Nvidia Stock Pops as AI-Powered Earnings and Revenue Beat Wall Street's Expectations Despite Chinese Market Headwinds

Shares of Nvidia (NASDAQ: NVDA) gained 4.9% in Wednesday's after-hours trading, following the artificial intelligence (AI) tech leader's release of a better-than-expected report for the first quarter of fiscal 2026 (ended April 27, 2025).

The main catalysts for the stock's rise are the quarter's revenue and earnings beating Wall Street's expectations, with the profit beat a sizable one.

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Second-quarter revenue and earnings guidance fell slightly short of the analyst consensus estimates, but not enough to be a concern. Recently, most companies are being particularly conservative with guidance -- or not issuing it at all -- due to extreme uncertainty in the macroeconomic environment stemming from U.S. trade policy.

Nvidia's key numbers

Data source: Nvidia. YOY = year over year. GAAP = generally accepted accounting principles. Fiscal Q1 2026 ended April 27, 2025.

Investors should focus on the adjusted numbers, which exclude one-time items.

Wall Street was looking for adjusted EPS of $0.75 on revenue of $43.25 billion, so Nvidia exceeded both expectations.

Adjusted EPS surged 57% year over year excluding the H20 chip charge

Nvidia's results were much better than they might seem at first glance. Both the top and bottom lines were hurt by new U.S. government export controls on the company's H20 chip, which it had specifically designed for the Chinese market to comply with the government's second round of advanced AI chip export controls.

As a result of the new export controls of which Nvidia was informed on April 9 (so 18 days before the end of the quarter), the company incurred a $4.5 billion charge in the first quarter associated with "H20 excess inventory and purchase obligations." The company said sales of H20 chips were $4.6 billion for the first quarter prior to the new restrictions, and that it was unable to ship an additional $2.5 billion of H20s in the quarter.

Excluding the H20 charge and related tax impact, Nvidia's adjusted EPS would have surged 57% year over year to $0.96. This result is a more accurate reflection of the company's underlying business performance.

Platform performance

Data source: Nvidia. OEM = original equipment manufacturer; OEM and other is not a target-market platform. YOY = year over year. QOQ = quarter over quarter.

The data center segment's revenue accounted for nearly 89% of Nvidia's total revenue, up from almost 87% in the year-ago period. This segment's growth is being driven by the powerful demand for Nvidia's products that enable AI capabilities.

Gaming also had a great quarter -- indeed, it generated record quarterly revenue.

What the CEO had to say

CEO Jensen Huang's statement from the earnings release:

Our breakthrough Blackwell NVL72 AI supercomputer -- a 'thinking machine' designed for reasoning -- is now in full-scale production across system makers and cloud service providers.

Global demand for NVIDIA's AI infrastructure is incredibly strong. AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate. Countries around the world are recognizing AI as essential infrastructure -- just like electricity and the internet -- and NVIDIA stands at the center of this profound transformation.

Guidance for the second quarter

For Q2 of fiscal 2026, which ends in late July, management expects revenue of $45.0 billion, which equates to growth of 50% year over year. This outlook reflects a loss in H20 revenue of about $8.0 billion due to the recently enacted export controls.

Management also guided (albeit indirectly by providing a bunch of inputs) for adjusted EPS of $0.98, or 44% growth.

Going into the report, Wall Street had been modeling for Q2 adjusted EPS of $0.99 on revenue of $45.66 billion, so the company's outlook fell just slightly short on both counts. But it's extremely likely management is being extra conservative on guidance given the uncertainty surrounding U.S. trade policy and the possibility of further export restrictions.

Importantly, the company reiterated that it's "continuing to work toward achieving gross margins in the mid-70% range late this year."

A robust report

In short, Nvidia did a superb job in the quarter despite being blindsided by the H20 export controls at the tail end of the quarter. Moreover, Q2 guidance is very solid, particularly considering the Chinese market headwinds.

It makes good sense that investors are pushing the stock price up.

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Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.