Nvidia earnings review

Nvidia comes unstuck on the China question, even though revenues soar

• Nvidia’s revenues soared by more than 50% last quarter.
• The company pledges a massive $60bn buyback.
• Nvidia’s stock price falls in post market trading.
• Market underwhelmed by China news, as company had no H20 sales to China last quarter, even though China export restrictions were eased.
• Forward guidance was underwhelming.
• Without positive news about China sales, it is hard to see where the next driver for Nvidia’s share price will come from.

There aren’t many companies in the world who can post earnings growth of more than 50% and then see their share price fall, but that is exactly what has happened to Nvidia this evening. Its share price is lower in the aftermath of last quarter’s earnings report, although revenue came in at a staggering $46.74bn, beating estimates of $46.23bn, an increase of 56% compared to a year earlier.

The good news did not end there. Data centre revenue grew by more than  50% YoY, networking revenue was higher by 98% YoY and gaming revenue, which Nvidia was originally famous for, was higher by 49% YoY and brought in $4.29bn. When it comes to Nvidia’s earnings reports, margins are always worth watching, and these also did not disappoint. Gross profit margin was 72.7%, beating estimates of 72.1%.

Lack of China sales causes wave of worry for investors

So, what went wrong for Nvidia, and why is the market not enthused by another monster earnings report? There are two reasons for this. Firstly, Nvidia has still not resumed sales of its H20 chip to China, even though export restrictions were lifted by President Trump. There are hopes that China will be a lucrative revenue stream for Nvidia, to the tune of tens of billions of dollars per year. However, the longer it takes to generate sales in China, the more likely it is that Chinese consumers will turn to domestic chip makers who could eventually rival Nvidia’s chips for their advanced capabilities.

Nvidia in tricky political waters

The Nvidia/ US/ China story has been huge so far in 2025, and it has also been central to Nvidia’s share price, which is higher by 33% YTD. Firstly, export restrictions were lifted to allow sales into China, then the US government agreed a deal with Nvidia to get 15% of all profits of Nvidia’s sale of H20 chips to China. Nvidia has waded into tricky political waters, which could have big ramifications for the company both to the upside and to the downside in the future, which is another reason why the share price is pausing after this earnings report.

The CFO summed up Nvidia’s position by saying that it is operating in a ‘dynamic external environment’, which sounds like the under statement of the century. Due to the dynamic environment, Nvidia has decided against including forward projections of Chinese revenue in this earnings report, which is a disappointment to some investors, who had expected sales to immediately surge once export restrictions were lifted.

China could still be a rich vein for Nvidia

The earnings call shed more light on this theme. The CFO said that Nvidia could ship between $2bn - $5bn of H20 chips to China, as long as geopolitical issues remain a barrier to sales. The CEO Jensen Huang, said that China could represent a $50bn opportunity for Nvidia this year, however, as the CFO has said, there are risks around this. However, if investors start to look on the bright side once more, then this news could limit the downside for Nvidia’s stock price.

China, the unanswered question for analysts

Ultimately, the market does not know how big the China market is for Nvidia, or the impact of the Chinese government encouraging a move away from Nvidia’s chips, especially for government systems. Thus, this earnings report does not give us too much information on future sales growth to China, and it also fails to deliver what analysts want to know: the potential sales growth for Nvidia’s chip that has been designed specifically for the Chinese market. This is one reason why the stock price is down more than 2.5% in post-market trading.

Nvidia’s customer base remains uncomfortably concentrated

The other disappointment for investors was Nvidia’s continued reliance on a handful of mega-cap tech companies to generate the bulk of its revenue. Over 50% of revenue from Nvidia’s most advanced chip, Blackwell, is generated from a handful of hyper-scalers, which suggests that Nvidia’s revenue remains extremely concentrated. This also highlights why investors are disappointed with the lack of guidance around China sales, there had been hopes that China could dilute Nvidia’s customer base. For example, Nvidia has 874 customers, but Microsoft, Meta and Super Micro Computer account for 35% of Nvidia’s total revenue. Luckily for Nvidia, the hyper-scalers like US tech firms, are continuing to ramp up their capex spending, with approx. $600bn from the top four for this year, so we can expect more monster earnings reports from Nvidia going forward.

Future revenue predictions failed to inspire investors

Future revenue projections were also slightly underwhelming.  Although estimates were inline with analyst estimates at $52.9bn - $55.1bn for the third quarter, some had expected super-charged revenues of $60bn for this quarter due to the impact of sales to China. Not even a $60bn share buyback programme could halt the slide in Nvidia’s share price.

What next for Nvidia’s share price?

On average, Nvidia’s share price rises by more than 6% in the aftermath of an earnings report. Tonight’s fall in post market trading, highlights how the market is disappointed with the China news. Nvidia’s shares were priced for perfection, and the question now is will the slide extend on Thursday, as the question over China sales, which is important for Nvidia’s outlook, remain unanswered. Without clear guidance on China revenues, it is hard to see what the next driver of Nvidia’s share price will be, which is why it has stalled on Wednesday night.