Nvidia Stock Declines on China Market Uncertainty -- But Q2 Earnings Report and Q3 Guidance Were Fantastic

Key Points

• Fiscal second-quarter revenue and adjusted earnings per share (EPS) surged 56% and 54%, respectively, year over year, surpassing Wall Street's expectations.

• These results were particularly impressive since they did not include any H20 data center AI chips to China due to the U.S. government's export controls spanning the entire quarter.

• Q3 guidance exceeded the analyst consensus estimates on the top and bottom lines.

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Shares of Nvidia (NASDAQ: NVDA) are down 3% in Wednesday's after-hours trading as of 7:42 p.m. ET, following the artificial intelligence (AI) tech leader's release of its report for its second quarter of fiscal 2026 (ended July 27, 2025).

The stock's modest decline can likely be mainly attributable to the uncertainty still surrounding the Chinese data center market. On the earnings call, management said it has received U.S. government licenses to resume selling its H20 data center AI chip to several Chinese customers, and that it has the immediate capacity to sell $3 billion to $5 billion of these chips to China in the third quarter. However, due to geopolitical issues still being "open," as management put it, it did not assume any H20 sales in its third-quarter guidance.

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That said, Q2 revenue and adjusted earnings per share both beat Wall Street's estimates, as did Q3 guidance for both the top and bottom lines.

In my Nvidia earnings preview, this chain of events is as I predicted: "I'm predicting it [Nvidia] will beat Wall Street's earnings estimate. That said, I think the stock's movement will largely depend on H20 news and related Q3 guidance."

Image source: Getty Images.

Nvidia's key numbers

Data source: Nvidia. YOY = year over year. GAAP = generally accepted accounting principles. Fiscal Q2 2026 ended July 27, 2025.

Investors should focus on the adjusted numbers, which exclude one-time items.

Wall Street was looking for adjusted EPS of $1.01 on revenue of $46.13 billion, so Nvidia exceeded both expectations. It also handily beat its own guidance, which was for adjusted EPS of $0.98 on revenue of $45 billion.

For the quarter, GAAP and adjusted gross margins were 72.4% and 72.7%, respectively.

Platform performance

Data source: Nvidia. OEM = original equipment manufacturer; OEM and other is not a target-market platform. YOY = year over year. QOQ = quarter over quarter.

The data center segment's revenue accounted for about 88% of total revenue, so it continues to drive the company's overall performance.

The data center platform's strong year-over-year and sequential growth was driven by "demand for our accelerated computing platform used for large-language models, recommendation engines, and generative and agentic AI applications," Colette Kress said in her CFO commentary.

Notably, within data center, Blackwell revenue grew 17% sequentially. Blackwell is Nvidia's graphics processing unit (GPU) architecture that is currently in full production.

The other platforms also performed very well. Auto had particularly powerful year-over-year growth. Its growth was driven by "strong adoption of our self-driving platforms," Kress said. The driverless vehicle revolution is advancing -- and Nvidia is the best driverless vehicle stock, in my view.

What the CEO had to say

CEO Jensen Huang stated in the earnings release:

Blackwell is the AI platform the world has been waiting for, delivering an exceptional generational leap -- production of Blackwell Ultra is ramping at full speed, and demand is extraordinary. Nvidia NVLink rack-scale computing is revolutionary, arriving just in time as reasoning AI models drive orders-of-magnitude increases in training and inference performance. The AI race is on, and Blackwell is the platform at its center.

Guidance for the third quarter

For Q3 of fiscal 2026, which ends in late October, management expects revenue of $54 billion, which equates to growth of 54% year over year. This outlook does not assume any H20 chip sales to China.

Management also guided (albeit indirectly by providing a bunch of inputs) for adjusted EPS of $1.22, or 51% growth.

Going into the report, Wall Street had been modeling for Q3 adjusted EPS of $1.19 on revenue of $52.76 billion, so the company's outlook beat both estimates.

A fantastic quarter and guidance

In short, Nvidia turned in a fantastic quarter and guidance. The stock's modest decline is likely due to short-term traders and will be recovered shortly, in my opinion.

The results were particularly impressive since they did not include any sales of H20 data center AI chips to China due to the U.S. government's export controls spanning the entire quarter. And Q3 guidance was also particularly impressive for the same reason -- it assumes no H20 sales to China. So any H20 chips that are sold to China in Q3 will be icing on the cake.

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Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.