Nvidia’s CFO clarified that the company hasn’t yet resumed H20 sales in China despite a select number of the company’s China-based customers receiving licenses over the past few weeks.
Nvidia Corp. (NVDA) stock fell sharply in Wednesday’s extended session after the company’s data center sales softness and its projection for a slowdown in revenue growth for the current quarter worried traders. Wall Street analysts, however, were positive about the quarterly print.
In overnight trading, Nvidia stock was down 3.04% at $176.08.
China Dents Data Center
The Santa Clara, California-based company reported data center sales of $41.1 billion for the second quarter of the fiscal year 2026. This marked a 5% sequential rise and a 56% year-over-year (YoY) increase, but slightly missed the $41.3 billion estimate provided by some analysts. The segment’s sales growth slowed from the 10% sequential and 73% YoY pace recorded for the first quarter.
CFO Colette Kress said on the earnings call that Nvidia’s H20 — China-specific artificial intelligence (AI) chip revenue fell $4 billion, according to a transcript made available by Koyfin. She also noted that the company sold $650 million worth of H20 chips to an unrestricted customer outside of China, with the company benefiting from a $180 million release of previously reserved H20 inventory.
The CFO clarified that the company hasn’t yet resumed H20 sales in China despite a select number of the company’s China-based customers receiving licenses over the past few weeks.
China’s share of data-center revenue declined on a sequential basis to a low single-digit percent.
In a statement, Kress said, “We continue to ramp our Blackwell architecture, which grew 17% sequentially, including our newest architecture, Blackwell Ultra.”
The company reported sequential and YoY revenue growth for all its other business segments, namely Gaming & AI ($4.3 billion), Professional Visualization ($601 million) and Automotive and Robotics ($586 million).
Nvidia’s Outlook
The Jensen Huang-led company said it expects third-quarter revenue to be $54 billion, plus or minus 2%, translating to a range of $52.92 billion to $55.08 billion. At the midpoint of the range ($54 billion), the guidance suggests 54% YoY growth, less than the 56% growth recorded for the second quarter.
Analysts, on average, estimate revenue of $52.77 billion for the third quarter.
Kress said on the earnings call that the guidance does not assume any H20 shipments to China. “If geopolitical issues subside, we should ship $2 billion to $5 billion in H20 revenue in Q3,” she said.
The company expects adjusted gross margins of 73.5%, plus or minus 50 basis points, an improvement from the 72.7% reported for the second quarter. It reaffirmed its goal for exiting the year with adjusted gross margin in the mid-70% range.
Replying to an analyst’s question on the call, Huang said the company had estimated China as a $50 billion opportunity this year. “And if it’s $50 billion this year, you would expect it to grow, say, 50% per year,” he said.
Key Q2 Metrics
- $46.74 billion revenue Vs. $46.13 billion consensus (Fiscal.ai)
- $1.05 adjusted EPS Vs. $1.01 consensus
Revenue grew 6% sequentially and 56% YoY.
Huang said, “Blackwell is the AI platform the world has been waiting for, delivering an exceptional generational leap — production of Blackwell Ultra is ramping at full speed, and demand is extraordinary.”
He called Nvidia NVLink rack-scale computing “revolutionary,” and said it would benefit from reasoning models’ demand for training and inference.
Baird, Wedbush Cheer Q2 Print
Commenting on the quarterly results, Baird analyst Tristan Gerra noted that he sees multiple drivers of sequential AI revenue acceleration in the second half of calendar year 2025 and the following year. He maintained his EPS estimate for this year. The analyst expects $200 billion in projected AI revenue, with the majority of this revenue expected to be realized in the fourth quarter.
The analyst noted that the GB200 AI accelerator sell-through run rate is accelerating. At the same time, GB300 availability is expected to be widespread in the second half, suggesting a significant acceleration in sequential comps ahead, he said.
Gerra noted that Huang reiterated a yearly cadence in new products, placing tremendous pressure on the competition.
Baird has an ‘Outperform’ rating for Nvidia stock and a $225 price target.
Wedbush analyst Daniel Ives said, “Godfather of AI, Jensen, and NVDA do it again,” adding that demand for Blackwell chips remains robust.
“We view any decline in NVDA stock to be a clear buying opportunity as NVDA remains the only game in town, fueling this 4th Industrial Revolution that continues to accelerate with the company well on its way to hitting a $5 trillion market cap by early 2026,” the analyst said.
Retail Upbeat
On Stocktwits, retail sentiment toward Nvidia stock improved to ‘extremely bullish’ (94/100) by late Wednesday from ‘bullish’ a day before. The message volume also spurted to ‘extremely high’ levels. The 24-hour message volume change leading up to late Wednesday was about 300%.
The stock was the top trending equity ticker on the platform.
NVIDIA’s stock has gained 35.25% year-to-date.
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