Nvidia Q2 Data Center Revenue Falls Short of Expectations, Stock Drops Over 5% After Hours

 

After Wednesday’s close Eastern Time, Nvidia, the world’s highest-valued company and a leader in AI chips, released its latest earnings.

 

Despite revenue and profit exceeding market expectations, its stock fell over 5% in after-hours trading due to two consecutive quarters of slightly below-expected revenue from its critical data center segment.  

 

As of press time, Nvidia’s after-hours decline narrowed to over 3%.  

 

The earnings showed Nvidia’s Q2 FY2026 (ended July 2025) revenue at $46.74 billion, up 56% year-over-year, beating the expected $46.06 billion; net income was $26.42 billion, up 59%, with earnings per share at $1.05, surpassing the expected $1.01.  

 

 

Nvidia forecasts Q3 revenue at $54 billion, slightly above Wall Street consensus, noting that its projection excludes H20 sales. H20 is Nvidia’s “special edition” AI chip tailored for the Chinese market.  

 

Since the generative AI boom emerged mid-2023, Nvidia has posted year-over-year revenue growth exceeding 50% for nine consecutive quarters, though Q2 marked the slowest growth in that period.  

Data Center Revenue Below Expectations  

Nvidia’s growth is primarily driven by its data center business, centered on graphics processing units (GPUs) and related products. This segment’s Q2 revenue grew 56% to $41.1 billion but fell short of the expected $41.34 billion.  

 

 

Nvidia stated it did not sell H20 chips to China in Q2 but released $180 million in inventory to non-China clients. Reports indicate H20 sales dropped by $4 billion in Q2.  

 

CFO Colette Kress noted that, if geopolitical conditions permit, H20 chip shipment revenue could reach $2-5 billion in Q3.  

 

Robust demand from the rapidly growing AI industry is the main driver of Nvidia’s strong performance. As tech giants like OpenAI, Microsoft, Amazon, Google, and Meta continue training more powerful AI models, they keep bulk-purchasing Nvidia chips, offsetting the adverse impact of its China business.  

 

Before Nvidia’s earnings, its major clients—Meta, Google, Microsoft, and Amazon—had already reported their quarterly results. These four companies invest hundreds of billions quarterly in infrastructure to compete in the AI model and services market.  

 

Nvidia’s latest-generation Blackwell series GPU—the most powerful chip to date—saw a 17% sequential sales increase, reflecting “exceptionally strong” demand.  

 

According to CEO Jensen Huang, early Blackwell customers include Disney, Hitachi, Hyundai Motor, and SAP.  

 

Huang stated, “Blackwell chips are in full-scale production with extremely strong demand.” He added, “The AI race is on, and Blackwell is the core platform.”  

Other Businesses  

Nvidia’s gaming business reported $4.3 billion in Q2 revenue, up 49%. Once the company’s largest segment, it has been surpassed by data center sales amid the AI boom.  

 

The robotics business posted $586 million in Q2 revenue, up 69%, which management views as a high-potential growth area.  

 

Nvidia’s board also approved an additional $60 billion stock buyback with no expiration date. The company repurchased $9.7 billion in stock this quarter.  

 

Nvidia’s stock nearly doubled in 2024 and has risen 35% this year (as of Wednesday’s close). In contrast, the S&P 500 rose 23.31% last year and 10.2% year-to-date.  

 

In July, Nvidia became the first company to surpass a $4 trillion market cap.