Nvidia Beats Wall Street in Q2 but Stock Tanks on China Uncertainty

TLDR:

• Nvidia Q2 revenue hit $46.7B, up 56% year-over-year, beating Wall Street estimates by half a billion dollars.
• Data center sales reached $41.1B, slightly under forecasts, raising concerns over core AI demand strength.
• Q3 guidance forecasted $54B revenue, higher than expectations, but excluded potential China H20 chip sales.
• Nvidia returned $24.3B to shareholders in H1 while expanding its buyback program by $60B.

Nvidia has closed another record quarter, delivering revenue growth, soaring profits, and stronger guidance. Yet the stock didn’t celebrate. Shares fell sharply even as the company outperformed expectations. 

Investors worried more about what was left unsaid than what was delivered. Concerns over China, stretched valuations, and hyperscaler spending cycles quickly took center stage.

Nvidia Q2 Earnings and AI Growth

Wall St Engine reported Nvidia’s Q2 revenue at $46.74 billion, beating expectations of $46.23 billion. 

Adjusted earnings per share landed at $1.05, up 54% from last year. Data center revenue rose 56% year-over-year to $41.1 billion, narrowly missing forecasts of $41.25 billion.

The company highlighted strong demand for Blackwell chips, which drove a 17% sequential gain. Compute revenue hit $34.1 billion in line with projections, while networking reached $5.07 billion, also matching expectations. 

Gaming pulled in $4.3 billion, a 49% annual increase, and automotive sales climbed 69% to $586 million.

Profitability metrics stayed robust. Adjusted gross margin came in at 72.7%, above the 72.1% estimate. Net income rose to $25.78 billion, while operating income grew 51% year-over-year to $30.17 billion. Nvidia also returned $24.3 billion to shareholders in the first half of the year.

CEO Jensen Huang said demand for AI infrastructure remained extraordinary, pointing to Blackwell as the key driver. He described a surge in reasoning AI workloads fueling both training and inference capacity.

China Restrictions and Market Reaction

Despite the strong numbers, shares sold off following the release. Analyst Karan Singh Arora explained that the slight miss in data center sales dampened excitement. He noted that Wall Street wanted perfection and instead got results that were strong but not flawless.

Guidance for Q3 stood at $54 billion in revenue, plus or minus 2%, ahead of the $52.5 billion forecast. Still, this excluded any potential contribution from H20 AI chip sales to China. Restrictions barred shipments in Q2, leaving a $2 to $5 billion revenue gap if rules remain unchanged.

Investors also grew cautious about the pace of hyperscaler spending. With valuations already stretched, traders were quick to react to any uncertainty. Even with revenue growth intact, the absence of clarity on China weighed heavily.

Long-term drivers remain intact, including sovereign AI projects and broader data center demand. However, the near-term risks continue to revolve around China policy shifts and the spending patterns of large tech customers.

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