Nvidia's Blockbuster Quarter Hides a $27 Billion Cash Conundrum

Nvidia's blockbuster quarter has left investors in awe, but a closer look at the balance sheet reveals an uncomfortable truth. Revenue soared to $96.2 billion, up 18% sequentially and 106% from a year ago, with shares trading at $225.92 on Thursday afternoon.

However, free cash flow took a significant hit, plummeting from $48.6 billion in the previous quarter to $21.3 billion, a $27.2 billion sequential decline.

The company attributed this drop to 'extended payment terms for large purchases by certain investment-grade customers to be shipped over multiple quarters', which increased days sales outstanding (DSO) from 45 days to 60 days.

This extended payment term is essentially vendor financing, where the supplier provides financing to buyers, allowing them to commit to multi-quarter orders. Nvidia has been providing such financing to many current and potential customers, accelerating this practice.