Nvidia shares surge as earnings beat despite chip export restrictions
Nvidia reported first-quarter earnings for fiscal year 2026 that exceeded market expectations and provided an upbeat outlook for the current quarter. This comes despite an estimated $8 billion (€7.1 billion) loss due to US chip export restrictions affecting sales to China.
Nvidia's share price jumped nearly 5% in after-hours trading, placing it just 8% below its all-time high in January. Year-to-date, the stock is set to return to a positive return amid the price surge. Nvidia is now the world's biggest company, surpassing Microsoft and Apple in market capitalisation.
'Investors entered this quarter looking for signs that Nvidia could alleviate short-term concerns. What they received was a clear message that demand remains robust,' said Josh Gilbert, a market analyst at eToro Australia.
Sales revenue from Nvidia's core business, data centres, increased by 73% year-on-year to $39.1 billion (€34.7 billion), reaching a new record. However, this represented a deceleration from 93% growth in the previous quarter. Despite the slower pace, the result aligned with market expectations, as some analysts had anticipated weaker figures due to regulatory headwinds.
Overall revenue rose 69% to $44.1 billion (€39.2 billion), while earnings per share came in at $0.96 (€0.85), both ahead of expectations. CEO Jensen Huang attributed the sustained growth to strong global demand for artificial intelligence (AI), particularly from major cloud service providers. Nvidia's most advanced AI chip, Blackwell, 'is now in full-scale production across system makers and cloud service providers,' said Huang.
'Global demand for Nvidia's AI infrastructure is incredibly strong. AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate. Countries around the world are recognising AI as essential infrastructure—just like electricity and the internet—and Nvidia stands at the centre of this profound transformation,' he added.
The company expects revenue of $45 billion (€40 billion), plus or minus 2%, for the current quarter. 'This outlook reflects a loss in H20 revenue of approximately $8.0 billion due to the recent export control limitations,' it stated.
The US government required Nvidia to obtain export licences for its H20 GPUs destined for China during the first quarter. Although the H20 chips had previously been approved, the new rules led to $4.5 billion (€4 billion) in write-downs due to excess inventory. Without this, the company would have generated an additional $2.5 billion (€2.2 billion) in sales.
As a result, Nvidia's gross margin for the first quarter stood at 61%. It would have been 71.3% had the charges not occurred. 'The $50 billion China market is effectively closed to
the US industry,' Huang said. 'As a result, we are taking a multibillion-dollar write-off on inventory that cannot be sold or repurposed.'
Nvidia expects a non-GAAP gross margin of 72.0%, plus or minus 50 basis points, for the current quarter. For context, the margin was 73.5% in the fourth quarter of 2024 and 79% during the same quarter of the previous fiscal year.
In an interview with Bloomberg TV, Huang noted that Nvidia is exploring alternatives to the H20 chip. However, the company must obtain approval from the US government for any such measures.
Nvidia is among the tech giants supporting President Donald Trump's ambitious AI initiatives in the United States, announced in January. The company also unveiled a partnership with Saudi Arabia's HUMAIN to build AI factories in the kingdom during a recent visit to the region that coincided with Trump's trip. These developments were highlighted in the earnings report in the section for data centre.
'While sales in China are clouded by export restrictions, the Middle East looks set to become the new launchpad for Nvidia's next phase of growth,' Gilbert added.
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