Nvidia signals $45B Q2 revenue outlook while navigating China export controls and AI infrastructure surge
May 28, 2025 8:52 PM ET
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Earnings Call Insights: NVIDIA Corporation (NVDA) Q1 2026
Management View- Colette Kress, Executive Vice President & Chief Financial Officer, reported "revenue of $44 billion, up 69% year-over-year, exceeding our outlook in what proved to be a challenging operating environment." Kress highlighted that Data Center revenue reached $39 billion, growing 73% year-over-year, with AI workloads transitioning strongly to inference and AI factory buildouts driving significant revenue. The Blackwell GPU ramp was cited as the fastest in company history, contributing nearly 70% of Data Center compute revenue in the quarter, and the transition from Hopper nearly complete.
- Kress addressed the impact of new U.S. export controls on the H20 GPU for the China market, stating, "In Q1, we recognized $4.6 billion in H20 revenue... but also recognized a $4.5 billion charge as we wrote down inventory and purchase obligations tied to orders we had received prior to April 9." She added that "losing access to the China AI accelerator market, which we believe will grow to nearly $50 billion, would have a material adverse impact on our business going forward and benefit our foreign competitors in China and worldwide."
- The CFO also noted networking revenue grew 64% sequentially to $5 billion, and Spectrum-X is now annualizing over $8 billion in revenue with expanded adoption among major customers including Microsoft Azure, Oracle Cloud, Google Cloud, and Meta. Gaming revenue reached a record $3.8 billion, up 48% sequentially, and the automotive segment posted $567 million, up 72% year-over-year.
- Jensen Huang, President & CEO, remarked, "China is one of the world's largest AI markets and a springboard to global success... Today, however, the $50 billion China market is effectively closed to U.S. industry." He explained the company is exploring limited ways to compete under the new restrictions and emphasized the acceleration in AI infrastructure deployment globally, referencing sovereign AI investments in Saudi Arabia, UAE, Taiwan, and Sweden.
Outlook- Kress stated, "Total revenue is expected to be $45 billion, plus or minus 2%. We expect modest sequential growth across all of our platforms. In Data Center, we anticipate the continued ramp of Blackwell to be partially offset by a decline in China revenue." The outlook includes a loss in H20 revenue of approximately $8 billion for the second quarter. GAAP and non-GAAP gross margins are expected to be 71.8% and 72%, respectively, with continued progress toward mid-70%s gross margins later in the year.
Financial Results- Kress reported Data Center revenue of $39 billion and overall revenue of $44 billion for Q1 2026. Recognized a $4.5 billion charge on H20 inventory and purchase obligations following new export controls. Networking revenue reached $5 billion, with NVLink shipments exceeding $1 billion. GAAP gross margin was 60.5% and non-GAAP gross margin was 61%; excluding the $4.5 billion charge, non-GAAP gross margin would have been 71.3%.
- Gaming revenue was $3.8 billion, and Pro Visualization reported $509 million. Automotive revenue was $567 million. The company returned $14.3 billion to shareholders via share repurchases and dividends.
Q&A- Joe Moore, Morgan Stanley: "Can you give us a sense for how much of that [reasoning inference] demand you're able to serve and... do we need full-on NVL72 rack scale solutions for reasoning inference going forward?" Jensen Huang replied, "Grace Blackwell NVLink72 is the ideal engine today... for reasoning AI... Compared to Hopper, Grace Blackwell is some 40 times higher speed and throughput."
- Vivek Arya, Bank of America Securities: "On the China impact... is there still some left as a headwind for the remaining quarters?... how to model growth for next year?" Colette Kress responded, "Our Q2 is going to be meaningfully down in terms of China Data Center revenue... Going forward, though, it's a bigger issue regarding the amount of the market that we will not be able to serve. We assess that TAM to be close to about $50 billion in the future as we don't have a product to enable for China." Jensen Huang added, "AI is several things... we're really at the very beginning of it, because the adoption of this technology is really kind of in its early, early stages."
- CJ Muse, Cantor Fitzgerald: "Are there other [large GPU cluster investments] that have yet to be announced... how are these orders impacting your lead times for Blackwell...?" Jensen Huang said, "We have more orders today than we did at the last time I spoke about orders at GTC... we're going to keep our supply chain quite busy for several -- many more years coming."
- Ben Reitzes, Melius: "The $8 billion for H20... that would mean that with regard to your guidance, the rest of the business... is doing $2 billion to $3 billion or so better. So... what the primary driver was there...?" Colette Kress confirmed, "Had the export controls not occurred, we would have had orders of about $8 billion for H20... We also have talked about here is the growth that we've seen in Blackwell." Jensen Huang cited "four positive surprises" including "the step function demand increase of reasoning AI" and "the rescinding of the AI diffusion rule."
- Timothy Arcuri, UBS: "Have you been approved to ship a new modified version into China?... can we get back to those sorts of quarterly run rates once you get something that you're allowed to ship back into China?" Jensen Huang replied, "We have some -- we have limited options. And so, we just -- the key is to understand the limits... We don't have anything at the moment, but we're considering it."
- Unidentified Analyst (for Aaron Rakers, Wells Fargo): "Can you give some additional color around the strength you saw within the networking business, particularly around the adoption of your Ethernet solutions...?" Jensen Huang: "Spectrum-X has been really, quite frankly, a home run. And this last quarter, as we said in the prepared remarks, we added two very significant CSPs to the Spectrum-X adoption."
Sentiment Analysis- Analyst questions reflected a slightly negative to neutral tone, with repeated concerns about China export control impacts, sustainability of growth, and the ability to serve demand for AI infrastructure, as well as requests for clarity on guidance math and lead times.
- Management's sentiment was confident on the strength and demand for Blackwell, and on the global AI infrastructure buildout. Kress and Huang were explicit about the challenges from China export controls but emphasized resilience and strategic opportunities, with Huang stating, "We're off to the races."
- Compared to the previous quarter, analysts in Q1 2026 were more focused on quantifying the China headwind and the ability to offset it, while management maintained a high degree of confidence about long-term demand and global expansion, echoing but slightly amplifying their prior optimism.
Quarter-over-Quarter Comparison- Guidance for Q2 2026 revenue increased from Q1's guidance, despite a material headwind from China. Management now expects $45 billion versus the previous outlook of $43 billion for Q1. Gross margin guidance also increased to 71.8% (non-GAAP 72%), up from 71% in the prior quarter.
- The magnitude of the China export control impact has become more acute, with a $4.5 billion inventory write-down and an $8 billion loss in projected H20 revenue for Q2, compared to prior quarters where China revenue was described as relatively stable.
- Analysts' focus shifted from product ramp logistics and margin recovery to the sustainability of non-China revenue growth and the impact of global sovereign AI investments.
- Management’s tone remained assertive, but with added emphasis on navigating the export control challenge, while reiterating strong demand signals from hyperscalers, enterprises, and sovereigns.
Risks and Concerns- The most significant challenge cited was the loss of access to the China AI accelerator market, with management warning of a "material adverse impact" on future business and competitive position.
- Management is "still evaluating... limited options to supply data center compute products compliant with the U.S. government's revised export control rules."
- The $4.5 billion write-down and inability to ship $2.5 billion in H20 revenue in Q1, plus an expected $8 billion Q2 revenue loss, underscore the scale of the headwind.
- Tariff-related uncertainty was noted as a temporary impact on Pro Visualization, and Kress referenced higher operating expenses tied to compensation and employee growth.
Final Takeaway
NVIDIA management emphasized record revenue growth, the rapid ramp of the Blackwell platform, and surging demand for AI infrastructure across global hyperscalers and sovereign projects. While the company faces a substantial headwind from increased China export controls and associated inventory charges, it projects continued top-line growth, robust margins, and multiple new product launches. The outlook remains focused on scaling Blackwell, expanding sovereign and enterprise AI, and maintaining annual product cadence, with management confident in NVIDIA’s position to drive the next wave of AI infrastructure and compute worldwide.
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