Margin Whiplash and Data Center Glory
NVIDIA turned in another blockbuster quarter with Q1 FY2026 revenue hitting $44.1 billion, a 12% bump from Q4 and an eye-popping 69% jump year-over-year. Yet behind the gleam of silicon lies a bit of regulatory soot: export restrictions on their H20 chips to China torpedoed $2.5 billion in unrealized sales and led to a $4.5 billion inventory charge. That H20 is starting to taste like reheated alphabet soup.
Still, core fundamentals remain dazzling. Data center revenue soared to $39.1 billion, up 73% YoY. Gaming brought in a record $3.8 billion, and operating cash flow was a Herculean $27.4 billion. Excluding the H20 misfire, gross margin would’ve been a god-tier 71.3%. With adjusted EPS at $0.96, Granny tips her hat—if she wore one not lined with gold leaf.
The outlook remains bullish. NVIDIA is guiding Q2 revenue to $45B despite forecasting an $8B hit from continued H20 export bans. GAAP margins are expected to rise to 71.8%, with ongoing demand for AI infrastructure— especially the Blackwell platform—keeping the gravy boat afloat.
Of course, Granny’s not daft. Operating income dropped 10% QoQ, and the China roadblock isn't clearing soon. But with fortress-like cash reserves, surging global AI demand, and leadership in every high-performance computing category, NVIDIA remains the crown jewel of silicon empire-building. The 10-for-1 stock split in June 2024 makes the shares more nibble-friendly too.
Granny’s Verdict: Allocate. NVDA remains a generational compounder. H20 hiccups or not, Granny’s adding a ladleful to her AI stew.
