Analyst(s): Olivier Blanchard, Daniel Newman
Publication Date: June 2, 2025
NVIDIA’s latest results reflect sustained global demand for AI computing, with data center and gaming segments driving performance. The company is scaling Blackwell deployments while navigating export-related challenges.
What is Covered in this Article:
- NVIDIA’s Q1 FY 2026 financial results
- Blackwell ramp growth in data center revenue and accelerated AI inference adoption
- Strong sequential growth in networking revenue led by NVLink and Spectrum-X scale-out
- Record gaming revenue and launch of GeForce RTX 5060/5060 Ti GPUs built on Blackwell
- Sovereign AI factory momentum helping offset H20 export headwinds in China
- Guidance for Q2 FY 2026 and final thoughts
The News: NVIDIA Corporation (NASDAQ: NVDA) reported Q1 FY 2026 revenue of $44.1 billion (+1.7% above consensus estimates), up 12% sequentially (QoQ) and 69% year-on-year (YoY). Data Center revenue reached $39.1 billion, increasing 73% YoY. The company, however, recorded a $4.5 billion charge related to H20 inventory and purchase obligations after new U.S. export licensing restrictions on China. Excluding this charge, non-GAAP gross margin would have been 71.3%; reported non-GAAP gross margin was 61.0%. Non-GAAP operating income came in at $23.3 billion (+29% YoY), while non-GAAP net income was $19.9 billion (+33% YoY). Diluted non-GAAP earnings per share (EPS) were $0.81 (+33% YoY), or $0.96 (+57% YoY; +2.8% above consensus), excluding the H20 charge.
“Our breakthrough Blackwell NVL72 AI supercomputer – a ‘thinking machine’ designed for reasoning – is now in full-scale production across system makers and cloud service providers,” said Jensen Huang, founder and CEO of Nvidia. “Global demand for NVIDIA’s AI infrastructure is incredibly strong. AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate.”
NVIDIA Q1 FY 2026 Revenue Jumps 69% Despite China Export Setback
Analyst Take: NVIDIA’s Q1 FY 2026 results reinforced the company’s dominant positioning in global AI infrastructure despite headwinds from China’s H20 export restrictions. The strong ramp-up of Blackwell, coupled with accelerated AI inference demand and robust networking growth, underpinned the performance. While the $4.5 billion inventory-related charge weighed on margins, NVIDIA’s core business momentum remained resilient. Management commentary and Q2 FY 2026 guidance suggest that enterprise deployments, reasoning inference workloads, and sovereign AI are set to drive sustained expansion.
Blackwell Ramp Accelerates Inference Adoption and Data Center Scale
Blackwell ramped at scale during Q1 FY 2026, helping drive NVIDIA’s 73% YoY increase in data center revenue, which has now reached $39.1 billion. Blackwell contributed nearly 70% of data center compute sales, with the Hopper-to-Blackwell transition nearing completion. The introduction of GB200 NVL systems, which optimize cost-per-inference-token, further enables hyperscalers and sovereign entities to scale their AI inference workloads. Microsoft, for example, is already deploying tens of thousands of GB200s and is projected to ramp to hundreds of thousands this year. Meanwhile, startups like Perplexity and financial institutions like Capital One are leveraging the Dynamo-accelerated NVL72 systems, reporting up to 30x inference throughput and 5x latency reductions over previous alternatives.
NVIDIA highlighted that inference demand from reasoning AI models has also surged tenfold in the past year, with agentic workloads requiring exponentially higher token processing than one-shot inference. To that end, Blackwell’s software optimizations have already improved performance by 1.5x in the past month alone. NVIDIA expects to keep delivering more performance gains throughout the product’s lifecycle, giving more credence to the notion that Blackwell will continue to be the foundation for the next wave of AI compute at scale.
Networking Momentum Builds with NVLink and Spectrum-X Growth
Networking revenue surged 64% sequentially to $5 billion, primarily driven by AI factory scaling requirements. NVLink shipments crossed $1 billion in Q1 FY 2026, powered by the fifth-generation NVLink Compute Fabric, which can handle 130 TB/s per rack.
At COMPUTEX, NVIDIA launched NVLink Fusion, which enables hyperscalers and ecosystem partners—including MediaTek, Fujitsu, Qualcomm, and Marvell—to build semi-custom accelerators connected directly to NVIDIA’s platform.
In addition, Spectrum-X, NVIDIA’s Ethernet platform optimized for AI workloads, is now annualizing at over $8 billion. The solution saw strong adoption from A-list cloud providers like Microsoft Azure, CoreWeave, xAI, Google Cloud, and Meta.
NVIDIA also introduced new silicon photonics-based Spectrum-X and Quantum-X switches, enhancing power efficiency by 3.5x and network resiliency by 10x. With rising demand for high-throughput, low-latency interconnects in large-scale AI clusters, NVIDIA’s networking offerings are increasingly important in supporting broader AI infrastructure deployments. This trend towards reducing latency, increasing throughput, and injecting more efficiency across every step of AI workloads is increasingly moving to the forefront of TCO and ROI conversations relating to AI-forward hardware and system buildouts.
Gaming and Automotive Deliver Record Performance and Strategic Momentum
Somewhat out of nowhere, gaming revenue reached a record $3.8 billion in Q1 FY 2026, rising 48% sequentially and 42% YoY. Part of the reason for this overdue surge in the segment can be linked to NVIDIA having expanded its gaming portfolio with the launch of GeForce RTX 5060 and 5060 Ti desktop GPUs (powered by the Blackwell architecture and priced from $299) alongside RTX 5060 laptops starting at $1,099. These systems double frame rates and reduce latency, advancing the adoption of AI-enhanced gaming technologies. The ongoing Windows 11 PC refresh was also a likely factor in the jump, but significant improvements in gaming UX, performance, and efficiency seem to have landed well with the otherwise underserved (at least of late) gaming community.
Automotive revenue came in at $567 million, up 72% YoY but down 1% sequentially, which we attribute primarily to tariff friction and macroeconomic uncertainty. Broadly, NVIDIA’s momentum in the Automotive segment remains strong: During the quarter, NVIDIA partnered with General Motors to develop next-gen vehicles, factories, and robots, leveraging Omniverse, Cosmos, and DRIVE AGX. NVIDIA also introduced Halos, a unified automotive safety system, which looks promising, but will need time to make its way into automotive OEMs’ ecosystems, many of which are already committed to competing systems into 2028. In other words, NVIDIA’s ramp-up in the automotive segment should take several cycles to scale, so the name of the game here is patience.
NVIDIA also unveiled Isaac GR00T N1 and N1.5 – open humanoid robot foundation models – alongside GR00T-Dreams, a synthetic motion data platform. New Cosmos world foundation models and physical AI data tools were also released to bolster robotics capabilities. While we are still relatively far from the adoption of humanoid robots scaling both in commercial and consumer markets, NVIDIA’s work here is foundational to the broader market opportunity and positions the company well for future growth.
We should also mention that recent announcements from PC OEMs, like Dell, have placed NVIDIA chips at the center of high-performance, enterprise-grade AI PCs, further expanding NVIDIA’s reach across the AI value chain. Dell’s Pro Max GB10 and GB300 desktop and desk-side PCs effectively deliver secure, local, resource-efficient server-class AI workload capabilities to the enterprise and SMBs, particularly for developers, AI engineers, and data scientists, thanks to the versatility of NVIDIA Grace Blackwell GPUs.
Together, these segments complement NVIDIA’s core data center business by extending its AI ecosystem into high-growth verticals like gaming, autonomous vehicles, robotics, and high-performance client computing.
Sovereign AI Expansion Cushions China Export Impact
NVIDIA took a $4.5 billion charge in Q1 FY 2026 due to unsold H20 inventory and purchase obligations, after new U.S. export licensing restrictions disrupted shipments to China. While these restrictions created a near-term headwind in a key market, NVIDIA reported strong sovereign and enterprise momentum in other geographies.
Case in point: NVIDIA is currently supporting the development of nearly 100 AI factories worldwide, doubling both site count and average GPU density YoY. Recent sovereign AI initiatives include Saudi Arabia’s HUMAIN cluster, the UAE’s Stargate UAE project (with G42, Oracle, OpenAI, and Cisco), and a Taiwan partnership with Foxconn and the government. These regional wins strengthen NVIDIA’s role in enabling national AI infrastructure and help cushion the impact of delayed China shipments, which are expected to cost the company in the neighborhood of $8B in the next quarter.
Guidance and Final Thoughts
For Q2 FY 2026, NVIDIA guided for revenue of $45 billion (+/-2%), factoring in an estimated $8 billion impact from the H20 export restrictions. Non-GAAP gross margin is projected to improve sequentially to 72% (+/-50 bps). Operating expenses are expected to stand at approximately $4 billion (non-GAAP). While China-related challenges remain unresolved, and management commentary left uncertainty around future participation in that market, the company’s strong execution despite these headwinds stood out.
What is critical to note is that even with a multibillion-dollar shipment loss and the associated writedown, NVIDIA delivered strong guidance and beat expectations, highlighting operational momentum and the strength in demand for its AI solutions. Continued strength in segments other than data centers, like gaming and automotive, further reinforces the company’s resilience. Although demand for AI chips and solutions by data centers doesn’t look like it will slow down anytime soon, NVIDIA’s diversification efforts should be seen as a hedge for NVIDIA against the growth plateau that data center chip demand will invariably reach at some point in the next decade. These potential high-growth markets will eventually help the company maintain its growth trajectory without being overindexed in the data center segment. Broadly, with end-to-end integration across silicon, systems, networking, and software, NVIDIA continues to look very well-positioned to lead the next wave of AI infrastructure buildout.
See the full press release on NVIDIA’s Q1 FY 2026 financial results on the NVIDIA website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
Other insights from Futurum:
Is GM’s AI Bet With NVIDIA a Turning Point for Its Vehicle and Factory Roadmap?
The Six Five Pod | EP 254: Unpacking GTC: Nvidia’s AI Dominance and the Hyperscaler Challenge
Nvidia Q4 FY 2025: AI Momentum Strengthens Despite Margin Pressures
Author Information
Research Director Olivier Blanchard covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
