Nvidia reported its first-quarter earnings for fiscal 2026, showing strong performance despite significant challenges in the Chinese market due to export restrictions. The semiconductor giant posted revenue of $44.06 billion, representing a 69% year-over-year increase and exceeding analyst estimates of $43.29 billion.
The company faced substantial headwinds from new U.S. export controls, resulting in approximately $2.5 billion in lost sales to China during the quarter. Additionally, Nvidia recorded a $4.5 billion charge related to H20 excess inventory and purchase obligations, as demand for these products declined following new export licensing
requirements.
Breaking down the revenue segments, data center sales reached $39.1 billion, growing 73% year-over-year but slightly missing analyst expectations. Gaming revenue showed robust growth at $3.76 billion, up 45% and surpassing estimates. The company’s networking division generated $4.96 billion in revenue, while automotive and professional visualization segments contributed $567 million and $509 million, respectively.
Adjusted earnings per share came in at 81 cents, missing the estimated 93 cents. However, excluding the H20-related charge, adjusted EPS would have been 96 cents. The company maintained strong margins, with adjusted gross margin at 71.3%, slightly above the estimated 71%.
Looking forward, Nvidia provided guidance for the second quarter, projecting revenue of $45 billion (plus or minus 2%), which fell slightly below the consensus estimate of $45.5 billion. This outlook factors in an anticipated loss of approximately $8 billion in H20 revenue. The company expects adjusted gross margins between 71.5% and 72.5% for the upcoming quarter.
CEO Jensen Huang emphasized the robust global demand for Nvidia’s AI infrastructure, noting that AI inference token generation has increased tenfold in just one year. The company’s financial position remains strong, with cash and marketable securities reaching $53.7 billion, up significantly from $31.4 billion a year ago.
However, Nvidia faces ongoing challenges in the Chinese market, as disclosed in their 10Q filing. The company acknowledges potential difficulties in creating competitive products for China and is still evaluating options to comply with U.S. government rules. Chinese regulators have also launched inquiries into Nvidia’s sales practices and commitments related to the Mellanox acquisition, investigating whether U.S. export control compliance unfairly discriminates against Chinese customers.
Despite these challenges, investors responded positively to the results, with the stock rising approximately 3% in after-hours trading. While the shares remain about 10% below their early January record high, the company’s valuation has become more attractive, trading at roughly 29 times forward earnings, down from 35 times at the start of the year.
The company’s performance demonstrates its resilience in navigating complex geopolitical challenges while maintaining strong growth in its core business segments. The recent deals announced during President Trump’s Middle East tour, which CEO Huang attended, may provide additional growth opportunities, though these arrangements are too recent to be reflected in the current quarter’s guidance.