NVIDIA Corporation (NASDAQ:NVDA) was trading at around $238 on October 5, up 1.66% on the day and within a few cents of its 52-week high.
The company reported net income of $192.88 billion over the past twelve months and free cash flow of $127.01 billion. A gap of roughly $66 billion between profit and cash is large even at a company this profitable.
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Follow the Three Figures in Order:
Net income was $192.88 billion. Operating cash flow was $134.36 billion. Free cash flow was $127.01 billion. Two things happen between those figures, and only one of them is large. The first gap of roughly $59 billion is profit booked against cash collected. When revenue grows 105.90%, the company has shipped far more than a year ago and has not yet been paid for the most recent of it. That unwinds when growth slows.
The second gap is only $7.35 billion, everything Nvidia spent on property and equipment. For a company adding this much capacity, that is very little. So the answer is mostly yes, and the shortfall has one cause. Nvidia is outrunning its collections rather than spending cash on plant.
None of that questions the profitability. Operating margin is 66.24% on revenue of $302.97 billion.
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Why the Gap Matters More Than It Looks:
The gap matters because of which number the market is using. Nvidia is worth $5.45 trillion. Against reported earnings, that is 28.51 times, which for this growth rate looks undemanding. Against the cash the business actually freed up, it is closer to 43 times.
Nothing about the balance sheet forces the issue. Cash of $62.47 billion exceeds $38.86 billion of debt, and the current ratio is 4.59. What the gap creates is a dependency rather than a danger. The receivables only keep being replaced by larger ones while growth continues, so a slowdown appears in the cash line before it reaches the earnings line.
That is what makes this worth watching at all. The cash statement moves first, which means it is the early warning for a multiple built on the other one.
Converting two-thirds of reported profit into free cash is strong at this growth rate. Billionaire investors hold ten semiconductor stocks, and Nvidia tops that list. The nine they bought alongside it are ranked here.
The Valuation Case:
A 66.24% operating margin exists because these processors have no close substitute for training large models, and the capital spending inside that cash gap is partly what keeps it true. On price, the earnings multiples are the least demanding part, at 28.51 times trailing and 24.88 times forward, both lower than a year ago.
Price-to-sales of 18.16 and price-to-book of 23.78 are where the premium actually sits. Short interest is 1.27%, so almost nobody is positioned against it. Nvidia headed our January list of ten high-return stocks. The nine we placed behind it are revealed here.
Conclusion:
Free cash flow is broadly keeping pace, and the shortfall has a defensible cause. Revenue grew 105.90%, so cash for the latest shipments has not been collected, while capital spending of $7.35 billion is small against a 66.24% operating margin. The balance sheet carries more cash than debt. However, the market is paying 28.51 times a profit figure still running $66 billion ahead of the cash, and that gap stays harmless only while growth stays extreme. The number to watch is operating cash flow, because it will turn before earnings do.
Market Sentiment:
NVIDIA Corporation was held by 285 hedge funds with a combined stake value of about $94.67 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 275 hedge fund holders with a cumulative investment value of around $83.89 billion in the previous quarter.
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This article is originally published at Insider Monkey.
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