Nvidia Stock Investors Just Got Fantastic News From CEO Jensen Huang

As one of the foremost providers of the graphics processing units (GPUs) powering artificial intelligence (AI), Nvidia (NASDAQ: NVDA) has become a bellwether for the state of AI. As such, Wall Street and Main Street alike were pulling up their chairs, popcorn at the ready, ahead of the company's quarterly financial report after the market close on Wednesday.

Questions about the overall adoption of AI, increasing competition, and a complex macroeconomic and geopolitical backdrop had investors wondering if Nvidia could deliver on the future promise of AI, and they were not disappointed.

Image source: The Motley Fool.

The results are irrefutable

It turns out that concerns that Nvidia growth might slow turned out to be unfounded. In fact, it was quite the opposite: sales continued to accelerate. For its fiscal 2027 first quarter (ended April 26), the company generated record revenue of $81.6 billion, up 85% year over year and 20% quarter over quarter. This drove adjusted earnings per share (EPS) of $1.87, which surged 140%. The results were partially driven by Nvidia's impressive 74.9% gross margin.

For context, analysts' consensus estimates were calling for revenue of $79.12 billion and adjusted EPS of $1.77, so Nvidia sailed past both benchmarks with room to spare.

The data center segment, which includes processors used for cloud computing, high-performance computing, AI, and (as the name implies) data centers, produced another record-setting performance. Segment revenue of $75.2 billion soared 92% year over year and 21% sequentially. Nvidia was quick to point out that the results included no shipments of products to China. Given the persistent demand, I don't think Nvidia needs to sell to China to continue to prosper, as it's selling its AI chips as fast as it can make them.

The gaming segment -- which once generated the lion's share of Nvidia's sales -- has been rebranded as the "Edge Computing" segment, and includes any devices at the forefront of agentic and physical AI. This includes PCs, workstations, game consoles, robotics, and automotive. The segment also posted a solid performance, with edge computing revenue of $6.4 billion, climbing 29% year over year and 10% sequentially.

CFO Colette Kress commented on the new reporting structure, which signaled the ongoing shift to AI, saying, "Following the rapid evolution in our businesses, we are transitioning to a new reporting framework that better reflects our current and future growth drivers."

CEO Jensen Huang was also clear as to what was driving the results, noting that its cutting-edge processors will continue to extend its lead. "The build-out of AI factories -- the largest infrastructure expansion in human history -- is accelerating at extraordinary speed. Agentic AI has arrived, doing productive work, generating real value, and scaling rapidly across companies and industries."

A move that few saw coming was the company's increasingly shareholder-friendly policies. Nvidia announced it was increasing its dividend to $0.25 per share, up from $0.01. That should yield 0.5%. While that's still minuscule, it's the result of the stock's relentless gains. Moreover, the payout ratio of less than 8% shows there's plenty of room for future increases.

Nvidia also announced an additional $80 billion share buyback. While the sheer magnitude of the number is awe-inspiring, at current prices, it would reduce Nvidia's share count by about 1.5%.

The AI boom is alive and well

As I pointed out above, there's been a lot of ink spilled about increasing competition, and Nvidia's results seem to put that concern to rest -- at least for the time being. Investors will want to keep an eye out for any signs of decelerating growth, margin compression, or other signs that its rivals are moving Nvidia's cheese.

Management's forecast suggests more accelerating growth in the second quarter. Nvidia's outlook calls for revenue of $91 billion, representing year-over-year growth of 95%, up from the current quarter's 85%. The company also suggested that its gross margin will remain stubbornly high at 74.9% at the midpoint of its guidance.

Despite the blockbuster quarter, Nvidia barely moved in after-hours trading, with the stock down roughly 1% (as of 5:40 p.m. ET). However, given that the stock is up 65% over the past year, it's understandable that investors would pause to digest the results. The lackluster reaction aside, the company continues to lay the foundation for a strong future. And at less than 27 times forward earnings, Nvidia stock is an unqualified buy.

Danny Vena, CPA has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.