China business shaken… NVIDIA falls 3% in after-hours trading after earnings [Comprehensive]

NVIDIA Q2 earnings release and conference call

Revenue $46.74 billion · EPS $1.05

"AI infrastructure spending could reach $3 to $4 trillion by 2030"

"Efforts to resolve geopolitical issues with China"… China excluded from Q3 guidance

Global AI chip leader NVIDIA reported Q2 (May–July) results that slightly beat market expectations. However, the stock fell in after-hours trading. There are concerns that data center revenue, a core business segment, is no longer showing steep growth, and analysts say uncertainty about chip exports to China remains significant.

On the 27th (local time), NVIDIA said it posted Q2 revenue of $46.74 billion (approximately 65,155,500,000,000 won) and earnings per share (EPS) of $1.05 (1,463 won). This slightly exceeded Wall Street revenue estimate of $46.06 billion and EPS estimate of $1.01 compiled by market research firm LSEG. Revenue rose 56% year-on-year.

CNBC said the quarterly results showed NVIDIA has firmly established itself amid the build-out of global AI infrastructure. Colette Kress, NVIDIA's Chief Financial Officer (CFO), said on the conference call after the earnings release, "We expect AI infrastructure spending to reach $3 to $4 trillion by 2030."

However, the data center segment, a core business, fell short of market expectations. Data center revenue, including NVIDIA's graphics processing units (GPUs), was $41.1 billion, up 56% year-on-year. The market had expected at least $41.3 billion. CNBC reported that the absence of H20 chip sales to China also had an impact.

NVIDIA said the suspension of H20 exports to China this quarter caused a $4.5 billion loss, and that if sales had been possible within the quarter, it could have added $8 billion to revenue. NVIDIA said it did not sell H20 chips to China during the quarter but shipped $180 million worth of H20 inventory to non-China customers and profited.

NVIDIA's 'China risk' continues. H20 chips were restricted from export to China by the Donald Trump administration in April but received approval to resume sales last month. Recently, NVIDIA made an unusual agreement with the U.S. government to give 15% of sales from H20 chip sales to China. Reuters reported that uncertainty continues amid escalating U.S.-China tensions.

CFO Kress said, "We continue to work to resolve geopolitical issues," adding, "If geopolitical issues are resolved, we could generate $2 to $5 billion in H20 sales from China this quarter."

NVIDIA forecast Q3 revenue of $54 billion, more than a 50% year-on-year increase. This also slightly exceeded Wall Street's estimate of $53.14 billion and does not include H20 chip sales to China.

Despite beating market expectations, concerns about weak future exports to China sent NVIDIA's stock tumbling more than 3% in after-hours trading. Before the earnings release, it closed the regular session down about 0.09%. After the release, in after-hours trading it at one point widened the drop to 5.35% and is currently down more than 3%.

Noh Jeong-dong Hankyung.com reporter dong2@hankyung.com