Will Spectrum-X Further Drive NVIDIA's Networking Business Revenues?

NVIDIA Corporation’s NVDA networking business has become a critical part of its overall growth story, and the Spectrum-X platform could take it to the next level. In the second quarter of fiscal 2026, networking revenues surged 98% year over year to $7.25 billion, driven by strong demand for artificial intelligence (AI) data center connectivity. As workloads become larger and more complex, the need for faster, more efficient interconnects is growing, and Spectrum-X is designed to meet that demand.

Spectrum-X is NVIDIA’s Ethernet-based networking platform built specifically for AI workloads. It delivers performance approaching InfiniBand levels while maintaining compatibility with existing Ethernet systems, making it attractive for hyperscalers that want scalability without major infrastructure changes.

The platform also enables efficient data movement between thousands of graphics processing units (GPUs), a key requirement for training massive AI models. In August 2025, NVIDIA introduced Spectrum-XGS, a next-generation version aimed at connecting multiple AI factories, showing its ambition to dominate large-scale networking for AI.

Adoption momentum appears strong. Cloud providers and enterprise customers are increasingly turning to Spectrum-X to power new AI clusters. Companies like Meta Platforms, Oracle and CoreWeave are already integrating Spectrum-X to power their next-generation AI data centers. Additionally, other companies like Cisco and Hewlett Packard Enterprise are working with NVIDIA to integrate and offer the Spectrum-X architecture within their product lines and reference architectures for enterprise and cloud customers.

NVIDIA’s ability to integrate networking tightly with its GPU and software platforms gives it a unique advantage. If Spectrum-X adoption accelerates, networking could become one of NVIDIA’s most powerful revenue drivers in the AI infrastructure boom. The Zacks Consensus Estimate for NVIDIA’s networking revenues in fiscal 2026 is pegged at $39.33 billion, calling for a more than three-fold jump from fiscal 2025’s $12.99 billion.

NVIDIA’s Key Rivals in AI Networking

NVIDIA faces competition from Broadcom AVGO and Arista Networks ANET in the AI networking space. Broadcom is a leader in Ethernet switching and custom silicon solutions, providing high-performance chips that form the backbone of modern data centers. Its strong relationships with hyperscalers like Google and Amazon allow it to deliver networking hardware tailored for large-scale AI and cloud workloads.

Arista Networks is another important rival, specializing in high-speed Ethernet switches used in AI and cloud environments. Arista Networks’ software-driven architecture and scalable systems make it a preferred choice for cloud service providers building AI clusters.

NVIDIA’s Price Performance, Valuation and Estimates

Shares of NVIDIA have risen around 34.8% year to date compared with the Zacks Computer and Technology sector’s gain of 22.8%.

NVIDIA YTD Price Return Performance

From a valuation standpoint, NVDA trades at a forward price-to-earnings ratio of 31.69, higher than the sector’s average of 29.24.

NVIDIA Forward 12-Month P/E Ratio

The Zacks Consensus Estimate for NVIDIA’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 48.8% and 39.3%, respectively. Estimates for fiscal 2026 and 2027 earnings have been revised upward in the past 60 days.

NVIDIA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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