Summary:
Despite beating on revenue and EPS, Nvidia's shares fell as data centre sales were a touch light and no H20 China shipments left guidance excluding that demand.
Nvidia beat expectations on both revenue and earnings, but the share price slipped because investors focused on a slightly softer‑than‑hoped data centre line and the lack of H20 chip sales to China, which were also excluded from guidance. In a market priced for perfection, even small gaps in a flagship segment can outweigh an otherwise strong quarter.
Nvidia reported Q2 FY2026 revenue of about $46.7 billion, up roughly 56% year on year and 6% quarter on quarter, setting another quarterly record. (Nvidia) Adjusted (non‑GAAP) earnings per share were about $1.05, while GAAP EPS were around $1.08. GAAP gross margin was near 72.4% and non‑GAAP gross margin was around 72.7% for the quarter. Excluding a one‑time $180 million H20 inventory release and related tax effects, non‑GAAP gross margin would have been about 72.3% and non‑GAAP EPS about $1.04.
Data centre revenue was roughly $41.1 billion, accounting for about 88% of total sales. The company noted strong demand for accelerated computing and said Blackwell data centre revenue grew 17% sequentially, reflecting the early ramp of the new platform. While the headline numbers beat expectations, the market's attention turned to the fine print inside the data centre, where performance landed only a touch below very high estimates.
For Q3 FY2026, management guided revenue to about $54.0 billion, plus or minus 2%. The company expects a GAAP gross margin of roughly 73.3% and a non‑GAAP gross margin of about 73.5%, each plus or minus 50 basis points. Operating expense guidance points to continued investment in growth, with an expectation to exit the year with non‑GAAP gross margins in the mid‑70% range.
The initial reaction in extended trading saw the shares down by roughly 3%–5%. (Business Insider) The main reason was that investors had set the bar very high for data centres, and that line came in just a touch light versus some forecasts. When a single segment drives the majority of revenue and profits, even small shortfalls can trigger profit‑taking after a strong run.
China was the other clear factor. The company confirmed it shipped no H20 units to China in the quarter, and the Q3 outlook assumes no H20 shipments either. That removes a potential near‑term boost to data centre sales from that market. While global demand for AI infrastructure remains strong, the absence of China shipments made the near‑term mix look less robust than some had hoped.
Another nuance was mixed inside the data centre. Commentary around a softer compute sub‑line, offset by strength in networking, suggested the quarter was strong but not flawless. In a priced‑for‑perfection setup, this was enough to overshadow the beat on headline revenue, the solid margin profile, and a higher revenue guide.
Data centres remain the growth engine and now dominate the business at roughly nine‑tenths of sales. The ramp of the Blackwell platform and ongoing AI infrastructure build‑outs at cloud, enterprise, and sovereign levels are central to the outlook. Gaming grew year on year from a smaller base, supported by the PC and AI‑PC cycle, which adds a second pillar of demand, even if it is far smaller than data centres.
Professional visualisation and automotive also improved from smaller bases, adding useful diversity in end‑markets without changing the overall story driven by accelerated computing.
| Metric | Q2 FY2026 Result | Notes |
|---|---|---|
| Total Revenue | ~$46.7B | Record quarter; ~+56% YoY; ~+6% QoQ |
| Adjusted EPS (Non-GAAP) | ~$1.05 | GAAP EPS ~ $1.08 |
| GAAP / Non-GAAP Gross Margin | ~72.4% / ~72.7% | Ex-H20 items, non-GAAP ~72.3% |
| Data Centre Revenue | ~$41.1B | ~88% of total; slightly below lofty forecasts |
| Q3 Revenue Guidance | ~$54.0B ±2% | Assumes no H20 shipments to China |
| H20 Shipments to China | 0 in Q2 | Export constraints; excluded from guide |
| Buyback Authorisation | +$60.0B | Added with no expiration |
| Initial After-Hours Move | ~−3% to −5% | Focus on data centre optics and the China mix |
Export restrictions meant Nvidia shipped no H20 units to China in the quarter. Management also excluded H20 shipments from the Q3 outlook. This does not derail the global AI build‑out, but it does remove a potential source of near‑term upside for data centre growth.
The company did highlight a $180 million release of previously reserved H20 inventory and about $650 million in unrestricted H20 sales to a customer outside China, which helped margins and underlines demand flexibility. Still, until there is a clearer pathway for compliant China sales, some investors will expect the data centre mix to lean more on demand outside China and on networking strength.
The revenue guide of about $54.0 billion (±2%) signals continued momentum into Q3. The margin guide of roughly 73%–74% on both GAAP and non‑GAAP bases points to a healthy mix and pricing. Management expects to exit the year with non‑GAAP gross margins in the mid‑70% range, consistent with strong operating leverage as Blackwell ramps. Operating expenses are set to rise as the company invests in products, software, and platforms to support rapid growth.
The guide's exclusion of H20 to China adds conservatism and makes any eventual resolution a potential upside swing factor.
Nvidia has led the market higher for much of the year, so expectations were very high into the print. When leadership names are priced for perfection, any small gap in a flagship line can weigh on the first reaction. That is what happened here: a clear beat on the top line and EPS, strong margins, and a higher guide, but a slightly softer‑than‑hoped data centre print and zero H20 shipments to China led to a quick reset in the share price after hours.
This does not change the medium‑term drivers of demand for accelerated computing, but it does remind investors that concentration risk cuts both ways.
The Board approved an additional $60.0 billion for share repurchases, with no expiration. This expands capital return capacity and can cushion volatility, while also supporting per‑share earnings over time. The company returned more than $24 billion to shareholders in the first half of FY2026 through buybacks and dividends, and it declared a quarterly dividend of $0.01 per share for payment on 2 October 2025 to holders of record on 11 September 2025.
Clearer China Pathway: A concrete route for compliant shipments would reduce uncertainty around the regional mix and near‑term growth.
Blackwell Ramp Evidence: Continued proof of volume ramps and delivery against orders would support the guidance and margin story.
Broader AI Demand Signals: More signs of sustained orders from cloud, large enterprise, and sovereign AI projects would validate multi‑year assumptions.
Data Centre Mix: A stronger compute sub‑line, alongside networking, would address concerns about the internal balance of the segment.
Nvidia delivered a record quarter with revenue around $46.7 billion, non‑GAAP EPS of about $1.05, and gross margins around 72%–73%.
Shares fell because data centre revenue, while huge, was a touch light versus very high expectations, and there were no H20 China shipments (also excluded from the guide).
The Q3 revenue guide of about $54.0 billion (±2%) and a $60.0 billion buyback expansion support the medium‑term case, but near‑term sentiment hinges on China clarity and the depth of the Blackwell ramp.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment, or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.
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