The Best and Worst Part of Nvidia's Recent Earnings Report

Core Insights - Nvidia reported strong second-quarter fiscal 2026 results, beating Wall Street estimates with $1.05 adjusted earnings per share and $46.74 billion in revenue, while guiding for $54 billion in revenue for the current quarter [3][6] - The company announced a $60 billion increase to its share repurchase program, aimed at enhancing earnings per share by reducing the outstanding share count over time [1] Financial Performance - Nvidia's revenue grew 56% year over year, but the data center business performance fell slightly short of estimates, leading to a negative market reaction [3][2] - The company faced a decline in sales of H20 chips to China due to government restrictions, impacting overall revenue potential [5][10] Geopolitical Factors - Ongoing geopolitical tensions have affected Nvidia's ability to sell advanced chips to China, with the company required to obtain export licenses under the Trump administration [6][7] - Nvidia's CEO indicated that resolving these geopolitical issues could potentially add $2 billion to $5 billion in revenue from H20 chip sales in the current quarter [9] Market Opportunities - Despite current challenges, Nvidia has the potential to re-enter the Chinese market with advanced products, which could represent a significant revenue opportunity, estimated at $50 billion by 2025 [9][12] - The company is reportedly working on a scaled-down Blackwell chip that may be allowed for sale in China, indicating a possible future market re-entry [7][10] Valuation Considerations - Nvidia currently trades at approximately 38 times forward earnings, above its five-year average of 34.4, suggesting a stretched valuation [12] - Given the expected revenue growth and potential upside from China, continued investment in Nvidia may be warranted, with dollar-cost averaging recommended as a strategy [13]