NVIDIA Q1 FY26 results: $44.1bn revenue surge dampened by $4.5bn H20 export hit, AI demand remains robust

NVIDIA Corporation (NASDAQ: NVDA) delivered a commanding financial performance for Q1 FY26, with revenue climbing to $44.1 billion, up 12% from the previous quarter and 69% year-over-year. Yet, the announcement was marked by an unexpected $4.5 billion charge due to unsold H20 chips, following a sudden U.S. restriction on exports to China. The episode underscores the rising geopolitical risks facing U.S. semiconductor exports, even as NVIDIA cements its leadership in global AI infrastructure.

Despite this regulatory setback, the company remains a dominant force across AI data centers, gaming, and industrial platforms. The performance was driven primarily by strong demand for Blackwell-based systems and record-setting data center revenue of $39.1 billion. As AI agents become core to enterprise workflows and sovereign computing strategies, NVIDIA’s strategic moat appears stronger than ever.

Why Did NVIDIA Incur a $4.5 Billion Charge?

The significant $4.5 billion charge stems from the April 2025 announcement by the U.S. government mandating a new export license requirement for NVIDIA’s H20 chips into China. Developed as a workaround to earlier restrictions on A100 and H100 GPUs, the H20 series quickly became redundant for the Chinese market. While NVIDIA had booked $4.6 billion in H20-related revenue before the ruling, it was unable to fulfill an additional $2.5 billion in expected shipments. The write-down led to a sharp contraction in reported margins, with non-GAAP gross margin falling to 61.0%. Excluding the H20 charge, the adjusted gross margin would have been 71.3%, closer to historical levels.

Is AI Demand Still Driving Growth?

Yes. The company’s Data Center revenue exploded to $39.1 billion, reflecting a 73% increase from the year-ago quarter and up 10% sequentially. NVIDIA attributed this growth to the full-scale production of its Blackwell NVL72 supercomputing platform and the rising adoption of AI inference and agentic reasoning models. CEO Jensen Huang described AI as “the new electricity,” emphasizing that token generation by AI models has grown tenfold in the past 12 months.

To meet this exponential demand, NVIDIA is scaling its global footprint with partnerships in the Middle East (Stargate UAE, HUMAIN KSA), East Asia (Foxconn Taiwan), and the U.S., where AI factory infrastructure is being co-developed with major hyperscalers. The company also launched NVIDIA DGX SuperPOD and NVLink Fusion, further reinforcing its hardware leadership.

How Did NVIDIA’s Core Financial Metrics Hold Up?

Adjusted financials reflect strong operational resilience. Non-GAAP net income reached $19.89 billion, with EPS at $0.81. Stripping out the H20 impairment, adjusted EPS stands at $0.96. Operating income came in at $23.27 billion on a non-GAAP basis, and free cash flow surged to $26.13 billion—significantly up from $15.3 billion in Q1 FY25. GAAP gross margin dropped to 60.5% due to the one-off charge, while non-GAAP operating expenses rose 6% to $3.58 billion, reflecting ongoing AI R&D investments.

What’s the Stock Market Saying About NVIDIA?

As of May 29, 2025, NVIDIA stock (NASDAQ: NVDA) was trading at $134.81, showing a marginal 0.5% decline from the previous close. However, the broader trend remains bullish. Over the past month, the stock has gained approximately 25%, driven by heightened demand for AI infrastructure and the successful commercialization of Blackwell GPUs. This appreciation reflects confidence from both retail and institutional investors.

Analysts continue to express strong conviction, with consensus price targets ranging between $120 and $160. Some bullish forecasts extend to $220, citing NVIDIA’s unmatched position in AI compute. The stock’s 10-for-1 split in June 2024 has also improved liquidity and broadened retail participation.

What Are Institutional Investors Doing?

Recent weeks have witnessed substantial institutional inflows into NVIDIA shares. Hedge funds, sovereign wealth funds, and pension managers have added exposure amid expectations that NVIDIA will remain the foundational player in AI infrastructure. Data suggests a buy-heavy trend from institutional desks post-earnings, despite headline concerns around China.

Forum sentiment on platforms like r/stocks and StockTwits has largely supported a “hold” or “buy the dip” approach, reflecting faith in NVIDIA’s long-term trajectory even as macro and regulatory noise persists. Retail investor focus has shifted toward NVIDIA’s Blackwell rollout roadmap and upcoming announcements around DGX Cloud and Quantum-X scaling.

What’s in Store for Q2 FY26 and Beyond?

Looking ahead, NVIDIA has issued revenue guidance of $45.0 billion for Q2 FY26 (±2%), incorporating an expected $8 billion shortfall in H20 shipments due to ongoing export restrictions. Nonetheless, non-GAAP gross margins are forecasted to rise to 72.0%, reaffirming operational strength. Operating expenses are expected to increase moderately to $4.0 billion, consistent with AI infrastructure expansion and global buildouts.

Strategic partnerships are also expanding. NVIDIA’s AI factory initiatives with Oracle, Microsoft Azure, Google Cloud, and AWS are deepening. Meanwhile, its open-source Llama Nemotron models are being adopted in new agentic AI applications across finance, pharma, and autonomous robotics.

Should Investors Buy, Hold, or Sell NVIDIA Stock?

With NVIDIA’s fundamentals remaining rock-solid and demand for AI compute infrastructure accelerating, most analysts maintain a “buy” or “strong buy” rating. The post-earnings pullback is viewed more as a regulatory hiccup than a structural threat. Still, geopolitical risks and supply chain dependencies, particularly with China, will need careful monitoring.

Retail investors may consider a “hold” position in the near term while tracking any further export regulation changes or retaliatory policy shifts. Long-term investors bullish on AI infrastructure, quantum computing, or autonomous systems could see NVIDIA as a cornerstone play for portfolio exposure.

Can NVIDIA Sustain Leadership Amid Geopolitical Pressure?

The Q1 FY26 report confirms that NVIDIA remains at the epicenter of global AI transformation. Despite short-term turbulence from export control measures, its ability to generate record-breaking revenue, expand free cash flows, and deepen cross-border AI collaborations highlights extraordinary resilience. If NVIDIA continues to diversify geographically and maintain its pace of innovation, it could emerge not just as a chipmaker, but as the foundational compute utility of the AI era.