Nvidia, a driving force behind the artificial intelligence boom, is set to potentially boost its stock rally with a new strategy: returning cash to shareholders. The company, renowned for its explosive growth, is increasingly using dividends and stock buybacks to support its valuation, mirroring a playbook successfully employed by Apple, according to a new Yahoo Finance analysis.
Record Cash Returns
In the fiscal second quarter, Nvidia returned a record $26 billion to shareholders, marking a significant shift in its capital allocation strategy. This figure included approximately $20 billion in stock repurchases and $6 billion through its quarterly dividend. The company currently pays a quarterly dividend of $0.25 per share, a significant increase from the $0.01 it paid before raising the payout earlier this year.
This substantial increase in dividends and stock repurchases reflects Nvidia’s confidence in its financial health and growth prospects. By the end of the fiscal second quarter, Nvidia had about $99 billion remaining under its share repurchase authorization. This substantial war chest demonstrates the company’s commitment to returning value to shareholders while also maintaining flexibility for future investments.
The next $0.25 dividend is scheduled to be paid on October 1 to shareholders of record as of September 10. This dividend, along with the company’s ongoing stock buyback program, provides a steady stream of income and capital appreciation opportunities for Nvidia’s shareholders.
Apple’s Course Offers a Clue
The comparison to Apple is notable not just because both companies have experienced explosive growth, but also because Nvidia’s stock has faced valuation compression. This phenomenon can occur when investors question the sustainability of exceptional growth rates. However, Nvidia’s latest financial results suggest that its earnings power could indeed support a higher valuation.
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Nvidia reported fiscal second-quarter revenue of $96.2 billion, up an impressive 106% from a year earlier. This growth was driven by strong demand for the company’s products across various sectors, including data centers, gaming, and automotive. Meanwhile, adjusted earnings reached $2.22 per diluted share, surpassing Wall Street expectations.
Digging deeper into Nvidia’s results, we find that its Data Center business was particularly robust. Revenue for this segment soared 117% year over year to $89 billion, reflecting continued demand for computing infrastructure powering generative AI, agentic AI, and other advanced workloads. This strong performance shows Nvidia’s leadership in the AI market and its potential for continued growth.
Looking ahead, Nvidia projected revenue for the fiscal third quarter between $105.8 billion and $110.1 billion. If achieved, this range would mark the first time the company surpasses $100 billion in quarterly revenue. This remarkable milestone is a sign to Nvidia’s ability to consistently exceed Wall Street expectations and drive sustained growth.
Beyond its core AI business, Nvidia’s capital return strategy is another reason investors might consider owning the stock. With rapidly rising revenue and strong free cash flow, the company is well-positioned to continue returning cash to shareholders. This commitment to shareholder distributions, combined with its impressive growth prospects, offers investors a compelling case for owning Nvidia stock.
Indeed, Nvidia’s capital return strategy has already evolved significantly. In May, the company raised its quarterly dividend to $0.25 per share and authorized an additional $80 billion in share repurchases. Moreover, Nvidia announced plans to return at least 50% of free cash flow to shareholders during calendar 2026. This enhanced focus on shareholder distributions demonstrates the company’s commitment to creating long-term value for its investors.