Investors are closely watching Nvidia Corporation as the chipmaker released its latest financial results, which not only surpassed Wall Street expectations but also underscored the company’s pivotal role in the ongoing artificial intelligence (AI) revolution. The company has become synonymous with AI advancements, serving as a key indicator for the broader tech industry. For the first quarter of its fiscal year 2026, which concluded on April 27, Nvidia reported record revenue of $44.1 billion, marking a substantial 69% increase year-over-year and a 12% rise from the previous quarter. Adjusted earnings per share rose 33% to $0.81, outpacing analyst expectations that had anticipated revenue of $43.25 billion and earnings of $0.75 per share.
This financial performance was largely propelled by a landmark achievement in Nvidia’s data center segment, which reported year-on-year revenue growth of 73% to reach $39.1 billion. The surging demand for AI technologies continues to fuel this segment, as more industries recognize the necessity of AI infrastructures akin to basic utilities like electricity and the internet. Nvidia’s CEO Jensen Huang elaborated on this trend, suggesting that AI demand has become essential for the future of technology and business operations globally. He indicated that AI inference token generation has increased tenfold in just a year, reflecting heightened activity in the AI landscape.
Notably, amidst the general optimism was a cautionary red flag concerning new export restrictions imposed by the Trump administration, which have significantly impacted Nvidia’s international business strategy. Specifically, the company faced challenges regarding its H20 processors, originally designed for AI applications destined for China. The introduction of tighter licensing requirements led to diminished demand and a substantial write-off of $4.5 billion in the first quarter, although this figure was lower than earlier estimates of $5.5 billion.
Despite the effects of these restrictions, Nvidia’s operational efficiencies bolstered its bottom line. Operating expenses increased by just 44%, well below the dramatic revenue uptick, allowing the company to maintain robust cash flow. Over the past year, Nvidia’s liquidity position has strengthened, with cash and marketable securities climbing to $53.7 billion, up 71% year-over-year, and free cash flow soaring to $26.1 billion, a 75% increase from last year.
Huang’s confident assertions about the future of AI technologies, along with the company’s strong financial metrics, contributed to a marked uptick in Nvidia’s stock price in after-hours trading, with shares climbing over 4%.
Looking forward, Nvidia’s management has signaled an optimistic outlook, guiding for an anticipated second-quarter revenue of $45 billion, indicative of a 50% rise compared to the previous year. This guidance, however, comes with qualifiers, particularly noting an anticipated revenue loss of approximately $8 billion from H20 chips due to the newly implemented export requirements.
Despite these headwinds, investor sentiment towards Nvidia remains buoyant. Currently, Nvidia shares trade at roughly 32 times the expected earnings for the next fiscal year. This valuation may appear a modest premium for a company projected to expand its profits by 39% this fiscal year and 35% in fiscal 2026, even in light of reduced sales to China.
Nvidia’s Chief Financial Officer, Colette Kress, highlighted that large cloud service providers continue to represent nearly 50% of the company’s data center revenue. Furthermore, it is worth noting that approximately 44% of Nvidia’s overall revenue is derived from relationships with major cloud infrastructure players such as Amazon Web Services, Microsoft’s Azure, and Alphabet’s Google Cloud, alongside significant investments from Meta Platforms in their data center expansions.
The growing emphasis on AI infrastructure indicates that leading tech companies are committed to sustained capital expenditures focused on AI technologies. Nvidia’s dominance in the data center GPU market remains robust, holding over 90% of this sector. This strong market position continues to position Nvidia as central to the AI evolution, further validating its standing as a high-conviction stock for long-term investors.
As the financial landscape evolves, Nvidia’s performance and strategic decisions will likely remain in the spotlight, reflecting not just on its own success but potentially setting the stage for broader trends within the technology sector and the global economy at large.