Nvidia has once again defied expectations, posting an impressive 69% year-over-year revenue growth in Q1 of its fiscal year 2026, even as tightened U.S. export controls led to a multibillion-dollar setback in China.
The chipmaker announced $44.1 billion in total revenue, driven largely by its core data centre business, which generated a record $39.1 billion, up 73% from the same period last year.
Despite a slowdown from the prior quarter’s 93% surge, the results were aligned with Wall Street forecasts and sparked a nearly 5% jump in after-hours trading.
Major Loss in China Sales Due to Export Rules
The upbeat results came in the shadow of a $4.5 billion inventory write-down, caused by new U.S. rules requiring licenses for Nvidia’s H20 AI chips destined for China. These controls, introduced in Q1, also blocked $2.5 billion worth of expected shipments, resulting in a combined $8 billion revenue hit.
Without these charges, Nvidia’s gross margin would have reached 71.3%, instead of the reported 61%.
CEO Jensen Huang candidly addressed the situation:
“We are taking a multibillion-dollar write-off on inventory that cannot be sold or repurposed.” “The $50 billion China market is effectively closed.”
AI Momentum Powers Global Growth
Despite the China headwinds, Huang remains bullish on global AI momentum, citing extraordinary demand for Nvidia’s AI solutions:
“Global demand for Nvidia’s AI infrastructure is incredibly strong,” he said. “AI inference token generation has surged tenfold in just one year.”
Nvidia’s new Blackwell AI chip is now fully in production across hyperscale cloud platforms, further positioning the company as a central player in what Huang described as a shift where AI is becoming “essential infrastructure like electricity or the internet.”
Looking ahead, Nvidia projects $45 billion in revenue for the next quarter, with a non-GAAP gross margin of 72%, slightly under Q4 2024’s 73.5%.
To counterbalance China-related losses, the company is actively exploring growth opportunities elsewhere. It has partnered with Saudi Arabia’s HUMAIN to build AI factories in the region, and is also supporting President Donald Trump’s AI initiatives.
“While sales in China are clouded by export restrictions, the Middle East looks set to become the new launchpad for Nvidia’s next phase of growth,” said Josh Gilbert, analyst at eToro Australia.
Following the robust earnings report, Nvidia has now surpassed both Microsoft and Apple, becoming the world’s most valuable publicly listed company. Its stock is currently just 8% below its record high from January.
