Nvidia shares surge as earnings beat despite chip export restrictions to China

Nvidia reported strong Q1 FY2026 earnings, exceeding expectations with a 69% revenue increase to $44.1 billion and EPS of $0.96, driven by robust demand for AI data center products, up 73% year-over-year to $39.1 billion; the company projects $45 billion in revenue for the current quarter despite an estimated $8 billion revenue loss due to US export restrictions on chips to China, particularly the H20 GPU, however, the company's stock jumped nearly 5% after hours as CEO Jensen Huang highlighted strong global AI demand and full-scale production of the Blackwell chip.

Analysis

Nvidia reported first-quarter fiscal year 2026 earnings that substantially exceeded market forecasts, with overall revenue increasing 69% year-over-year to $44.1 billion and earnings per share at $0.96. This performance was driven by a 73% YoY growth in its core data center business to $39.1 billion, despite this segment seeing a deceleration from 93% growth in the previous quarter, a slowdown that aligned with analyst expectations given regulatory challenges. The company navigated significant headwinds from US chip export restrictions targeting China, incurring $4.5 billion in write-downs for H20 GPU inventory and foregoing an additional $2.5 billion in sales during Q1. In response to the results and outlook, Nvidia's share price increased nearly 5% in after-hours trading, elevating it to become the world's largest company by market capitalization. Looking ahead, Nvidia issued an upbeat revenue forecast of $45 billion (plus or minus 2%) for the current quarter, an outlook which already accounts for an anticipated $8 billion revenue loss specifically from the H20 export limitations to China. CEO Jensen Huang highlighted sustained, robust global demand for AI infrastructure, particularly from major cloud service providers, and confirmed the Blackwell AI chip is now in full-scale production, underscoring AI's role as essential global infrastructure.

Key Decisions for Investors

• Investors should acknowledge Nvidia's demonstrated resilience and strong underlying AI demand, evidenced by Q1 results beating expectations and robust guidance, even after accounting for significant revenue impacts from China export restrictions.
• Closely monitor the ongoing financial impact of US export controls, noting that the current quarter's $45 billion revenue guidance already factors in an $8 billion reduction due to H20 limitations, and assess how effectively the new Blackwell chip and global demand can offset these geopolitical pressures.
• Evaluate the current valuation, with Nvidia now the world's largest company and its stock near all-time highs, in the context of sustained high growth in AI, tempered by the deceleration in data center revenue growth (to 73% from 93% YoY) and the persistent China-related headwinds.