Nvidia Stock Dips 3% Despite Beating Earnings Estimates... "China Export License Delay"

Second-Quarter Revenue · Net Profit Up 56% · 59%... Third-Quarter Revenue Forecast Also Exceeds Market Expectations

Additional Share Buyback of 53 Trillion Won Approved... "AI Competition Begins, Blackwell at its Center"

Nvidia Logo [AFP Yonhap News File Photo. Reproduction and DB Prohibited]

Artificial intelligence (AI) bellwether Nvidia announced on August 27 (local time) that its second-quarter (May-July) revenue and earnings per share were $46.74 billion (65.1555 trillion won) and $1.05 (1,463 won), respectively.

These figures slightly exceeded Wall Street's average revenue of $46.06 billion and earnings per share of $1.01, as compiled by market research firm LSEG.

Revenue increased by 56% compared to the same period last year.

Net profit was recorded at $25.78 billion, a 59% increase from a year earlier.

Nvidia projected third-quarter revenue to reach $54 billion, an increase of more than 50% year-over-year. This figure does not include exports of H20 chips to China. Wall Street had forecast $53.14 billion, with some expecting over $60 billion.

Nvidia's stock, which closed down 0.09% in regular trading on the New York Stock Exchange today, is down more than 3% in after-hours trading following the earnings announcement. It had previously fallen by over 5% at one point.

Nvidia's revenue is largely driven by its data center segment, which includes graphics processing units (GPUs). This segment's revenue grew 56% year-over-year to $41.1 billion. However, it fell short of the average expectation of $41.3 billion.

In a statement, Nvidia Chief Financial Officer (CFO) Colette Kress explained that $33.8 billion of data center revenue came from GPU chip sales, and that H20 sales decreased by $4 billion, resulting in a 1% drop from the first quarter.

She added that $7.3 billion was generated from sales of networking components required for Nvidia's complex system builds, which is approximately double the amount from a year ago.

Nvidia stated that while it had no H20 chip sales to China in the second quarter, it generated revenue by selling $180 million worth of H20 chip inventory to customers outside of China.

The H20 chip, which had its export to China restricted by the Trump administration in April, received approval for sales resumption in July.

Large cloud providers account for about half of Nvidia's data center revenue, and these companies are purchasing the latest generation Blackwell chips. Nvidia's Blackwell sales in the second quarter increased by 17% compared to the first quarter.

In a statement, CEO Jensen Huang said, "Blackwell is the AI platform the world has been waiting for, achieving incredible advancements unlike anything before. Blackwell Ultra production is ramping up at full speed, and demand is immense."

He added, "The AI race has begun, and Blackwell is at its center."

Revenue from the gaming segment increased by 49% year-over-year to $4.3 billion, and the robotics segment saw a 69% increase to $586 million.

Robotics is an area Nvidia sees as its biggest growth opportunity in the future. CEO Huang has previously stated that "Robotics could be the next biggest growth market after AI" and signaled an aggressive market push.

Nvidia also announced that its board of directors has approved an additional share buyback program of $60 billion.

Nvidia CEO Jensen Huang [AFP Yonhap News File Photo. Reproduction and DB Prohibited]

CFO Kress told analysts during a conference call that the transition to the latest GB300 product line from GB200 "has gone smoothly," adding, "We are currently producing Blackwell GB300 and are producing 1,000 racks per week." A rack is a large unit made up of multiple latest-generation chips.

She also mentioned that the next-generation AI chip Rubin is scheduled for release next year, "maintaining our annual product release cycle."

However, CFO Kress emphasized, "Sales to China are currently suspended due to delays in export licenses from the U.S. government. If we obtain a license, we could realize $2 billion to $5 billion in revenue from H20 exports to China in the third quarter."

The Trump administration reportedly agreed to have Nvidia pay 15% of its China export revenue to the U.S. government in exchange for export licenses.

Bloomberg reported that the U.S. government has not yet formalized the 15% revenue allocation rule, and Nvidia stated that if the U.S. government demands a portion of the revenue, it could lead to litigation, increased costs, and weakened competitiveness, which would benefit competitors.

CEO Huang has been in discussions with the Trump administration regarding expanded access to the Chinese market, emphasizing, "It is extremely important that U.S. companies lead the AI competition." He also stated that there is "a significant possibility for selling Blackwell chips in the Chinese market."

He avoided commenting on performance improvements for the Rubin chip, explaining that the company is currently focused on selling the Blackwell Ultra system, an upgrade to Blackwell.

Nevertheless, he added that Rubin will "incorporate a lot of new ideas," and "we will have ample time to explain the many innovations Rubin will bring over the next year. I cannot disclose them at this moment, but they will be revealed at GTC (October)."

CEO Huang estimated that AI infrastructure investment will reach $3 to $4 trillion by the end of this decade (2030), adding that "$3 to $4 trillion over the next five years is a very reasonable figure."

He stated that "the main drivers of Nvidia's business going forward will be the transition to 'reasoning AI' and 'long thinking' AI systems," and that "these AI applications require much larger computational resources."

He further commented that "these systems produce more accurate results," citing that the "hallucination" phenomenon in generative AI has been "significantly reduced."

He also projected significant advancements in 'physical AI,' including robotics systems and autonomous vehicles. Yonhap News