NVIDIA Form 10-Q: Q1 Fiscal Year 2025

Key insights

7 takeaways

01
NVIDIA reported net income of $18.775 billion for the first quarter of fiscal year 2026, up from $14.881 billion in the same period of the previous year.
02
Operating cash flow reached $27.414 billion for the quarter ended April 27, 2025, significantly higher than the $15.345 billion reported in the prior-year period.
03
The company incurred a $4.5 billion charge in the Compute & Networking segment during Q1 FY2026, attributed to excess inventory and purchase obligations related to H20 products.
04
Revenue concentration remains high, with two direct customers accounting for 16% and 14% of total revenue, respectively, during the first quarter of fiscal year 2026.
05
NVIDIA repurchased $14.5 billion of its common stock during Q1 FY2026 and held an additional $24.3 billion in authorized repurchase capacity as of April 27, 2025.
06
Deferred revenue saw a substantial increase, with additions of $6.493 billion in Q1 FY2026 compared to $553 million in the same period last year, driven largely by $6.2 billion in customer advances.
07
The U.S. government announced in May 2025 that it would rescind the 'AI Diffusion' interim final rule, which would have imposed worldwide licensing requirements on high-end data center products like the H200 and GB200.

Summary

NVIDIA's Q1 Fiscal Year 2026 financial performance demonstrates robust revenue growth driven primarily by its Data Center segment, alongside increasing operational complexities and significant financial provisions. The company reported a substantial increase in net income to $18.775 billion and revenue to $44.062 billion year-over-year, with diluted net income per share rising to $0.76. This growth was largely fueled by a 73% surge in Data Center product demand, reaching $39.1 billion.

However, the period was marked by considerable charges and rising expenses. NVIDIA incurred a $4.5 billion charge related to excess H20 product inventory and purchase obligations, a direct consequence of new U.S. export licensing requirements impacting the China data center market. This charge significantly reduced gross margins to 60.5% from 78.4% in the prior year. Operating expenses also rose substantially, with R&D up 47% and SG&A up 34%, driven by increased compensation and development costs. The company's future purchase commitments total $43.52 billion, with the majority due in fiscal year 2026, and product warranty liabilities increased to $2.08 billion.

NVIDIA faces substantial risks from demand estimation inaccuracies, long manufacturing lead times, and geopolitical tensions, particularly concerning U.S. export controls on AI semiconductors and supply chain dependencies on Taiwan and China. These factors create competitive disadvantages, disrupt supply chains, and could lead to being foreclosed from key markets. The company is also managing ongoing securities class action lawsuits. Despite these challenges, NVIDIA repurchased 126.2 million shares for approximately $14.9 billion and is expanding its Blackwell architecture and U.S.-based manufacturing to strengthen its supply chain and meet AI infrastructure demand. Revenue concentration remains high, with two direct customers accounting for 30% of total revenue within the Compute & Networking segment.