Nvidia (NASDAQ: NVDA) delivered stronger-than-expected second-quarter earnings on Wednesday, but its data center revenue came in slightly below forecasts as U.S. restrictions on H20 chip sales to China weighed on results.
The company’s stock fell 3.1% in after-hours trading following the report.
For the quarter ending July 31, Nvidia posted adjusted earnings per share of $1.04 on revenue of $46.7 billion, beating analyst expectations of $1.01 per share on $46.1 billion in revenue.
Nvidia’s data center division, which drives most of its revenue thanks to high demand for AI chips, generated $41.1 billion, up 56% year-on-year but just shy of the $41.34 billion estimate. The company confirmed there were no H20 chip sales to China in Q2, after a U.S. ban in April restricted shipments until late July.
Q3 guidance strong, but China outlook cautious
For the current quarter, Nvidia projected revenue of $54 billion, plus or minus 2%, topping Wall Street’s estimate of $52.76 billion. However, the outlook excluded H20 chip sales to China due to ongoing geopolitical and regulatory uncertainty.
CFO Colette Kress said no H20 shipments had been made to China this quarter despite U.S. approval, citing delays and regulatory scrutiny. She added that Nvidia has not received confirmation on reports that the U.S. government may claim 15% of revenue from H20 China sales.
If tensions ease, Nvidia estimates $2 billion to $5 billion in potential H20 revenue could be booked in the third quarter. CEO Jensen Huang said China still represents a $50 billion opportunity for Nvidia, with future prospects for its next-generation Blackwell chips in the region remaining possible.
Market outlook and AI skepticism
Analysts at Wolfe Research described Nvidia’s guidance as “a touch low” compared to high market expectations but noted that Blackwell remains on track as the company’s next major growth engine.
Nvidia remains at the center of the AI-driven valuation boom, benefiting from soaring demand for its chips. However, investor skepticism is rising, with a recent MIT report questioning the long-term profitability of AI products.
Such doubts could slow investment in data centers, weighing on future chip demand. Still, Huang dismissed concerns, saying that continued heavy spending by AI hyperscalers will sustain long-term demand for Nvidia’s products.
