NVIDIA’s Q1 Fiscal Year 2026 Report: Growth and Global Challenges

The Growth Story and the Question of Profitability

NVIDIA, traded on NASDAQ, continues to stand at the forefront of the global artificial intelligence revolution, presenting impressive financial performance for the first quarter of 2025 (which constitutes the first quarter of the company’s fiscal year 2026). Alongside the sharp jump in revenue, the current report is characterized by exceptional and significant events: the imposition of new export restrictions by the US government on the Chinese market, a one-time hit to the company’s profit margins, and a continuous increase in its operating expenses. In light of this, the central question arises: Do these trends signal a change in strategic direction, or are they a temporary obstacle on the path of continuous growth?

Key Data: Significant Jump Alongside Costs

NVIDIA’s revenue in the first quarter totaled $44.1 billion, reflecting an increase of 12% compared to the previous quarter and a jump of 69% compared to the corresponding period last year. The main growth stemmed from its activity in the data center sector, which generated revenue of $39.1 billion – an increase of 10% compared to the previous quarter and 73% compared to the past year. This figure highlights the growing demand for advanced computing solutions, particularly around artificial intelligence models on a global scale.

The gaming sector also presented record results, with revenue of $3.8 billion, representing an increase of 48% from the previous quarter and 42% from the previous year. In addition, the Professional Visualization sector recorded revenue of $509 million (an increase of 19%), and the Automotive and Automation sector reached revenue of $567 million – an increase of 72% compared to last year.

The Impact on China: Export Restrictions and Their Implications

On April 9, 2025, the US government announced a requirement for special licensing for the export of NVIDIA’s H20 chips to the Chinese market, due to concerns about potential security uses. As a result of this event, the company recorded an exceptional charge of $4.5 billion, resulting from excess inventory and unfulfilled obligations. Sales of H20 chips in the quarter totaled $4.6 billion, but the company failed to realize additional deals worth $2.5 billion, which remained “stuck” due to the regulatory restriction.

Consequently, gross profit margins (GAAP) fell to 60.5%, compared to 73% in the previous quarter and 78.4% in the previous year. Excluding the impact of the one-time charge (Non-GAAP, excluding the cost of inventory in China), profit margins would have stood at 71.3% – a result located at the high end of the chip industry. GAAP operating profit stood at $21.6 billion (a decrease of 10% from the previous quarter), and net profit totaled $18.8 billion (a decrease of 15% from the previous quarter, but an increase of 26% compared to the previous year). Diluted earnings per share (after adjusting for the split) stood at $0.76.

Expenses, Cash Flow, and Financial Strength

Operating expenses (GAAP) jumped to $5.03 billion – an increase of 7% from the previous quarter and 44% from last year. The main expense was directed to research and development (approximately $4 billion). These expenses support the accelerated development of new AI platforms, advanced servers, and innovative chip models, alongside regulatory adjustments and global collaborations. However, the company presented strong cash flow from current operations, in the amount of $27.4 billion – a figure that illustrates exceptional financial strength. The company’s cash reserves reached $53.7 billion at the end of the quarter.

NVIDIA’s Innovation: Global Technological Leadership

During the quarter, the company introduced Blackwell NVL72 – an AI supercomputer, which is now in serial production for leading cloud providers and AI industries. In addition, NVIDIA announced the establishment of AI factories in the United States, Saudi Arabia, Taiwan, and the United Arab Emirates, alongside collaborations with giant companies such as Google, Microsoft, Oracle, and Foxconn. The company also launched new products in the gaming sector (GeForce RTX 5070 and 5060 cards) and unveiled significant upgrades in the fields of robotics, automotive, and industrial visualization.

Key Highlights and Contrasts Between Performance and Data

The strong trends in growth, alongside huge investments in innovation, stand out especially in light of the decline in profit margins – a direct result of the H20 chip crisis in the Chinese market. On the other hand, the company maintains a double-digit growth rate in most sectors of activity and continues to expand global collaborations, despite geopolitical difficulties.

A significant increase in operating expenses can also be identified, mainly due to the increasing competition in the chip industry and the constant race to achieve a technological advantage. The regulatory environment continues to be a significant challenge, but NVIDIA’s ability to direct resources to rapid development in new markets – and in particular to create local production lines outside of China – may constitute a significant strategic advantage in the coming years.

Forecast for the Second Quarter and the Remainder of 2026: Maintaining Strong Dynamics

NVIDIA provided a forecast for the second quarter, including a revenue forecast of $45 billion (with a deviation range of 2% in either direction). This is despite a loss of approximately $8 billion in revenue from H20 chips, following the continuation of restrictions in China. Gross profit margins are expected to improve and approach 72% (GAAP and Non-GAAP), while operating expenses are expected to total approximately $5.7 billion (GAAP) and approximately $4 billion (Non-GAAP).

The company emphasizes the continued global growth in demand for AI computing and its ability to expand into new areas of activity – with an emphasis on partnerships with government bodies, large cloud companies, and the defense industries. At the same time, the company announced a quarterly dividend of $0.01 per share, which will be paid on July 3, 2025.

Summary: Leadership with Challenges and Opportunities

The current report illustrates NVIDIA’s ability to lead the field of artificial intelligence despite complex market conditions and unprecedented regulatory challenges. The company manages to present exceptional business results, especially against the background of a sharp decline in profit margins, which stems from external influences and not from global operational performance.

NVIDIA’s technological leadership continues to be expressed in product launches, the development of international production lines, and the strengthening of its position against technology giants. Investors and analysts will continue to closely monitor the company’s handling of export restrictions to China, the extent of improvement in profit margins, and the ability to increase new market shares in Europe, the Middle East, and the United States.

Looking ahead, the company will need to continue to make rapid adjustments to maintain dominance, especially in changing geopolitical arenas. Despite the challenges, the overall picture remains very positive – double-digit growth, strong cash flow, balance sheet stability, and continuous innovation.