During Nvidia's (NVDA +5.50%) financial analyst question-and-answer session at GTC 2026, CEO Jensen Huang and CFO Colette Kress fielded a question about Nvidia's free cash flow (FCF) plans.
Huang answered first by saying that the primary uses of cash flow are the company's growth and Nvidia's ecosystem -- from its integrated hardware stack to supporting software. Beyond that, Nvidia will still generate significant FCF.
Kress then said that the company expects to use at least 50% of its FCF to return capital to Nvidia shareholders through buybacks and dividends -- especially in the second half of the year as Nvidia works through some of its more capital-intensive investments.
Nvidia didn't explicitly say it was raising its dividend. But with so much expected FCF, it would make a ton of sense. Here's why.
Image source: Getty Images.
Nvidia's FCF is reaching unprecedented heights
In fiscal 2026, Nvidia earned $215.9 billion in revenue and $96.6 billion in FCF, which supported $41.1 billion in stock buybacks and dividends -- a combined 42.6% of FCF. So Nvidia is already committing a larger percentage of FCF to buybacks and dividends with its 50% target.
Analyst consensus estimates call for $8.28 in fiscal 2027 earnings per share, up from $4.90 in fiscal 2026. As a rough estimate, if we take that same growth rate of 69% and apply it to Nvidia's FCF, it would earn $163.3 billion in fiscal 2027 FCF. That translates to over $80 billion in projected buybacks and dividend payments.
Nvidia pays quarterly dividend of just $0.01 per share right now, which cost $974 million in fiscal 2026. So almost all of its capital return program is going toward buybacks. Other big tech-focused companies like Apple and Microsoft use a combination of buybacks and growing dividends to reward shareholders. And even Alphabet and Meta Platforms introduced dividends in 2024, although they are still significantly smaller than their buyback budgets.
The size of Nvidia's projected FCF and the precedent set by other mega-cap growth stocks are reason enough for Nvidia to boost its dividend. But the even better argument stems from the shift in its business model.
NASDAQ: NVDA
Key Data Points
Monetizing mainstream AI
The data center infrastructure investment super cycle will eventually fade, which would be catastrophic if Nvidia were overly dependent on one-time hardware sales. But it isn't.
Nvidia's software is deeply embedded into its "extreme codesign" hardware, which is a rack-scale solution for artificial intelligence (AI) data centers that includes graphics processing units, central processing units, and associated networking hardware. Its CUDA software has been around for 20 years, and CUDA-powered systems have become widespread in AI data centers.
Nvidia's latest Feb. 25 earnings release and GTC event focused a lot on the inferencing inflection point, which is the shift from AI training to actually deploying and using that AI. Tokens are the currency for using AI models to do things -- like embedding agentic AI into enterprise workflows. It's a similar pricing structure to cloud services, where compute, storage, and networking are metered and billed based on usage.
Blackwell and Nvidia's latest Rubin architecture are tailor-made for low-latency, high-throughput inference to process as many tokens as possible. Tokens help Nvidia collect recurring revenue from its hardware in operation through enterprise software, support contracts, cloud servicing, and licensing for inference services. And if future Nvidia architectures continue to improve the token processing rate, hyperscalers will be incentivized to buy or rent that hardware.
A dividend is the logical next step for Nvidia
The inferencing boom should help Nvidia become less dependent on a spending supercycle and expand its recurring revenue base. That business model is well-suited to fund a sizable capital return program that remains primarily buybacks, but increasingly incorporates dividends as well.
If Nvidia pays a dividend, it could help grow its investor base by attracting folks who value passive income as an incentive to buy and hold a stock -- especially if Nvidia begins regularly raising its dividend each year, like Microsoft and Apple.
