Why Is Everyone Worried About Nvidia’s Days Sales Outstanding? What That Means, and Why It Matters for NVDA Stock.

Core Viewpoint - Nvidia's stock has experienced significant volatility despite strong quarterly results, with concerns raised about the increase in Days Sales Outstanding (DSO) potentially indicating financial irregularities [3][4][5]. Company Overview - Nvidia is a leading technology firm specializing in graphics processing units and artificial intelligence solutions, with a market capitalization of $4.32 trillion, making it the world's most valuable company [2]. Financial Performance - Nvidia reported a substantial increase in free cash flow, surging 64% sequentially to over $22 billion, indicating strong cash management despite concerns over DSO [6][7]. Days Sales Outstanding (DSO) Analysis - DSO has increased from an average of 46 days in FY2020-2024 to 53 days in Q3 FY26, raising alarms among some investors who equate this with potential financial issues [5][8]. - The rise in DSO is attributed to a higher concentration of receivables among a few large customers, particularly cloud service providers, which traditionally have longer payment terms [8][9]. - Analysts argue that Nvidia's DSO is reasonable when compared to other suppliers serving the same customers, whose DSO typically exceeds 60-70 days [9]. Analyst Sentiment - Despite recent skepticism, Wall Street analysts maintain a strong bullish outlook on Nvidia, with 44 out of 48 analysts rating it a "Strong Buy" and an average price target of $252.33, indicating a 39.3% upside potential [11][12].