Nvidia Reported Record Earnings and It’s Not Even Doing Business With China
In a stunning display of resilience and innovation, Nvidia has once again defied expectations with its latest earnings report. The semiconductor giant announced a record-breaking revenue of $46.7 billion for the second quarter of its fiscal year 2026, marking a 6% increase from the previous quarter and a remarkable 56% year-over-year surge.
At the heart of this success is Nvidia’s data center business, which saw revenue from its next-generation Blackwell chips grow by 17% sequentially. The company’s earnings per share (EPS) also impressed, reaching $1.05—54% higher than the same period last year and exceeding Wall Street forecasts. Gross margins remained robust at 72.7%, underscoring Nvidia’s ability to maintain profitability amidst rising demand for its AI-focused hardware.
Despite these stellar numbers, Nvidia’s stock experienced volatility following the earnings announcement. Shares initially dropped more than 4% before recovering, as investors weighed the company’s strong performance against a tempered outlook for the next quarter. Nvidia’s guidance for Q3 revenue, between $52.9 billion and $55.1 billion, aligns with consensus estimates but falls short of the most optimistic projections that had fueled the stock’s recent rally.
One key factor behind this cautious outlook is the ongoing uncertainty surrounding Nvidia’s business in China. The company reported no sales of its highly anticipated H20 chips in the region during the quarter due to regulatory challenges. However, Nvidia did benefit from $180 million in previously reserved H20 inventory sold outside of China, offering a silver lining amid the geopolitical tensions.
Speaking during the earnings call, Nvidia’s CFO, Colette Kress, highlighted the company’s readiness to adapt to shifting regulatory landscapes. She acknowledged the potential requirement for a 15% remittance on chips sold to China, a condition that could impact Nvidia’s ability to resume business in the region. For now, the company holds a substantial inventory of H20 chips destined for China, but their sale remains on hold pending regulatory clarity.
CEO Jensen Huang remained bullish on Nvidia’s future, touting the Blackwell platform as “the AI platform the world has been waiting for.” He emphasized its role as a generational leap in performance and capacity for AI workloads, a sentiment echoed by the rapid ramp-up of Blackwell Ultra production to meet surging demand. Huang also highlighted Nvidia’s NVLink rack-scale computing technology, calling it revolutionary for the future of AI, particularly as reasoning AI models drive exponential increases in training and inference performance.
Looking ahead, Nvidia’s guidance for the third quarter reflects both confidence and caution. With a projected revenue of approximately $54 billion (plus or minus 2%) and gross margins expected to remain in the mid-70% range, the company is banking on sustained demand for its AI solutions. However, the outlook also acknowledges the risks posed by ongoing geopolitical tensions and regulatory uncertainties, particularly in China.
For investors, the key takeaway is clear: Nvidia’s dominance in the AI hardware space remains unchallenged, but the road ahead is fraught with challenges. As Huang succinctly put it, “the AI race is on, and Blackwell is the platform at its center.” Whether Nvidia can maintain its momentum will depend on its ability to navigate the complex interplay of technological innovation, market demand, and geopolitical dynamics.
Nvidia’s Continued Growth and Evolving Market Dynamics
Nvidia’s second-quarter earnings painted a picture of a company at the pinnacle of the AI revolution, yet navigating a complex global landscape. The data center business, fueled by the Blackwell platform, emerged as the cornerstone of this success, with revenue growing 17% sequentially. This growth underscores the industry’s rapid adoption of Nvidia’s AI-focused solutions, as enterprises worldwide accelerate their transition to generative AI applications.
The absence of H20 chip sales in China during the quarter highlighted the growing geopolitical tensions impacting Nvidia’s operations. Despite this, the company managed to generate $180 million from previously reserved H20 inventory sold outside of China, demonstrating its ability to adapt to market restrictions. This strategic maneuver not only offset some of the losses from the Chinese market but also underscored the global demand for Nvidia’s cutting-edge AI hardware.
The stock market’s reaction to Nvidia’s earnings reflected broader investor sentiment. While the company’s financial performance exceeded expectations, the tempered outlook for the next quarter introduced caution. Nvidia’s guidance for Q3 revenue, projected to fall between $52.9 billion and $55.1 billion, aligns with consensus estimates but falls short of the lofty expectations that had driven the stock’s recent rally. This dynamic underscores the delicate balance between strong fundamentals and external uncertainties.
Geopolitical pressures, particularly those involving China, continue to cast a shadow over Nvidia’s outlook. CFO Colette Kress addressed the potential requirement for a 15% remittance on chips sold to China, a condition that could significantly impact the company’s ability to resume operations in the region. With a substantial inventory of H20 chips ready for shipment to China, Nvidia finds itself in a state of regulatory limbo, awaiting clarity that could unlock a critical market.
CEO Jensen Huang’s bullish commentary on the Blackwell platform emphasized its transformative potential. Describing it as “the AI platform the world has been waiting for,” Huang highlighted its role in driving a generational leap in AI performance and capacity. The rapid ramp-up of Blackwell Ultra production further underscores Nvidia’s commitment to meeting the surging demand for advanced AI hardware. Huang also pointed to Nvidia’s NVLink rack-scale computing technology as a game-changer, particularly as reasoning AI models push the boundaries of training and inference performance.
Looking ahead, Nvidia’s forward guidance reflects a mix of confidence and caution. With a projected Q3 revenue of approximately $54 billion (plus or minus 2%) and gross margins expected to remain in the mid-70% range, the company is well-positioned to capitalize on sustained AI demand. However, the outlook also acknowledges the risks posed by ongoing geopolitical tensions and regulatory uncertainties, particularly in China.
For investors, the key takeaway is clear: Nvidia’s dominance in the AI hardware space remains unchallenged, but the road ahead is fraught with challenges. As Huang succinctly put it, “the AI race is on, and Blackwell is the platform at its center.” Whether Nvidia can maintain its momentum will depend on its ability to navigate the complex interplay of technological innovation, market demand, and geopolitical dynamics.
Conclusion
Nvidia’s record earnings for the second quarter of its fiscal year 2026 underscore the company’s resilience and dominance in the AI hardware space. Despite the absence of sales in China, Nvidia’s data center business, led by the Blackwell platform, continues to drive growth and profitability. The company’s ability to adapt to geopolitical challenges and regulatory uncertainties highlights its strategic prowess and innovative spirit.
While the tempered outlook for the next quarter introduces caution, Nvidia’s strong fundamentals and cutting-edge technology position it as a leader in the AI revolution. As the company navigates the complex landscape of technological innovation, market demand, and geopolitical dynamics, its future remains promising. With the Blackwell platform at the center of the AI race, Nvidia is poised to maintain its momentum and shape the future of AI hardware.
Frequently Asked Questions (FAQ)
Why is China important to Nvidia’s business?
China is a significant market for Nvidia, particularly for its H20 chips. However, due to regulatory challenges, Nvidia reported no sales of H20 chips in China during the quarter, impacting its revenue outlook.
What is the significance of the Blackwell platform to Nvidia’s success?
The Blackwell platform is Nvidia’s next-generation AI platform, driving a 17% sequential growth in data center revenue. It is seen as a generational leap in AI performance and capacity, making it central to Nvidia’s growth strategy.
Why did Nvidia’s stock experience volatility after the earnings report?
Nvidia’s stock dropped initially due to a tempered outlook for the next quarter, which fell short of the most optimistic investor expectations. However, the stock recovered as the company’s strong financial performance was recognized.
What is the impact of the 15% remittance requirement on Nvidia’s China business?
A potential 15% remittance requirement on chips sold to China could significantly impact Nvidia’s ability to resume business in the region, affecting its revenue and profitability.
What is NVLink rack-scale computing technology?
NVLink is Nvidia’s revolutionary rack-scale computing technology, designed to enhance AI training and inference performance. It is particularly important for reasoning AI models, which require high levels of processing power and efficiency.
What is Nvidia’s outlook for the third quarter?
Nvidia projects Q3 revenue between $52.9 billion and $55.1 billion, with gross margins expected to remain in the mid-70% range. The outlook reflects confidence in sustained AI demand but acknowledges risks from geopolitical tensions and regulatory uncertainties.