We're raising our Nvidia price target after a great quarter and rosy guidance

Nvidia reported strong fiscal Q1 2026 results, with revenue up 69% year-over-year to $44.06 billion and adjusted EPS increasing 57% to 96 cents, both exceeding expectations. CEO Jensen Huang cited advancements in reasoning AI, the rescinding of AI diffusion rules, enterprise AI agents, and industrial AI as drivers of surging demand. Despite China export restrictions causing a $4.5 billion charge, Nvidia projects fiscal Q2 revenue of approximately $45 billion, though slightly below consensus, and anticipates continued strong demand from hyperscalers and sovereign AI initiatives.

Analysis

Nvidia reported a robust fiscal Q1 2026, with revenue reaching $44.06 billion, a 69% year-over-year increase, surpassing the $43.31 billion consensus. Adjusted earnings per share rose 57% year-over-year to 96 cents, exceeding the 93-cent estimate. CEO Jensen Huang attributed this strong performance to multiple factors, including advancements in reasoning AI, the rescission of AI diffusion rules fostering national AI infrastructure projects, growth in enterprise AI agents, and increased demand for Nvidia Omniverse driven by industrial AI and manufacturing on-shoring. The Blackwell GB200 superchip contributed significantly, accounting for 70% of the $34.16 billion in data center compute revenue, with the overall data center segment reporting $39.1 billion, a 73% year-over-year growth, though slightly missing the $39.36 billion FactSet estimate. Despite these strengths, U.S. export restrictions to China impacted operations, resulting in a $4.5 billion charge related to H20 chip inventory and purchase commitments, although this was less than the $5.5 billion initially projected. For its fiscal second quarter, Nvidia anticipates revenue of approximately $45 billion, slightly below the $45.9 billion consensus, reflecting an estimated $8 billion loss in H20 revenue due to these export controls. However, projected adjusted gross margins of 72% remain strong. The company highlighted sustained aggressive spending by hyperscalers and the burgeoning potential of "Sovereign AI" as countries invest in national AI capabilities, reinforcing the view that the AI expansion is in its early stages.

Key Decisions for Investors

• Investors should acknowledge Nvidia's continued strong performance and leadership in the AI sector, but weigh this against the significant 55% stock price increase from its 52-week low leading to a maintained hold-equivalent rating by the article's source despite a price target lift to $170.
• Monitor key catalysts including the manufacturing ramp and market adoption of the Blackwell and upcoming Blackwell Ultra chips, the growth trajectory of Sovereign AI initiatives globally, and sustained capital expenditure by hyperscalers on AI infrastructure.
• Closely track developments related to U.S. export controls on China, as this presents both a current headwind, reflected in the $8 billion H20 revenue impact on Q2 guidance, and a potential future variable depending on Nvidia's ability to supply compliant chips to this substantial market.