When UBS talks about Nvidia, Wall Street listens. In a March 2 research note, UBS analyst Timothy Arcuri reiterated a buy rating on Nvidia (NVDA) with a price target of $245. This was a nearly 40% increase from the share price at the time.
Previously, Arcuri met with Nvidia Chief Financial Officer Colette Kress during a UBS Semiconductor bus tour. What he heard didn’t scare him. This makes him more optimistic.
That’s what drives that confidence.
On February 25, Nvidia announced a record revenue of US$68.1 billion in the fourth quarter of fiscal year 2026, a year-on-year increase of 73% and a month-on-month increase of 20%.
It topped Wall Street expectations of $66.2 billion by nearly $2 billion.
Data center revenue reached US$62.3 billion, a year-on-year increase of 75%. Gross profit margin remained stable at 75%. The last number is important. Skeptics have spent months predicting margin squeezes for rivals like Google and Broadcom. But it didn’t happen.
CEO Jen-Hsun Huang didn’t mince words on the earnings call. “Computing needs are growing exponentially,” he said. He believes that the era of agent artificial intelligence has arrived, and computing has actually become the revenue of cloud providers.
Strong results are one thing. The guidance is something else entirely.
Nvidia expects revenue in the first quarter of fiscal 2027 to be $78 billion. Wall Street expected $72.6 billion. This is a huge blow to the forward guidance, not just the rear-view numbers.
This is also the fourth consecutive quarter of accelerated growth. UBS noted that inventory purchase commitments nearly doubled quarter-on-quarter. Revenues of $100 billion per quarter are no longer a fantasy.
Data center revenue reached $62.3 billion, up 75% year over year, driven by the rollout of Blackwell GPUs across major cloud providers
Network revenue in the fourth quarter alone was close to $11 billion, growing more than 3.5x year-over-year as the Spectrum-X Ethernet platform grows
Sovereign AI revenue more than tripled to more than $30 billion for full fiscal year as governments build national AI infrastructure
Free cash flow for the quarter was $35 billion, and free cash flow for the full fiscal year was $97 billion, providing Nvidia with significant room for investment and capital returns.
That was Arcuri’s most poignant takeaway from his conversation with Kress. Most investors focus on Nvidia’s GPUs. UBS sees the online business as a latent story.
Nvidia’s Spectrum-X Ethernet switches and BlueField processors are becoming the backbone of AI data centers. They are deeply embedded in customer infrastructure. This makes them difficult to tear off. UBS Group AG has greater confidence in the segment as a long-term profit driver.
Photo by NurPhoto via Getty Images ·Photo by NurPhoto via Getty Images
Network revenue increased by more than 263% year-over-year in the fourth quarter. This segment is already poised to become a multi-billion dollar business in its own right, entirely independent of GPU sales.
Any honest bull case ignores its downsides. Nvidia’s stock price actually fell 5.5% a day after its blowout earnings. Approximately US$260 billion in market value was wiped out in a single trading day. High expectations come at a cost.
China is also a real headwind. Export restrictions cut off a once meaningful source of revenue. In its first-quarter guidance statement, Nvidia said it would not assume any data center computing revenue comes from China. Sovereign AI deals in the Middle East and India are filling some of the void, but it’s still a void.
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China’s export restrictions remain a structural headwind with no solution in sight in the short term
Over time, Google and Broadcom’s custom chip plans could reduce hyperscalers’ reliance on Nvidia
The valuation is about 47 times forward earnings, much higher than the S&P 500 average of 22 times
Gaming revenue of $3.7 billion fell short of expectations of $4 billion as post-holiday inventory weighed on the sector
Nvidia’s GTC conference will kick off on March 18th. UBS and most bullish analysts see it as the next major catalyst for the stock.
Nvidia is expected to launch its next-generation Rubin GPU architecture. Huang said it can reduce the cost of AI inference by ten times compared to Blackwell. The company has announced partnerships with AWS, Google Cloud, Microsoft Azure and Oracle to initially deploy Rubin-based systems.
UBS is not alone. Of the 39 analyst ratings tracked by TipRanks, 37 recommend buying Nvidia. The average price target is $273.38. Morgan Stanley’s stock price is $260. RBC Capital’s price is $250.
The bottom line for UBS is simple. Hyperscalers are not backing down. They are now targeting compute buildout for 2027. AI spending isn’t slowing down. It’s accelerating. For Nvidia, the demand problem has been solved. The only question that remains is how quickly supply can catch up.
Related: Denny’s, GPUs, and AI: Nvidia’s journey
This article was originally published by TheStreet on March 5, 2026, and first appeared in the Investment section. Click here to add TheStreet as your preferred source.
