Blackwell Drives Record Earnings Amid China Trade Uncertainty

NVIDIA’s second-quarter fiscal 2026 earnings exceeded expectations, driven by robust revenue growth and strong demand for its Blackwell AI platform, despite ongoing challenges in the China market. For the quarter ended July 27, 2025, the company reported revenue of $46.7 billion, reflecting a 6% sequential increase and a 56% year-over-year rise. Non-GAAP earnings per share stood at $1.05, with GAAP earnings per share at $1.08 [1]. Data Center revenue was particularly noteworthy, hitting $41.1 billion for the second quarter, up 56% year-over-year and 5% sequentially [1]. The Blackwell Data Center segment saw 17% sequential growth, although the H20 product, primarily designed for China, remained absent from sales in the quarter [1]. NVIDIA also benefited from a $180 million release of previously reserved H20 inventory, which affected its gross margins [1]. Gross margins for the quarter were reported at 72.4% on a GAAP basis and 72.7% non-GAAP, a significant increase from 60.5% in the prior quarter. However, excluding the $180 million inventory release, non-GAAP gross margins would have been 72.3% [1]. The company returned $24.3 billion to shareholders through share repurchases and dividends in the first half of fiscal 2026, and on August 26, 2025, NVIDIA’s board approved an additional $60 billion in share repurchase authorization [1]. Looking ahead, NVIDIA provided guidance for the third quarter, forecasting revenue of $54 billion, with no H20 shipments to China assumed. Gross margins are expected to remain in the mid-70s range for the year [1]. Analysts have noted that the company's performance could be impacted by geopolitical factors, particularly the U.S. export restrictions on H20 chips to China. In May, NVIDIA had estimated these restrictions would reduce Q2 sales by $8 billion, and the company incurred a $4.5 billion charge in the prior quarter [3]. The U.S. government’s requirement for export licenses to China for H20 products has created uncertainty for the company’s China business, which previously accounted for 13% of revenue. The situation has led to supply-side constraints and concerns over the long-term sustainability of sales in the region [3]. Despite these challenges, NVIDIA’s data center business continues to attract interest from major tech players. The company announced partnerships with Disney, Foxconn, Hitachi, Hyundai, Lilly, SAP, and TSMC for its RTX PRO 6000 Blackwell Server Edition GPU. Additionally, NVIDIA has been working with European countries such as France, Germany, Italy, Spain, and the U.K. to develop AI infrastructure, including the world’s first industrial AI cloud for European manufacturers [1]. In the gaming and AI PC segment, revenue reached $4.3 billion for the quarter, a 14% sequential increase. The launch of the Blackwell-powered GeForce RTX 5060 marked a significant milestone, and the integration of AI technology into gaming through features like DLSS 4 and GeForce NOW™ further solidified NVIDIA’s position in the market [1]. The company’s broader ecosystem expansion included the introduction of NVFP4, a 4-bit format designed for efficient inference latency, and collaborations with OpenAI and Novo Nordisk to advance AI and drug discovery [1]. Analysts remain cautiously optimistic about NVIDIA’s long-term prospects, particularly in the data center space, where demand is expected to remain strong. Morgan Stanley has analyzed data center expansion strategies, including AWS’s square footage growth, as an indicator of future performance in the cloud computing sector [5]. While the market is watching closely for signs of overvaluation in AI stocks, NVIDIA’s performance continues to outpace the broader chip index and the S&P 500. The company’s stock has gained over a third in 2025, outpacing the S&P 500’s near 10% year-to-date rise [3]. In the third quarter, analysts expect NVIDIA to report $52.96 billion in revenue, with approximately $6 billion potentially coming from China, assuming a resolution to the export restrictions and continued adoption of its AI chips [3]. Overall, NVIDIA’s ability to innovate and adapt to geopolitical constraints will be critical in maintaining its leadership in the AI and semiconductor industries. With strong growth in data center revenue, strategic partnerships, and a robust product pipeline, the company is positioned to navigate the challenges of the China-U.S. trade dynamics while capitalizing on global demand for AI-driven solutions [1].

Source:

[1] NVIDIA Announces Financial Results for Second Quarter Fiscal 2026 (https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-second-quarter-fiscal-2026)

[2] NVDA: Nvidia Faces Earnings Test as Government Rules Out (https://finance.yahoo.com/news/nvda-nvidia-faces-earnings-test-191955837.html)

[3] Nvidia results to spotlight fallout of China-US trade war (https://www.reuters.com/world/china/nvidia-results-spotlight-fallout-china-us-trade-war-2025-08-26/)

[4] Nvidia's Anticipated $8 Billion China Drag Puts (https://finance.yahoo.com/news/nvidias-anticipated-8-billion-china-184500273.html)

[5] Nvidia isn't getting much credit for a recovery in its China (https://sherwood.news/markets/nvidia-not-getting-credit-for-china-business-recovery)

[6] Huawei overtakes Nokia outside China (https://www.lightreading.com/5g/huawei-overtakes-nokia-outside-china-as-open-ran-stabilizes)