Summary of NVIDIA's Q1 Fiscal 2026 Conference Call Company Overview - **Company**: NVIDIA - **Date of Call**: May 28, 2025 - **Fiscal Quarter**: Q1 of Fiscal 2026 Key Industry Insights - **Data Center Revenue**: Reached $39 billion, a 73% year-on-year growth driven by strong AI workload transitions to inference and AI factory build-outs [2][3] - **AI Market in China**: The new export controls on the H20 GPU have significantly impacted NVIDIA's ability to operate in the Chinese market, which is projected to grow to nearly $50 billion [2][13] - **Inference Demand**: There is a sharp increase in demand for inference, particularly in reasoning AI, with major companies like Microsoft processing over 100 trillion tokens in Q1, a five-fold increase year-on-year [4][19] Financial Performance - **H20 Revenue Impact**: NVIDIA recognized $4.6 billion in H20 revenue before the new export controls but had to write down $4.5 billion due to unsold inventory and purchase obligations [2][11] - **Gross Margins**: GAAP gross margins were reported at 60.5%, with non-GAAP gross margins at 61%. Excluding the inventory charge, non-GAAP gross margins would have been 71.3% [11][12] - **Shareholder Returns**: NVIDIA returned a record $14.3 billion to shareholders through share repurchases and dividends [11] Product Developments - **Blackwell Architecture**: Contributed nearly 70% of data center compute revenue, with significant improvements in manufacturing yields and ramping production of GB200 NBL racks [3][4] - **New Products**: Introduction of the GB300 systems, which will leverage the same architecture as GB200, allowing for seamless transitions for customers [3] - **AI Factories**: Nearly 100 NVIDIA-powered AI factories are currently in operation, doubling year-on-year, with significant growth in GPU deployment [5] Strategic Partnerships and Initiatives - **Collaborations**: Partnerships with major companies like Microsoft, OpenAI, and Yum Brands to enhance AI capabilities across various sectors [6][10] - **Sovereign AI**: NVIDIA is positioning itself as a leader in the sovereign AI market, with nations investing in AI infrastructure akin to past investments in electricity and the internet [13][30] Market Challenges - **Export Controls**: The new restrictions on H20 have effectively closed the Chinese market to NVIDIA, leading to significant write-offs and potential long-term impacts on revenue [2][13] - **Competition**: The inability to compete in China may benefit foreign competitors and hinder NVIDIA's market position globally [2][13] Future Outlook - **Revenue Guidance**: For Q2, NVIDIA expects total revenue to be around $45 billion, with a significant decline in China data center revenue due to the H20 export ban [11][12] - **Growth Drivers**: Anticipated growth in enterprise AI, industrial AI, and reasoning AI, with a focus on building out AI infrastructure globally [19][30] Additional Insights - **Networking Growth**: Networking revenue grew 64% quarter-over-quarter, with significant adoption of Spectrum X solutions among major cloud service providers [7][28] - **Gaming Revenue**: Achieved a record $3.8 billion in gaming revenue, driven by strong demand for Blackwell GPUs [8][9] This summary encapsulates the key points from NVIDIA's Q1 Fiscal 2026 conference call, highlighting the company's performance, strategic initiatives, and market challenges.