Nvidia Navigates China Headwinds, Eyes AI Supercomputing Dominance Amidst Strong Q1 Performance
Chipmaker Nvidia beats revenue expectations but misses on Q1 earnings as US trade curbs impact AI chip sales to China
Quick overview
- Nvidia reported mixed Q1 results for fiscal 2026, with a 12% quarterly income increase to $44.1 billion but earnings per share falling short of expectations due to a $4.5 billion charge from US export restrictions.
- The company's data center revenue grew significantly, up 10% sequentially and 73% year-over-year, reflecting strong demand for AI infrastructure despite challenges in the Chinese market.
- Nvidia plans to introduce a new lower-cost AI chip for China to mitigate losses from export controls, while its Blackwell platform shows promising momentum in AI applications.
- Despite near-term obstacles, analysts maintain a positive outlook on Nvidia, with price targets ranging from $135 to $200, and the stock rallied nearly 5% in after-hours trading following the earnings release.
Under increasing pressure from US export restrictions on its China business, Nvidia Corporation (NASDAQ: NVDA) released mixed first-quarter results for fiscal 2026 on May 28, producing stronger-than-expected income growth while failing on earnings per share.
With quarterly income of $44.1 billion—a 12% increase from the prior quarter and a strong 69% gain year over year—the AI chipmaker said. By about 2.7%, the sum topped Wall Street’s consensus expectation of $42.91 billion, proving ongoing robust demand for the company’s artificial intelligence infrastructure in face of government obstacles.
But mostly because of a large $4.5 billion charge connected to US government restrictions on its H20 AI chip exports to China, Nvidia’s earnings per share of $0.81 fell short of analyst forecasts of $0.85. Up 26% from previous year, the company’s net income came out to be $18.8 billion.
Export Controls Create Significant Headwinds
The underwhelming results mirror the immediate effect of new US export licencing rules announced in April, which essentially stopped Nvidia’s capacity to ship high-powered H20 artificial intelligence processors to Chinese consumers. H20 product sales brought in $4.6 billion in first-quarter income before the limits; additional $2.5 billion in shipments were barred because of the new criteria.
Looking ahead, Nvidia believes the export restrictions will have even more of an impact in the current quarter. The results statement notes that the company’s Q2 sales projection of $45 billion “reflects a loss in H20 revenue of approximately $8.0 billion due to the recent export control limitations.”
With mass manufacturing slated to start in June, Nvidia apparently intends to introduce a new lower-cost AI chip especially for the Chinese market in order to offset these problems.
Data Center Business Remains Strong
Even with the China-related losses, Nvidia’s main Data Center business kept up an amazing rate of expansion. Comprising the great majority of the company’s total income, data center revenue in Q1 climbed 10% sequentially and 73% year-over-year.
“Global demand for Nvidia’s artificial intelligence infrastructure is incredibly strong,” Nvidia founder and CEO Jensen Huang remarked on the earnings call. “AI inference token generation has surged tenfold in just one year; as AI agents become mainstream, the demand for AI computing will accelerate.”
Huang underlined that, like electricity and the internet, artificial intelligence is becoming to be seen as necessary infrastructure by nations all around, thereby putting Nvidia in central focus of this technological revolution.
Blackwell Platform Shows Promise
With CEO Huang characterizing the Blackwell NVL72 AI supercomputer as a “thinking machine” intended for reasoning applications, the company emphasized great momentum for its next-generation Blackwell platform. With Blackwell cloud instances on main platforms including AWS, Google Cloud, Microsoft Azure, and Oracle Cloud Infrastructure, the platform is now in full-scale production across system manufacturers and cloud service providers.
Driven by great demand for RTX graphics cards and the release of new RTX 5070 and RTX 5060 models, gaming income also showed strength, reaching a record $3.8 billion in Q1, up 48% from the previous quarter and 42% year-over-year.
Analysts’ NVDA Outlook Remains Positive
Wall Street analysts keep a generally positive view on Nvidia despite near-term obstacles; Bernstein kept its Outperform rating with a $185 price target; Cantor Fitzgerald reiterated its Overweight rating with a $200 goal. Citing uncertainties about the China situation, DA Davidson boosted its price objective to $135 but kept a neutral posture.
In the second half of the year, Cantor Fitzgerald observed that Nvidia’s Data Center income may rise by at least 50% to perhaps support earnings power of $5.00 per share in calendar year 2025.
Following the earnings release, Nvidia rallied almost 5% in after-hours trading to $141.40, suggesting investor confidence in the company’s ability to negotiate current challenges while capitalizing on the larger AI infrastructure boom. Shares closed regular trading down 0.51% at $134.81 on May 28.
To investors of record as of June 11, 2025, the firm will pay its next quarterly dividend of $0.01 per share on July 3, 2025.
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Arslan Butt
Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.
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