NVDA Q1 Earnings Call: Export Controls and AI Demand Shape Outlook

Leading designer of graphics chips Nvidia (NASDAQ: NVDA) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 69.2% year on year to $44.06 billion. Its non-GAAP EPS of $0.81 per share was 8% above analysts’ consensus estimates.

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StockStory’s Take

Nvidia’s first quarter results were driven by rapid adoption of its Blackwell data center platform and rising inference AI workloads, as management described an “exponential” leap in demand from customers such as Microsoft, Google, and OpenAI. CEO Jensen Huang attributed much of the quarter’s growth to the company’s accelerated transition to Blackwell GPUs and the scale-up of AI factory deployments globally. However, CFO Colette Kress detailed a significant disruption from new U.S. export controls on the H20 GPU for China, leading to a $4.5 billion inventory write-down and a $2.5 billion shortfall in anticipated China revenue. Despite these headwinds, management highlighted manufacturing improvements and strong customer commitments.

Looking ahead, Nvidia’s outlook is shaped by the continued ramp of Blackwell products, expanding enterprise AI adoption, and a sharp increase in demand for reasoning and agentic AI models. Kress emphasized that U.S. export restrictions on China will meaningfully reduce data center revenue from that region this year, with limited near-term options for compliant products. Huang noted that global AI infrastructure build-outs are at an early stage, with large-scale projects underway in the U.S., Europe, and the Middle East. Management expects the proliferation of sovereign and enterprise AI deployments to offset China headwinds, but acknowledged that the market for AI accelerators in China, estimated at $50 billion, remains largely inaccessible.

Key Insights from Management’s Remarks

Nvidia’s leadership highlighted the impact of rapid Blackwell adoption, escalating inference demand, and the material effects of China export bans on Q1 performance.

• Blackwell platform transition: The company completed a fast ramp to its new Blackwell GPUs, which now account for nearly 70% of data center compute revenue, enabling large-scale customer deployments and supporting a surge in inference workloads.
• Export controls disrupt China business: U.S. government restrictions on H20 GPUs for China sharply reduced addressable market access, forced a $4.5 billion inventory write-down, and prevented $2.5 billion in expected Q1 China-related revenue.
• AI inference demand accelerates: Management described a “step function” increase in demand for AI inference, especially for reasoning models that require significantly more compute. Customers like OpenAI and Microsoft reported a fivefold rise in token generation on Nvidia platforms.
• Networking product momentum: Enhanced networking offerings, including NVLink and SpectrumX, showed strong uptake among cloud service providers, with SpectrumX now annualizing over $8 billion in revenue and adoption expanding to new hyperscale customers.
• Enterprise and industrial AI adoption: The company launched new enterprise AI servers (RTX Pro, DGX Spark, DGX Station) and reported early uptake in industrial automation and robotics, signaling broader diversification beyond hyperscale cloud deployments.

Drivers of Future Performance

Nvidia’s guidance is influenced by geopolitical risks, ongoing Blackwell ramp, and growing enterprise and sovereign AI investment.

• China headwinds persist: Management expects a meaningful decline in China data center revenue due to ongoing U.S. export controls, with limited ability to serve that market in the near term and no immediate product replacements for H20.
• Blackwell and enterprise AI expansion: The company anticipates continued global demand for Blackwell GPUs and its enterprise AI solutions, driven by the rise of agentic AI workloads, planned build-outs of national AI factories, and increasing on-premise adoption by large enterprises.
• Networking and new product launches: Growth in high-performance networking products and the introduction of next-generation GPUs (such as the upcoming GB300) are expected to support margin performance and extend Nvidia’s reach into new customer segments, despite ongoing supply chain investments and margin pressure from R&D and infrastructure.

Catalysts in Upcoming Quarters

Over the coming quarters, the StockStory team will monitor (1) the pace of Blackwell and GB300 GPU adoption and production output, (2) the impact of export controls on China revenue and any regulatory developments, and (3) the scale and timing of enterprise and sovereign AI infrastructure deployments globally. We also see networking product momentum and next-generation launches as key watchpoints for sustained growth.

Nvidia currently trades at a forward P/E ratio of 28.6×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it’s free).

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