Nvidia (NASDAQ:NVDA) continues to dominate the AI chip market, delivering another blockbuster quarter. Yet, despite strong results, a spotlight has turned to the company’s Nvidia Days Sales Outstanding (DSO) metric. DSO measures the average time a company takes to collect payment after a credit sale, and critics have suggested that Nvidia’s rising DSO could indicate cash flow issues or hidden financial risks.

While DSO is an important accounting metric, its relevance depends on context. In Nvidia’s case, the slight increase from 46 days in FY2020-2024 to 53 days in Q3 FY26 has spurred skepticism among some Wall Street analysts. However, examining the company’s cash flow, accounts receivable, and customer base provides clarity.

Nvidia Stock and the AI Market

Nvidia is widely recognized for its graphics processing units and AI solutions powering gaming, data centers, and emerging AI applications. The company has a market capitalization of $4.32 trillion, making it the world’s most valuable semiconductor firm. Nvidia Days Sales Outstanding has attracted attention precisely because NVDA stock has surged 35% year-to-date, reflecting investor enthusiasm for AI-related growth.

Market developments have also influenced the stock. Reports that the U.S. administration may allow Nvidia to sell its H200 AI chip to China lifted shares, while news of Meta Platforms (NASDAQ:META) exploring Google (NASDAQ:GOOGL) AI chips caused temporary pullbacks. Overall, NVDA remains resilient and highly sought-after in the market.

Why the DSO Increase Is Not a Red Flag

To understand the significance of Nvidia Days Sales Outstanding, consider how DSO is calculated. It divides accounts receivable by total credit sales and multiplies by the number of days in the period. Nvidia’s accounts receivable reached $33.4 billion in Q3, up 44.8% year-over-year. Critics have highlighted this rise, but analysts emphasize that the metric should be considered relative to sales, not as an absolute number.

BofA analyst Vivek Arya noted that DSO actually declined sequentially from 54 to 53 days, reflecting improved efficiency. TF International’s Ming-Chi Kuo added that the increase in DSO stems from a higher concentration of receivables among large customers like cloud service providers, who traditionally negotiate longer payment terms. When compared with peers serving similar customers—such as Arista (NASDAQ:ANET), Celestica (NYSE:CLS), and Vertiv (NYSE:VRT)—Nvidia’s DSO is relatively low and entirely reasonable.

Moreover, Nvidia clarified in a memo to analysts that its DSO aligns with historical averages and stressed that the company does not use special purpose entities or vendor financing to inflate revenue, distinguishing its accounting practices from past corporate scandals.

Analyst Sentiment for NVDA Stock

Despite short-term concerns, Wall Street remains strongly bullish on NVDA stock. Among 48 analysts covering Nvidia, 44 maintain a “Strong Buy,” two recommend a “Moderate Buy,” one suggests holding, and one assigns a “Strong Sell.” The average price target is $252.33, implying a 39.3% upside from current levels.

Recent earnings did not trigger any rating downgrades; in fact, several analysts at Citi, JPMorgan, Morgan Stanley, and Raymond James raised their targets or reaffirmed coverage with Strong Buy ratings. The consensus view is that Nvidia’s growth story, driven by AI demand and strong customer relationships, outweighs any minor concerns about DSO.

Bottom Line: DSO Shouldn’t Alarm Investors

The increase in Nvidia Days Sales Outstanding reflects natural shifts in customer concentration and payment terms, rather than underlying financial trouble. With cash flow at record levels and DSO improving sequentially, NVDA stock remains a compelling investment. For those considering entry points, analysts recommend monitoring pullbacks while keeping Nvidia’s long-term AI growth potential in focus.

Nvidia’s fundamentals and market position continue to support a Strong Buy rating, making DSO concerns largely a distraction rather than a signal to exit the stock.