NVIDIA Q1 2026 Earnings: Surging Demand for AI Drives Record Revenue Growth
Despite Trade Tensions, NVIDIA’s Leadership in AI and Strong Financial Performance Position It for Long-Term Growth
NVIDIA had a fantastic first quarter of 2026, with revenue hitting $44.1 billion, up 69% from last year, and surpassing expectations. The company saw huge growth in its Data Center business, which grew by 73% to $39.1 billion, thanks to strong demand for its Blackwell GPUs and GB200 NVL systems, especially from big tech companies like Microsoft and Google using AI. Although NVIDIA made $4.6 billion in sales before the U.S. imposed restrictions on some of its products sold to China, it also had to write down $4.5 billion in unsellable inventory, which slightly impacted its results.
In the Gaming business, the company saw a 42% increase in revenue, bringing in $3.8 billion thanks to the launch of its popular GeForce RTX 5060 and 5060 Ti products. Its Automotive business also grew by 72% to $567 million, as more companies adopted NVIDIA’s AI technology for self-driving cars.
NVIDIA’s new Blackwell architecture has ramped up at an incredible speed, now making up 70% of the company’s Data Center revenue. The company has also made huge progress with AI infrastructure, with nearly 100 AI factories now being built around the world, helping to meet the growing demand for AI. The company is also expanding into sovereign AI projects, working with countries like Taiwan, Saudi Arabia, and Sweden to build national AI platforms. Even though trade restrictions with China have been challenging, Jensen Huang (NVIDIA’s CEO) emphasized that the company’s growing presence in the U.S. and Europe, as well as global AI projects, will drive its future growth.
In terms of financial performance, NVIDIA reported a gross margin of 61%, which would have been 71.3%if not for the charges related to China. The company posted $23.3 billion in operating income and $26.1 billion in free cash flow. The company returned $14.3 billion to its shareholders through stock buybacks and dividends, showing strong financial health. Additionally, its Networking business saw a significant 64% rebound to $5 billion, driven by increased use of its Spectrum-X Ethernet and NVLink Fusion platforms for AI supercomputing. NVIDIA is also growing its AI PC and robotics businesses through partnerships with companies like Foxconn, Mercedes-Benz, and GE Healthcare, which could lead to big opportunities in the future for things like robots, healthcare technology, and autonomous vehicles.
Looking ahead, the company is expecting Q2 2026 revenue of about $45 billion (+/- 2%) with a gross margin of 72% and $4 billion in operating expenses. While the company expects to lose $8 billion in revenue from its China Data Center business due to restrictions, it believes that the strong demand for its Blackwell products and global AI growth will make up for much of this loss. The company also aims to reach mid-70% gross margins by the end of the year, supported by strong product pricing, software improvements, and its robust product roadmap through 2028. While the U.S.-China trade tensions remain a risk, NVIDIA’s leadership in AI infrastructure and software ecosystems is strong, with plenty of customer loyalty and dependence on its products driving future growth.
Here’s Our Take
NVIDIA's fundamentals are incredibly strong, driven by the booming demand for AI technology and its leadership in the AI space. While trade tensions and export restrictions with China pose some short-term risks, the company’s growth in AI infrastructure and its dominant position in the market remain solid. We are bullish on the stock for the long term. If the stock dips due to near-term concerns, it presents a good opportunity to add to your position. The long-term growth potential remains very compelling, but it’s important to monitor the geopolitical situation closely.
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