The issue this file is about
The problemA company can help its own customers buy from it. It can take a stake in them, wait longer to be paid, or help them build what they need. Every one of those is normal and legal. But once a company does it at scale, an outsider can no longer tell from the revenue line alone how much of the demand would exist without the help. The question stops being "are sales growing" and becomes "who is paying, and with whose money".
The caseNvidia. There is a loud public argument, usually called circular financing, about whether its profit is real. The company filed its quarterly report on 26 August 2026. It contains the numbers the argument has been missing, and the clearest of them is this: of $141.4bn of profit before tax in the first half, $23.7bn came from investments rising in value rather than from selling anything.
Why it matters at your sizeTake three zeros off and this is an ordinary small company problem. You give a distributor ninety days instead of thirty. You take equity in a reseller. You guarantee a customer's lease. Each decision is defensible. Together they mean your revenue and your risk are attached to the same few people, and your accounts will not say so unless somebody adds it up.
One dollar in six
Of every six dollars of profit Nvidia made before tax in the six months to 26 July 2026, roughly one came from its investments going up in value. A year earlier it was one dollar in twenty-six. That single change is what this file is about, and everything below is either how it happened or what it means for you.
Short answer: Nvidia reported $177.8bn of revenue and $118.0bn of net income for the six months to 26 July 2026. Underneath those numbers, $23.7bn of its $141.4bn pre-tax profit came from a line called gains from equity securities, which the filing says was driven mainly by unrealized gains. That is 16.8% of pre-tax profit, against 3.9% a year earlier. The same filing discloses $25bn of promised equity investments in AI companies, $279bn of supply commitments, up from $119bn a quarter earlier, customer payment terms of up to a year, arrangements to help customers find land and power, and $4.7bn of exposure through entities it does not own outright. None of this is hidden and none of it is wrongdoing. It is simply the answer to a question a lot of people are asking without opening the document.
1 · What people are actually arguing about
Since late 2025 there has been a running argument in the business press and on social platforms about what is usually called circular financing in artificial intelligence. Bloomberg has run a dedicated graphics package on it, university business schools have written it up, and it has been covered as a debate about several hundred billion dollars of committed money.
Stripped of jargon, the claim is this. A chipmaker puts money into an AI company. The AI company uses money to rent or build computing capacity. Whoever provides that capacity buys chips. The chipmaker records a sale. Critics say some of the demand is therefore being funded by the seller. Supporters say building AI is enormously expensive, chips are scarce, and investing alongside customers is how capacity gets built at all.
This file takes no side in that argument. What it does is open the document and report what the company itself discloses, because most of the argument is being conducted without it.
2 · The number the argument was missing
Start at the end, because it is the part that matters most and the part nobody is quoting.
A company's profit before tax has two broad sources. There is what it earns from running the business, which shows up as operating income. Then there is everything else, which sits below it in a line usually called other income. For most companies other income is small: a bit of bank interest, some currency movement. For Nvidia in this half it was $24.1bn.
Other income is the part of profit that did not come from the day job. If a bakery sells bread, the profit on bread is operating income. If the same bakery also owns a flat that went up in value, that gain lands in other income. It is real, it counts, and it tells you nothing about how the bread is selling.
The filing breaks that $24.1bn open. Interest earned was $1.0bn. Interest paid was $0.3bn. A category called other was negative $0.3bn. And gains from equity securities were $23.7bn. The company states the reason directly: Gains from equity securities, net, were primarily driven by unrealized gains in equity securities.
You bought something. It is now worth more. You have not sold it. Under current accounting rules a company does not wait for the sale: it marks the holding up to today's value and puts the increase straight into profit. If the value falls next quarter, the same rule puts the fall into profit too. The money has not moved. Only the valuation has.
| Six months ended late July, $ millions | 2026 | 2025 |
|---|---|---|
| Operating income | 117,270 | 50,078 |
| Interest income | 1,037 | 1,108 |
| Interest expense | (329) | (124) |
| Gains from equity securities, net | 23,707 | 2,073 |
| Other | (275) | (18) |
| Profit before tax | 141,410 | 53,117 |
| Share of profit before tax from equity gains | 16.8% | 3.9% |
Figures as filed. The share of profit before tax is computed from the two filed lines.
So the honest sentence is this. Nvidia's operating business grew enormously: operating income more than doubled, from $50.1bn to $117.3bn. Alongside that, a second engine appeared. Gains on investments went from $2.1bn to $23.7bn and now supply roughly one dollar in six of pre-tax profit. Those gains are mostly not cash and mostly not sales. They are the company's stakes in other businesses being revalued upward.
3 · Where those stakes came from
The balance sheet shows marketable equity securities of $42.8bn, against $12.9bn at the start of the year. Alongside that sit privately held stakes which are not traded on any exchange. The filing says those carried cumulative unrealized gains of $9.1bn, against $661m a year earlier.
A marketable holding is a stake in a company whose shares trade publicly, so there is a price on a screen every day. A non-marketable holding is a stake in a private company where no such price exists, so the value is estimated using recent funding rounds and comparable deals. Both can be revalued upward into profit. The second requires more judgement to value than the first.
The company has also promised to invest more. Among its future commitments is a line for equity investments of $25bn, of which $18bn falls in the remainder of the current fiscal year. The filing describes what these are: We committed to make certain equity investments in AI model makers, infrastructure financiers, and other private companies, subject to certain contingencies.
4 · The promises, which are larger than the sales
Buried in the commitments note is the number that most changes the shape of the business.
A commitment is money a company has agreed to spend but has not spent yet. It does not appear on the balance sheet as a debt, because nothing has been delivered. It appears in a note, as a promise. If demand falls, the promise usually does not fall with it.
Total future commitments are $366bn. The largest piece is supply and capacity at $279bn, and the filing states plainly that this rose from $119 billion last quarter to $279 billion as of July 26, 2026. That is an increase of $160bn in a single quarter. For scale, the company's revenue for the whole of the last six months was $177.8bn, so the supply commitment alone is about 1.57 times the revenue of the half just reported.
This cuts both ways and it is worth saying so. A company that has locked in $279bn of supply is either confident of extraordinary demand or exposed to an extraordinary amount of unsold capacity. The filing does not tell you which, and neither does this file. What it does tell you is the size of the bet, and the size changed by $160bn in twelve weeks.
5 · Four ways the filing says Nvidia helps customers buy
The circular financing argument is usually framed as one thing: taking stakes in customers. The filing describes four separate mechanisms, in four different places, and only one of them is the stake.
It buys a stake. $25bn of promised equity investments in AI model makers, infrastructure financiers and other private companies.
It waits longer to be paid. The revenue note says: Payment from customers is generally due shortly after delivery of our products. In certain cases, for investment-grade customer purchases, we have and may in the future provide longer payment terms ranging from 90 days up to one year to assist customers with large data center builds. Accounts receivable stood at $63.1bn against $38.5bn at the start of the year, and the company attributes part of that increase to extended payment terms on large multi-quarter agreements.
If you sell something and get paid in thirty days, the cash arrives almost with the sale. If you get paid in a year, you have recorded a sale and lent the customer the money in the meantime, without calling it a loan. The profit looks the same. The risk does not.
It helps them find sites. The filing states: Securing land, power, and shell for data centers is a critical phase in the AI infrastructure buildout. We have entered into arrangements to assist select customers with securing the land, power, shell, and data center capacity needed to support their growth.
It shares the risk through entities it does not fully own. This is the most technical of the four and the least discussed.
When a company owns a small slice of another business it just holds an investment. When it owns enough to have real influence, it uses what is called the equity method and books its share of that business's results. A variable interest entity, or VIE, is a further step: a separate vehicle where the company may carry the economic risk without owning a majority. Accounting rules require it to disclose the most it could lose.
The filing says: We had $3.3 billion of investments in infrastructure financiers accounted for using the equity method as of July 26, 2026. Those equity method investments deemed to be variable interest entities, or VIEs, had a maximum loss exposure, including carrying values and future committed amounts, of $4.7 billion. Infrastructure financiers are, on the plain meaning of the words, the entities that finance the computing infrastructure. That is the machinery the public argument is describing, disclosed in one paragraph, using the technical term that makes it findable.
6 · Who the customers are, and why the answer changes
If demand is concentrated in a few buyers, the risk is different from the same revenue spread across thousands. The filing discloses this, and it is a good example of why a number needs its basis attached.
This is simply the share of sales that comes from your biggest customers. Companies must disclose it when one customer is large enough to matter. The catch is that they disclose only the customers above a threshold, so the number of customers named changes from period to period, and two periods are often not directly comparable.
For the three months, one direct customer was 16% of revenue, where a year earlier two customers were 23% and 16%. On that reading the largest single customer got smaller. For the six months, three direct customers were 16%, 15% and 13%, adding to 44%, where a year earlier two customers were 20% and 15%, adding to 35%. On that reading concentration rose.
Both are true and neither is the whole picture, because the company disclosed a different number of customers in each period. Anyone claiming concentration simply rose or fell is choosing a basis without saying so. The safe statement is the narrow one: in the most recent half, the three largest direct customers accounted for 44% of all revenue.
7 · What the filing does not say
Being clear about the limits is the difference between analysis and insinuation, so here they are.
- It does not say how much revenue came from companies Nvidia has invested in. That breakdown does not exist in the document. Anyone who claims a precise figure for circular revenue is not getting it from here.
- It does not name the large customers. They are described as direct customers with percentages, not identified.
- It reports no related party transactions. There is no related party note in this filing, which means the transactions concerned did not meet that definition.
- It does not say the gains will reverse. Unrealized gains can continue, stall or reverse, and the filing makes no prediction. Nor does this file.
- None of the arrangements described is improper. Investing alongside customers, extending terms and helping secure capacity are ordinary commercial practices, disclosed as the rules require.
What the filing does establish is the scale. $23.7bn of pre-tax profit from investment marks. $25bn promised to more of them. $279bn of supply committed. $4.7bn of exposure through entities the company does not fully own. Payment terms up to a year. Those are the facts the argument should be conducted with.
8 · Ten things to take back to your own numbers
Remove the zeros and every one of these lands on a company with $10m to $500m of revenue. Most of them land harder there, because a smaller business has fewer places to absorb a surprise.
- Split your profit into what you sold and what you revalued. Two lines, one subtraction. If a meaningful share is coming from assets going up in value rather than from customers, say so before your bank or your board finds it.
- Treat unrealized gains as reversible, because they are. The same rule that puts the rise into profit puts the fall in. Never build a covenant, a bonus plan or a forecast on a number that can go backwards without anyone doing anything.
- Add up everything you have promised to spend. Commitments do not sit on the balance sheet. Purchase orders, minimum volumes, leases not yet started, investments agreed. Put the total on one page and compare it to a year of revenue.
- Know your largest customer as a percentage, this month. If your top three are more than about a third of revenue, that is a structural fact about your company, not a detail.
- Attach the basis to every concentration number. Quarter or year, how many customers, which threshold. Two figures on different bases cannot be compared, and comparing them is the most common way to reach a confident wrong answer.
- Count extended payment terms as lending, in your own head. If a customer pays in a year rather than a month, you have financed them. Price it, monitor it, and know what happens if they cannot pay.
- List every way you help customers buy from you. Discounts, credit, equity, guarantees, introductions. Individually each is a sales tool. Together they are a concentration of risk in the same names that produce your revenue.
- Find out whether you have any entity you do not control but could lose money in. Joint ventures, special purpose vehicles, guarantees to a supplier's financing. If the answer is yes, the maximum loss is a number you should be able to state.
- Read the notes before the headline. Everything in this file came from notes, not from the face of the statements. The face tells you what happened. The notes tell you how.
- Say the limits out loud. The strongest analysis names what it cannot conclude. It is also the fastest way to be trusted by an auditor, a lender or an acquirer.
9 · Where it stands
For the six months to 26 July 2026 Nvidia reported revenue of $177.8bn, up 95.9%, operating income of $117.3bn and net income of $118.0bn. It held $56.6bn of cash, cash equivalents and marketable debt securities, plus $42.8bn of marketable equity securities. It raised $24.9bn of debt in the half, having raised none in the comparable period. It spent $39.0bn buying back its own shares and paid $6.3bn of dividends, and in May approved a further $80.0bn of buyback authorisation. Accounts receivable were $63.1bn and inventories $31.6bn.
For price context, and stated as data rather than as any view on value: the shares closed at $217.55 on 28 August 2026, down $10.43 or 4.57% on the day, two sessions after the results. Market capitalisation was $5.25 trillion on 24.15 billion shares outstanding, as reported by stockanalysis.com at the 4:00 p.m. EDT close on 28 August 2026.
The argument that started this file will not be settled by one quarterly report, and this file does not settle it. What the report does is convert an argument into figures. One dollar in six of pre-tax profit came from investments being revalued upward. $25bn is promised to more of them. $279bn of supply is committed against $177.8bn of half-year revenue. Three customers are 44% of sales. And four separate mechanisms for helping customers buy are disclosed across four different notes.
Every one of those numbers was published on 26 August 2026 and has been freely available since. That is usually how it goes. The information is rarely hidden. It is filed, in a document most people never open, in a note that takes four minutes to read.
FAQ
What is the circular financing argument about Nvidia?
The claim is that money leaves the company as investment into AI companies, those companies spend on computing capacity, the providers of that capacity buy chips, and the amount returns as revenue. Critics argue this means some demand is funded by the seller. Supporters argue that building AI is expensive and investing alongside customers is how capacity gets built. The quarterly report filed on 26 August 2026 does not settle the argument, but it discloses the amounts involved.
How much of Nvidia's profit came from investments rather than sales?
For the six months ended 26 July 2026, gains from equity securities were $23,707 million out of $141,410 million of profit before tax, which is 16.8%. A year earlier the same line was $2,073 million out of $53,117 million, or 3.9%. The filing states these gains were primarily driven by unrealized gains.
What is an unrealized gain?
An increase in the value of something a company owns but has not sold. Under current accounting rules the increase is recorded in profit immediately rather than waiting for a sale. If the value falls later, the fall is recorded in profit too. No cash changes hands either way.
How much has Nvidia committed to spend in future?
$366 billion in total, as disclosed in the commitments note. That comprises $279 billion for supply and capacity, $29 billion of cloud service agreements, $25 billion of data centre leases not yet commenced, $25 billion of equity investments and $8 billion of capital expenditure. The supply and capacity figure rose from $119 billion in the prior quarter.
How concentrated are Nvidia's customers?
For the second quarter of fiscal 2027 one direct customer represented 16% of total revenue. For the first half, three direct customers represented 16%, 15% and 13%, adding to 44%. In the comparable prior periods two customers represented 23% and 16% for the quarter, and 20% and 15% for the half. The number of customers disclosed differs by period, so the totals are not directly comparable.
What is a variable interest entity?
A separate vehicle in which a company may carry economic risk without owning a majority. Accounting rules require disclosure of the maximum loss the company could suffer. Nvidia disclosed $3.3 billion of equity method investments in infrastructure financiers, with maximum loss exposure including future committed amounts of $4.7 billion.
Does the filing say how much revenue came from companies Nvidia invested in?
No. That breakdown is not disclosed. Any specific figure for circular revenue does not come from this filing.
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This is analysis of public filings, not advice on your facts, and not investment advice. Nothing here is a recommendation regarding any security. Unfolding Values has no relationship with NVIDIA Corporation, holds no position in its securities, and is not an audit firm. Figures are as filed and as of the dates stated, and figures described as computed are derived from filed figures with their inputs shown. The circular financing argument is described as a public debate and is neither endorsed nor rejected here. Nothing in this file asserts wrongdoing by any company or person, and the arrangements described are disclosed as accounting standards require. Forward-looking observations about future accounting outcomes are estimates of what standards require and are not predictions of results. For a read on your own filing, reach out.
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