Nvidia's Q2 Sales Jump 56%, But China Uncertainty Slows Growth Outlook

Nvidia reported a 56% YoY increase in revenue to $46.7bn for Q2, beating estimates. However, the company warned that uncertainty over sales in China could slow growth this quarter. Nvidia's Q3 guidance of $54bn in sales, plus or minus 2%, does not include China revenue. The exclusion of AI chip revenue from China from Nvidia's financial guidance disappointed some investors.

NVIDIA (NASDAQ: NVDA) reported a robust performance for the second quarter of fiscal 2026, with revenue of $46.7 billion, up 6% from the previous quarter and a staggering 56% year-over-year increase [1]. The company’s Blackwell Data Center revenue grew by 17% sequentially, driven by strong demand for its AI platform. However, NVIDIA warned that uncertainty over sales in China could slow growth this quarter, as there were no H20 sales to China-based customers in the second quarter [1].

The company’s financial results were bolstered by a $180 million release of previously reserved H20 inventory, with approximately $650 million in unrestricted H20 sales to a customer outside of China. This release helped to boost non-GAAP gross margins to 72.7% for the quarter [1]. Excluding the $180 million release, non-GAAP gross margin for the quarter would have been 72.3%.

NVIDIA’s CEO Jensen Huang praised the company’s progress, stating, “Blackwell is the AI platform the world has been waiting for, delivering an exceptional generational leap — production of Blackwell Ultra is ramping at full speed, and demand is extraordinary” [1]. The company’s Q3 guidance of $54.0 billion in sales, plus or minus 2%, does not include China revenue, which disappointed some investors [1].

NVIDIA returned $24.3 billion to shareholders in the form of shares repurchased and cash dividends during the first half of fiscal 2026, and it has $14.7 billion remaining under its share repurchase authorization. The company’s Board of Directors approved an additional $60.0 billion to its share repurchase authorization, without expiration [1].

The company expects GAAP and non-GAAP gross margins to be 73.3% and 73.5% respectively in the third quarter of fiscal 2026, plus or minus 50 basis points. NVIDIA continues to expect to exit the year with non-GAAP gross margins in the mid-70% range. GAAP and non-GAAP operating expenses are expected to be approximately $5.9 billion and $4.2 billion, respectively [1].

NVIDIA’s strong performance in the second quarter is a testament to its leadership in the AI and data center markets. However, the company’s caution over China sales and the exclusion of AI chip revenue from its financial guidance will require close monitoring by investors in the coming quarters.

References:
[1] https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-second-quarter-fiscal-2026