Nvidia beats on earnings again — even while it's locked out of China

Yahoo

3 days ago

Nvidia (NVDA) continues to soar beyond expectations — even if things are a little more complicated this time around. Its strong first-quarter headline numbers show that Nvidia's AI thesis is as strong as ever and that its margins remain elite, despite facing significant headwinds due to U.S. export restrictions on its H20 processors to China and other geopolitical concerns.
After the bell on Wednesday, the $3.3 trillion chipmaker reported $44.1 billion in revenue for the fiscal first quarter, up 69% from the same period a year ago, and the company reported a $18.78 billion profit. Analysts had forecasted a revenue surge to $43.26 billion. The H20 restrictions led to a $4.5 billion write-down related to excess inventory and a $2.5 billion revenue shortfall, affecting the company's gross margins.
Adjusted earnings per share came in at $0.81, ahead of Wall Street estimates of $0.75. Nvidia took a $4.5 billion charge related to exports of its H20 chips to China; without that charge and the related tax impact, first quarter non-GAAP diluted earnings per share would have been $0.96.
Stock soared over 5% in after-hours trading.
With demand for generative AI infrastructure still booming and competitors struggling to catch up, Nvidia's performance exceeded expectations. In a Tuesday note, Wedbush analysts led by Dan Ives said that Nvidia's earnings would likely be a 'bright green light' for the tech sector — especially companies heavily invested in the 'AI Revolution.' And it was.
The company's Data Center division brought in an almost unreal $39.1 billion in the first quarter, up 10% from the previous quarter and up 73% from a year ago. That means Nvidia's fastest-growing segment is now responsible for nearly 89% of all revenue — a sign of how deeply embedded its chips are in the AI build-out. Analysts had expected this division to generate $21.27 billion in Q1 revenue.
Looking ahead, Nvidia projects Q2 revenue around $43 billion, slightly below Q1 figures, with gross margins expected to remain in the low 70% range.
In his note, Ives wrote that, over the past several years, Nvidia's set-up has been about by how much the company would beat Wall Street's expectations, but this quarter, the earnings were 'more about strong numbers and the ability to maintain guidance despite the China blockade. Investors are more laser focused on the medium term and long-term outlook.'
Nvidia has long relied on the Chinese market for a sizable chunk of its revenue, but that has changed dramatically in the wake of tightening U.S. export controls and tariffs.
To maintain its foothold, Nvidia is pursuing R&D efforts in Shanghai and developing China-specific downgraded chips that comply with current restrictions. The company is ground zero in the U.S.-China tech rivalry — its GPUs might just be the most valuable components in the AI arms race, and its position is increasingly shaped by policy, not just engineering.
Nvidia has beat analysts' earnings expectations in 14 of the past 16 quarters. So can anything slow Nvidia down? Maybe. Competition is heating up. AMD (AMD) and Intel (INTC) are sharpening their AI chip offerings, while hyperscalers are continuing to invest in custom silicon. And export restrictions remain a geopolitical wild card.
Still, as the first-quarter earnings show, Nvidia's moat is wide. Its software ecosystem, deep relationships with cloud providers, and product cadence make it more than just a chipmaker. It's the AI era's platform company.
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