Nvidia Tops Estimates but China Chip Hit Clouds Outlook as Investors Await CEO Commentary

Nvidia's latest earnings report for the first quarter of fiscal 2026 delivered a complex mix of beats, caveats, and high-stakes expectations. The company exceeded Wall Street estimates on both the top and bottom lines, but the results were narrower than usual and came with significant baggage tied to the H20 export restrictions to China.

Despite these headwinds, Nvidia posted $44.1 billion in revenue, up 12% sequentially and 69% year-over-year, with AI infrastructure demand remaining the core growth engine. The headline numbers were solid enough to initially push the stock above $140, but the rally faded as investors weighed soft spots in margins and a less-than-euphoric forecast. All eyes are now on CEO Jensen Huang, whose upcoming comments on the 5 p.m. ET earnings call will likely shape investor interpretation of a results set that is proving difficult to digest.

On the metrics front, adjusted earnings per share came in at $0.81, missing the Street consensus of $0.94, while revenue of $44.1 billion topped the $43.29 billion estimate. Adjusted gross margin fell to 61.0%, far below the 71% analysts had anticipated, due primarily to a $4.5 billion charge tied to unsold H20 chips and purchase obligations. When excluding that charge, Nvidia’s non-GAAP EPS would have been $0.96 and gross margin would have landed at 71.3%, suggesting the business was stronger than the headline figures imply. Operating income of $21.64 billion missed consensus estimates, reflecting the drag from geopolitical frictions.

Nvidia’s Data Center business, which remains the primary focus for AI investors, generated $39.1 billion in revenue, up 73% year-over-year and 10% sequentially. Compute revenue in the segment grew 76% year-over-year to $34.2 billion, while networking revenue surged 64% sequentially to $5.0 billion, reflecting strong adoption of NVLink and Ethernet technologies across hyperscalers. While AWS, Azure, and other cloud providers accounted for nearly half of Data Center revenue, Nvidia emphasized broader customer uptake for its Blackwell architecture. Meanwhile, its Gaming unit posted a record $3.8 billion in revenue, up 48% sequentially and 42% year-over-year, driven by new Blackwell GPUs and RTX 50-series launches.

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However, the H20 export ban to China cast a long shadow. Nvidia revealed it had to absorb a $4.5 billion charge due to canceled H20 shipments and excess inventory. Additionally, it missed out on $2.5 billion in potential Q1 revenue tied to unshipped H20 units. Management warned that Q2 would reflect an $8 billion hit to revenue from continued export restrictions, creating a murky outlook for one of its fastest-growing product lines. Still, the company sees Q2 revenue of $45 billion, plus or minus 2%, which is slightly below the $45.5 billion consensus but arguably better than feared under the circumstances.

Gross margin guidance for Q2 was more upbeat, with non-GAAP margins expected to rebound to 72.0%, plus or minus 50 basis points. Nvidia reiterated its long-term goal of mid-70% margins as it ramps production of its more advanced Blackwell-based systems. Operating expenses are expected to rise into the mid-30% range for the year, consistent with ongoing investment in R&D and capacity expansion. Nvidia also continues to generate robust cash flow, reporting $27.4 billion in operating cash flow for the quarter and returning $14.3 billion to shareholders via buybacks and dividends.

The stock’s reaction captured the market’s indecision. Shares initially jumped 3% post-earnings, nearing $140, before pulling back as investors dissected the results and awaited more clarity from Huang. The softer-than-usual beat, compressed margins, and lower Q2 guidance left bulls and bears alike scrambling for footing. While Nvidia’s dominance in AI infrastructure remains undisputed, the bar has moved significantly higher following blockbuster quarters from peers like Broadcom and derivative suppliers such as Credo and Alchip.

In light of these dynamics, investors will be keen to hear Huang’s take on the durability of demand across geographies and workloads, the progress of Blackwell adoption, and any mitigation plans for the H20 shortfall. Commentary on hyperscaler spending, competitive positioning, and geopolitical risks will also weigh heavily. Analysts are particularly interested in signs of incremental wins with Microsoft’s Maia Gen3 and Amazon’s next-gen Trainium, two areas where Nvidia is rumored to be ceding ground.

In sum, Nvidia's Q1 was better than feared but far from flawless. The AI juggernaut continues to deliver staggering growth, but the headwinds around trade restrictions, inventory write-downs, and rising expectations have introduced new layers of complexity. As the dust settles, investors are looking to Huang to reassert the company’s leadership narrative and provide a roadmap that can power Nvidia through regulatory and competitive turbulence.