Despite this headline performance, net income fell 15% from the previous quarter to $18.8 billion
NVIDIA has reported its strongest-ever quarterly revenue, reaching a whopping $44.1 billion for Q1 FY2026 – up 69% from last year and 12% from the previous quarter. The chipmaker beat Wall Street expectations both on sales and adjusted profit, reporting non-GAAP earnings per share (EPS) of $0.81. Excluding a major one-time charge, EPS would have stood at $0.96 .
Despite this headline performance, net income fell 15% from the previous quarter to $18.8 billion. That drop is tied to a $4.5 billion charge the company incurred due to U.S. export restrictions on its H20 chips, which were AI processors designed specifically for the Chinese market. Announced in April 2025 under Donald Trump’s administration, the new policy barred shipments of H20 chips without a special license, immediately stranding $2.5 billion worth of unshipped inventory and slashing Q1 margins.
The H20 chips were created to comply with earlier U.S. restrictions and aimed to sustain NVIDIA’s foothold in China, which accounts for up to 25% of its data centre business. Their abrupt derailment could have been disastrous, but wasn’t. Strong global demand for AI infrastructure more than offset the China setback. The data centre division alone brought in $39.1 billion, a 73% year-on-year increase.
CEO Jensen Huang acknowledged the blow but maintained a forward-looking stance. “The demand for AI computing will accelerate,” he said, pointing to NVIDIA’s strategic shift: diversifying its AI operations across the Middle East, Europe, and North America. On Trump’s policy revival, Huang struck a cautious tone, warning that intensified U.S.–China tensions might “inadvertently strengthen” China’s domestic AI ecosystem by forcing it to develop alternatives.
Still, with a Q2 revenue forecast of $45 billion and margin recovery expected, NVIDIA remains on an upward trajectory. But the China shock paired with geopolitical risk makes clear that policy, not product, may be its biggest variable going forward.
