The numbers were excellent. Let’s get that out of the way first.
Nvidia reported revenue of $81.6 billion for its fiscal first quarter — up 85% from the same period a year ago. Earnings per share came in at $1.87, beating estimates by about 6%. Data center revenue nearly doubled to $75.2 billion, accounting for 92% of total sales. For Q2, the company guided to $91 billion in revenue, well above what analysts were expecting. They also announced $80 billion in share buybacks and raised the dividend.
That’s about as good as quarterly earnings reports get.
The stock is still down about 3% this morning.
Why? China.
Here’s what most of the headlines are missing. Nvidia’s Q2 guidance assumed zero revenue from China. Not a little revenue. None. Washington cleared roughly 10 Chinese companies to buy H200 chips, but not a single shipment has gone out. Beijing has reportedly been signaling to its own companies to wait. Jensen Huang has publicly valued the China AI chip market at around $50 billion. That $50 billion is sitting off to the side, unlocked by neither government.
When investors look at the guidance beat and then see the asterisk — “this number doesn’t include any China sales” — some of them start doing math. What happens when that market opens back up? What happens if it never does?
The Gross Margin Question
There’s also a subtle number in the report worth understanding. Gross margins came in at 74.9%, and the company guided for roughly flat margins in Q2. Analysts were expecting a slight improvement toward 75.1%. That’s a small gap, but margins matter at this scale. Flat margins on rising revenue is fine. Falling margins would be a different conversation.
The Long View
I’ve watched a lot of earnings reports over 40 years. What I saw last night wasn’t a bad quarter. What I saw was a company delivering extraordinary results against expectations that were already extraordinary. The stock pulled back because it had run up 40% in a month into the print and investors are now recalibrating.
The AI buildout is real. Nvidia’s position in it is real. Data center spending from the hyperscalers — Amazon, Microsoft, Google, Meta — is real and accelerating. If you own Nvidia at a reasonable cost basis, there’s nothing in this report that changes the thesis.
If you’ve been waiting to buy, the China uncertainty is worth taking seriously. It’s not a reason to avoid the stock. It’s a reason to size your position accordingly and understand what you’re actually buying.
The quarter was strong. The stock is lower. The two facts aren’t contradictory.
