Nvidia shares leap as Q1 results reassure on strong AI demand

Investing.com -- Nvidia unveiled on Wednesday better-than-expected first-quarter results, but the chipmaker flagged an $8 billion hit to Q2 guidance from the U.S. ban on chip sales to China.

Nonetheless, Nvidia (NASDAQ:NVDA) shares jumped 6% following the market open on Thursday as the results confirmed that AI demand remains strong. The stock was trading at around $143 per share by 09:44 ET (13:44 GMT). 

For the three months ended Apr. 27, the company announced first-quarter adjusted earnings per share of $0.96 on revenue of $44.06 billion. Analysts polled by Investing.com anticipated per-share income of $0.93 and revenue of $43.31B.

Nvidia’s data center unit, which makes up the bulk of revenue, saw revenue jump 73% to $39.1B, just missing for $39.36B. Gaming revenue for the first quarter was up 42% from a year ago.

"Global demand for NVIDIA’s AI infrastructure is incredibly strong," CEO Jensen Huang said. "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."

The beat comes despite a drag on growth from the U.S. ban on Nvidia H20 chips to China. The company took a $4.5B hit from the ban, which was less than the previously estimated $5.5B charge as it repurposed parts of the H20 chips. 

"The $4.5 billion charge was less than what we initially anticipated as we were able to re-use certain materials," the company said.

Looking ahead, the company forecast fiscal 2026 second-quarter revenue of $45 billion, plus or minus 2%, missing projections of $45.66B, reflecting a $8B hit from the U.S. ban on chip sales to China expected to be recorded in the current quarter.

During the earnings call, Huang stated that enterprise AI is still in its early stages. He added that we are at the beginning of the AI infrastructure build-out, and every country needs it.  He said there would be "many, many more" announcements of AI factories in the future.

Wall Street analysts were positive following the results. Wedbush analyst Daniel Ives said, "The Godfather of AI Delivers Again."

"With H20 China expenses/charges known heading into the print, Nvidia would have delivered gross margins of 71.3% if not for the China related charges," Ives commented. "Overall this was a robust quarter with very positive commentary around demand despite the China issue...that should be music to the ears of tech bulls listening to this conference call."

Separately, Raymond (NSE:RYMD) James analysts said Nvidia’s “F1Q results and F2Q outlook were better than our recent expectations, especially considering the larger than expected impact from H20 restrictions.”

“Blackwell racks are in full production as early yield issues are now behind, which also appears to be helping gross margins,” they added, raising their price target on the stock to $165 from $150.

Meanwhile, Evercore analyst Mark Lipacis said Nvidia remains a “top pick” following the report, highlighting its 9% EPS beat and a minor outlook miss.

“Hyperscalers are not slowing down CapEx, they want larger LLMs, demand is increasing from Tier 2 CSPs both domestically as well as internationally, and NVDA remains the AI ecosystem of choice,” Lipacis wrote.

(Yasin Ebrahim, Vahid Karaahmetovic contributed to this article)