Nvidia (NVDA 1.99%) published its second-quarter earnings results after the market closed on Aug. 23 and crushed Wall Street's expectations. The graphics processing unit (GPU) leader posted adjusted earnings of $2.70 per share on revenue of $13.51 billion, blowing past the average analyst estimate of per-share earnings of $2.09 on sales of $11.22 billion.

Surging demand for artificial intelligence (AI) hardware and services powered explosive growth for the company's data center segment and propelled huge sales and earnings beats.

Take a look at the chart below for a breakdown in Nvidia's sales and earnings in the record-setting quarter and read on for a more in-depth look at the massive, AI-driven transformation taking place at the company.  

A chart showing Nvidia's revenue, costs, earnings, and performance by business segment.

Image source: The Motley Fool.

AI helped Nvidia post earthshaking results in Q2

AI momentum helped power the data center segment up roughly 171% year over year, pushing overall revenue to more than double. Strikingly, the company's cost of revenue and total operating expenses climbed just 7% and 10%, respectively, during the period. These trends pushed net income up a staggering 843% to hit $6.2 billion in the period.

Nvidia CEO and founder Jensen Huang put the significance of the artificial intelligence shift in simple terms: "A new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI." Based on the company's second-quarter performance and forward guidance, it's hard to argue with his assertion that a new chapter in technological innovation has begun.

For the third quarter, Nvidia is guiding for sales of approximately $16 billion, once again crushing the average Wall Street analyst's target for $12.61 billion in sales in the period. 

Nvidia's next big leap forward is under way

Nvidia has already pulled off a major business transformation over the last decade. When the company first started, the processing leader's business largely revolved around designing high-performance graphics processing units (GPUs) for the consumer market.

Its GPUs were used to run high-end gaming computers and other visuals-heavy applications. The company established a leadership position in this category and used the foundation to branch into other emerging fields that could make use of its high-performance technologies. 

The company was able to adapt and quickly began making waves in the cloud computing industry with its processing hardware being used to perform complicated computations at data centers and then transmit the results to customers. Nvidia also bridged its GPU technologies into the automotive market with its processors being used for machine-vision systems that power self-driving applications. 

With data centers becoming the company's core performance driver, Nvidia entered into a new age of sales and earnings growth. 

NVDA Revenue (TTM) Chart

Data by YCharts.

Crucially, Nvidia is now in the midst of another big transformation. The company's technologies are already playing a key role in the AI revolution, and it's likely that the semiconductor leader will continue to enjoy a position at the forefront of this space. 

The company is once again using its strong foundations in advanced hardware to branch into a new category. Nvidia is expanding its cloud-based AI processing services and pairing these offerings with software support and features.

Rather than having to purchase and run the company's processors locally, customers can make use of cloud-based resources. The artificial-intelligence-as-a-service (AIaaS) push and demand for ultra-high-end hardware for AI applications stand to make the company's already high-margin business even more profitable.

Along with the modest rise for costs of goods sold, these trends caused the company's gross margin to expand to 70.1% in Q2 -- up from just 43.5% in the year-ago period. Notably, the company expects its gross margin to climb further to 71.5% in the current quarter. 

Nvidia also anticipates posting roughly $16 billion in sales in Q3. Based on that guidance, sales will skyrocket roughly 170% year over year and rise 18% on a sequential basis.

With AI powering incredible margin expansion and sales growth, Nvidia's new era is starting off with a bang.