Nvidia Corp (NASDAQ: NVDA) reports earnings on Thursday morning, and expectations are sky high. Analysts expect results to land in line with guidance, but with China headwinds and AI momentum colliding, this could be a pivotal update.
Nvidia reports its first-quarter FY26 earnings on Wednesday, 28 May (Thursday morning AEST).
Nvidia is not just underpinning the foundations of the AI revolution; over the last three years, it has been considered the bellwether stock for the broader technology sector and growth stocks in general.
It has been the 'top dog'; the leader that dictates the direction of the overall market. If Nvidia goes higher, then the market follows higher.
That has been the trend, so it's no surprise that there is so much anticipation around Nvidia earnings announcements.
After a staggering run-up in the share price, can Nvidia's AI-fuelled momentum continue? Or will restrictions on chip exports to China limit Nvidia's growth?
Here is what I think investors should be on the lookout for.
Can Nvidia overcome China restrictions and beat revenue guidance?
Nvidia has guided to US$43 billion in revenue for Q1 FY26, implying 65% year-on-year (YoY) growth and 9% growth from the most recent quarter.
Many Wall Street analysts are expecting results to be in that ballpark, with several flagging a low probability of a big beat-and-raise due to the restrictions placed by the US government on chip exports to China.
Wedbush, for example, expects Nvidia's revenue to be in line with its guidance, although it sees potential for a small beat given Nvidia's history of providing conservative guidance and the potential for Nvidia's Blackwell chip shipments to come in stronger than expected.
The US effectively banned Nvidia from exporting its H20 chips to China, a move that, according to founder and CEO Jensen Huang, is expected to cost Nvidia approximately US$15 billion in sales.
Nvidia has replaced its H20 chip exports to China with the cheaper and less advanced Blackwell chips. This has significant top-line implications because Nvidia used to sell its H20 chips in China for up to US$12,000, but reports suggest that the Blackwell chips could be sold for a lower price by up to 45%.
So, on balance, if Nvidia's revenue comes in at US$43 billion as expected, the share price is unlikely to move much higher (all else equal) given that the expectations are already baked in. Investors, however, will be on the lookout (and hoping!) for Q1 revenue well above US$43 billion.
Outlook and guidance will be key
Looking ahead, guidance for Q2 and beyond could be where sentiment gets tested.
The consensus is for Q2 revenue of around US$45.8 billion, but investors will be looking for further commentary on whether demand for its new products and demand from sovereign nations in the Middle East could help offset the headline risk from China.
On new products, Nvidia's new NVLink Fusion lets other big tech companies use Nvidia's high-speed connection technology with their own chips in custom AI server systems. It's a win for flexibility because until now, tech companies had to use mostly Nvidia chips to get access, but with NVLink Fusion, Nvidia is letting other companies, even those using different chips, plug into its technology. This means tech companies can build their own custom AI computers while still using Nvidia's best-in-class connection speed.
There's also ongoing momentum in sovereign nations spending big on AI. Analysts at Wedbush have highlighted the US$600 billion in planned investment by Saudi Arabia into AI infrastructure, plus growing investment from the UAE.
The shift from demand for Nvidia chips mainly coming from other big tech companies to now spending moving to broader "AI nation-building" projects is a tailwind that could keep Nvidia's revenue growing even as cloud capex slows.
However, a big question is whether this sovereign demand replaces some of the existing demand from big tech companies or whether it is in addition to that demand.
I suspect some of that sovereign demand will offset existing big tech demand because whilst these countries have plenty of cash to spend, they may not have the skills and expertise to implement these projects without the help of big tech. If it is indeed additional/incremental demand, that would be a significant tailwind for Nvidia shares.
Foolish takeaway
Zooming out, the long-term investment case remains intact. Nvidia continues to dominate the AI GPU space and is aggressively broadening its ecosystem.
I don't think Nvidia's earnings will deliver fireworks this quarter, but that's okay. Most analysts expect numbers to be in line with guidance, although China sales are a wildcard. The bigger question is whether Nvidia can keep guiding higher and confidently into Q2 and beyond.
A lot is already baked into the valuation, but Nvidia still looks like the best AI platform play in the market. For long-term investors, the key isn't whether this quarter beats expectations by a few hundred million; it's whether Nvidia keeps cementing its role at the centre of the AI stack.
As of now, the signs still point to yes.
