Nvidia reported a strong fiscal second quarter on Wednesday, surpassing Wall Street expectations for revenue and earnings and offering an even higher forecast for the next quarter.

The company posted $96.2 billion in quarterly revenue, above analysts’ $92.27 billion estimate. Data-center revenue reached $89 billion, beating the projected $85.4 billion, while earnings per share came in at $2.22, ahead of the $2.09 consensus forecast.

Nvidia shares gained roughly 4% in after-hours trading following the report. Bitcoin remained relatively stable, holding in a narrow range just above $78,000.

CEO Jensen Huang said the AI industry is reaching a significant inflection point, with accelerating demand for computing infrastructure driving Nvidia’s revenue growth.

Nvidia expects fiscal third-quarter revenue to reach $108 billion, above Wall Street’s $103.9 billion forecast. Surpassing $100 billion in quarterly revenue would put Nvidia in a relatively exclusive group of S&P 500 companies that have previously reached that level.

However, the company expects its gross margin to ease to 74% next quarter from 75% in the second quarter. The softer margin outlook appeared to weigh on the stock’s immediate reaction to the results.

Investing.com senior analyst Thomas Monteiro said the results point to growing pressure on Nvidia’s profitability as memory, financing and infrastructure expenses increase.

According to Monteiro, the 74% margin forecast represents the first sequential decline in the current cycle. He also warned that rising memory costs could make it harder for Nvidia to sustain margins in the mid-70% range.

Nvidia could have less ability to transfer those higher expenses to customers, Monteiro added, as large technology companies face rising capital expenditures and borrowing costs themselves.

Despite those concerns, Monteiro characterized the quarter as excellent overall. He said the results could nevertheless force investors to reconsider the company’s medium-term growth trajectory.

The analyst said the long-term AI opportunity remains strong, but investors will increasingly focus on how much of Nvidia’s growth can translate into sustained margins and cash flow.

During the earnings call, Huang discussed the supply and cost pressures affecting Nvidia’s operations.

He said the company is working with memory manufacturers and securing additional capacity for electricity, land and data-center infrastructure as demand continues to exceed available supply.

Huang also pointed to a price increase planned for the first quarter. He said customers can generate strong economic returns from Nvidia’s systems, potentially allowing the chipmaker to pass some of its higher costs on to customers.