Nvidia rallies after Q1 revenue beat
The chip designer’s hotly anticipated Q1 earnings have sent shares higher in after-hours trading.
Nvidia’s Q1 results are out, and the short message is: sales weren’t a problem, but profitability was temporarily challenged thanks to the ban on H20 exports to China.
Adjusted earnings per share were $0.96, which includes an additional adjustment in light of a $4.5 billion impairment charge linked to the export ban. Nvidia’s typically adjusted EPS came in at $0.81. The consensus estimate was $0.93.
Revenues totaled $44.1 billion, compared with Wall Street’s estimate of $43.3 billion.
Adjusted gross margin was 71.3%, compared to the consensus estimate of 70.2%, which again, includes a similar added adjustment for the impairment charge and would have otherwise been 61%.
The stock is up more than 5% in the after-hours session. The options-implied earnings move for the stock is plus or minus 6.3%.
Guidance from the chip designer calls for revenues of $45 billion plus or minus 2% in the current quarter with adjusted gross margins of 72%, plus or minus 50 basis points. The former is a touch light, while the latter is a bit better than expected: Wall Street was looking for sales of $45.45 billion with an adjusted gross margin of 71.74%.
It’s difficult to parse the revenue guidance relative to expectations because Wall Street analysts are somewhat confused as to how much, or whether, their peers were adjusting for potential lost sales in China.
“We may be unable to create a competitive product for China’s data center market that receives approval from the US government,” Nvidia said in its 10-Q. “In that event, we would effectively be foreclosed from competing in China’s data center computing/compute market, with a material and adverse impact on our business, operating results, and financial condition.”
And that revenue forecast would be $8 billion higher if not for the H20 export ban, management said. The company is reportedly readying a new AI chip for sale to China next month.
“The 2Q outlook of about $45 billion in revenue is just $3 billion short of where consensus was prior to the rules on shipments to China, despite a loss of $8 billion in potential revenue,” Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada wrote. “This suggests strong demand for its products in other regions, including the new Blackwell chip.”
