Nvidia forecasts second-quarter revenue below estimates

Nvidia reported fiscal first-quarter earnings that beat expectations, but projected second-quarter revenue of $45 billion, below the consensus estimate of $45.9 billion, citing an anticipated $8 billion revenue loss due to tightened U.S. export restrictions on AI chips to China. Despite the disappointing forecast, Nvidia shares rose 3% in extended trading, as the company reported first-quarter adjusted earnings per share of 81 cents, or 96 cents excluding charges related to the H20 restrictions, exceeding estimates of 93 cents.

Analysis

Nvidia reported a mixed fiscal outlook, beating first-quarter sales expectations and delivering adjusted earnings per share of 96 cents (excluding charges related to H20 restrictions), surpassing the 93-cent LSEG consensus. However, the company projected second-quarter revenue of $45 billion, falling short of the $45.9 billion analyst estimate, primarily due to an anticipated $8 billion revenue impact from tightened U.S. export restrictions on its AI chips to China. This significant headwind follows an already realized $2.5 billion loss in H20 chip sales to China during the first quarter. Despite this cautious guidance and a moderately negative overall sentiment score of -0.5 (with Nvidia's specific sentiment at -0.7), the company's shares rose 3% in extended trading, potentially reflecting market absorption of these challenges or a focus on the Q1 earnings beat. The stock's year-to-date performance has been relatively flat, contrasting with its substantial gains in the prior year, as the company navigates not only trade restrictions but also signs of a maturing AI datacenter market. While ongoing AI infrastructure investments by major cloud providers like Microsoft and Alphabet offer some demand stability, concerns persist around global trade policy shifts. A slight positive was the first-quarter charge related to H20 restrictions being $1 billion less than initially anticipated due to efficient material reuse.

Key Decisions for Investors

• Investors should closely monitor the realized impact of U.S. export controls on Nvidia's second-quarter revenue, given the forecasted $8 billion hit and the $2.5 billion loss already incurred in the first quarter.
• It is prudent to weigh the stock's recent post-earnings resilience against its flat year-to-date performance, the negative sentiment surrounding China sales restrictions, and the noted maturation of the AI datacenter market.
• Continuous assessment of U.S.-China trade policy developments regarding semiconductor exports is crucial, as these policies directly influence Nvidia's access to a key market and its overall growth trajectory.