Dive into our research products and learn more about our unique approach at valuesense.io

Explore diverse stock ideas covering technology, healthcare, and commodities sectors. Our insights are crafted to help investors spot opportunities in undervalued growth stocks, enhancing potential returns. Visit us to see evaluations and in-depth market research.

Understanding how a semiconductor and AI leader like NVIDIA Corporation (NVDA) makes money is essential for investors and anyone interested in the business of advanced computing. In this post, we break down NVIDIA's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

* *

Quick NVIDIA Overview

NVIDIA Corporation operates as a global leader in graphics processing units (GPUs), AI hardware, and software platforms. Its business model centers on designing and selling high-performance chips and systems for data centers, gaming, professional visualization, and automotive applications.
Revenue comes primarily from data center solutions (AI chips, cloud infrastructure), gaming GPUs, and specialized hardware for professional and automotive markets.
NVIDIA's business segments include Data Center, Gaming, Professional Visualization, Automotive, and Other.

Revenue Breakdown

• Total Revenue (Q2 2025): $46.7B (+55.6% YoY)
  • Data Center Revenue: $41.1B (87.9% of total, +56.4% YoY)
  • Gaming Revenue: $4.29B (9.2% of total, +48.9% YoY)
  • Professional Visualization: $601M (1.3% of total, +32.4% YoY)
  • Automotive Revenue: $586M (1.3% of total, +69.4% YoY)
  • Other: $173M
• Growth is powered by explosive demand for AI infrastructure, cloud computing, and continued strength in gaming hardware.

Gross Profit and Margins

• Gross Profit: $33.9B (72.4% gross margin)
  • Cost of Revenue: $12.9B (+72.6% YoY)
  • NVIDIA maintains robust margins due to its scalable digital business model, premium pricing power in AI chips, and operational efficiencies.
• Most costs come from manufacturing, supply chain, and component sourcing for advanced chips.

Operating Income and Expenses

• Operating Income: $28.4B (+52.6% YoY, 60.8% margin)
• Operating Expenses: $5.41B (+37.7% YoY)
  • R&D: $4.29B (+38.9% YoY, 9.2% of revenue) — Focused on next-gen AI architectures, software platforms, and autonomous vehicle technologies.
  • SG&A: $1.12B (+33.3% YoY, 2.4% of revenue) — Includes sales, marketing, and administrative functions supporting global expansion.
  • NVIDIA continues to prioritize innovation and invest in growth while maintaining efficiency in its operations.

Net Income

• Pre-Tax Income: $31.2B (+62.4% YoY, 66.8% margin)
• Income Tax: $4.78B (15.3% effective tax rate)
• Net Income: $26.4B (+59.2% YoY, 56.5% net margin)
• NVIDIA converts a significant portion of sales into profit due to its scalability, pricing power, and efficient cost structure.

What Drives NVIDIA's Money Machine?

• Data Center AI chips: 87.9% of revenue — NVIDIA's H100 and related products dominate the AI infrastructure market.
• Key metric: Data Center segment grew 56.4% YoY, reflecting surging demand for generative AI and cloud services.
• Investment area: R&D spending $4.29B targets AI, autonomous systems, and next-gen GPU architectures.
• Future growth areas: Automotive and professional visualization, though not yet profitable, are strategic bets for long-term expansion.

Visualizing NVIDIA's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially R&D) taking the largest chunk.
• Even after large investments in innovation, 56.5% of revenue drops to the bottom line.

Key Takeaways

• NVIDIA's money comes overwhelmingly from AI data center hardware and platforms
• High gross and net margins illustrate the power of NVIDIA's scalable, premium business model
• Heavy investment in R&D, balanced by efficiency in operating costs
• Ongoing growth is driven by AI adoption, cloud infrastructure, and gaming demand

Explore More Investment Opportunities

For investors seeking undervalued companies with high fundamental quality, our analytics team provides curated stock lists:

📌 50 Undervalued Stocks (Best) overall value plays for 2025
📌 50 Undervalued Dividend Stocks (For income-focused investors)
📌 50 Undervalued Growth Stocks (High-growth potential with strong fundamentals)

🔍 Check out these stocks on the Value Sense platform for free!

FAQ About NVIDIA's Income Statement

1. What is the main source of NVIDIA's revenue in 2025?

NVIDIA generates over 87.9% of its revenue from Data Center AI chips and platforms. Other significant sources include gaming GPUs 9.2% and professional visualization and automotive segments.

2. How profitable is NVIDIA in Q2 2025?

NVIDIA reported net income of $26.4B in Q2 2025, with a net margin of approximately 56.5%, reflecting strong profitability driven by premium pricing and operational scale.

3. What are the largest expense categories for NVIDIA?

The biggest expenses on NVIDIA's income statement are operating expenses, particularly Research & Development (R&D) at $4.29B in Q2 2025, as NVIDIA prioritizes AI, software, and autonomous systems. SG&A costs totaled $1.12B.

4. Why does Automotive operate at a loss?

Automotive, despite generating $586M in revenue, posted an operating loss in Q2 2025. This is because NVIDIA aggressively invests in autonomous driving technologies and automotive AI platforms, believing these will drive long-term growth—even if the division is unprofitable today.

5. How does NVIDIA's effective tax rate compare to previous years?

NVIDIA's effective tax rate in Q2 2025 was 15.3%, consistent with previous years. This moderate rate is primarily due to tax benefits from share-based compensation and international structuring.