TLDR
- Nvidia (NVDA) stock dropped 2% in premarket despite beating Q2 earnings with $1.05 EPS vs $1.01 expected
- Data center revenue of $41.1B missed $41.34B estimates for second straight quarter due to China chip restrictions
- Zero H20 chip sales to China but company projects $2-5B potential Q3 revenue if restrictions lift
- Q3 guidance of $54B beats $53.1B consensus, excludes any China H20 sales assumptions
- Blackwell chip sales up 17% quarter-over-quarter with strong demand from cloud providers
Nvidia stock fell 2% in premarket trading Thursday despite the AI chipmaker beating both earnings and revenue expectations for the second quarter. The decline highlights how investors remain focused on the company’s core data center business performance.
The chipmaker reported adjusted earnings of $1.05 per share, beating analyst estimates of $1.01. Revenue reached $46.74 billion, surpassing the $46.06 billion consensus forecast.
However, data center revenue of $41.1 billion came up short of the $41.34 billion Wall Street expected. This marks the second consecutive quarter where Nvidia’s largest division has missed revenue projections.
The revenue shortfall stems directly from U.S. restrictions on H20 chip sales to China. Nvidia sold zero H20 processors to Chinese customers during the quarter, despite receiving government approval in late July.
China Revenue Gap Creates Uncertainty
CFO Colette Kress disclosed that no H20 chips have shipped to China in the current quarter either. Several China-based customers received licenses recently, but actual shipments haven’t materialized.
The company did release $180 million worth of H20 inventory to a non-Chinese customer during the quarter. This provided minimal relief compared to the potential revenue loss from the China market.
Kress estimated Nvidia could generate $2 billion to $5 billion in H20 revenue during Q3 if geopolitical conditions improve. CEO Jensen Huang valued the Chinese market opportunity at “$50 billion” if the company could serve it with competitive products.
The uncertainty extends beyond current restrictions. Nvidia hasn’t received confirmation about reports that the U.S. government plans to take 15% of revenue from future H20 sales to China.
Blackwell Demand Remains Strong
Despite China headwinds, Nvidia’s Blackwell chip lineup showed continued momentum. Sales increased 17% from the previous quarter, with the product line representing roughly 70% of data center revenue.
Jefferies analysts noted that both Hopper and Blackwell chips remain “sold out across the board.” The Blackwell Ultra production ramp is progressing smoothly, addressing earlier supply chain worries.
Nvidia guided for Q3 revenue of $54 billion, plus or minus 2%. This beat analyst expectations of $53.1 billion while explicitly excluding any potential China H20 sales.
Company-wide revenue grew 56% year-over-year to $46.74 billion. This represents the ninth straight quarter of 50%+ growth, though it’s the slowest pace during that stretch.
Net income jumped 59% to $26.42 billion. The gaming division contributed $4.3 billion in sales, up 49% annually.
Nvidia approved an additional $60 billion share buyback program and repurchased $9.7 billion in stock during the quarter. The company projects $3-4 trillion in global AI infrastructure spending through 2030.
