NVIDIA fell in after-hours trading; when 'beating expectations' becomes the norm, the market no longer seeks another strong earnings report, but a new narrative capable of lifting the long-term growth trajectory once again.
$NVIDIA (NVDA.US)$ Once again delivering a report card of 'better-than-expected results and raised guidance,' yet the market reaction shows that for the global AI leader, robust growth no longer automatically translates into higher share prices.
NVIDIA reported first-quarter revenue of $81.6 billion, exceeding the market expectation of $79 billion and representing an 85% year-over-year increase; adjusted earnings per share came in at $1.87, above the expected $1.75. The company projected July-quarter revenue at $91 billion, also surpassing the FactSet consensus estimate of $87.3 billion.
Despite this, NVIDIA’s stock ultimately declined by approximately 1% in after-hours trading on Wednesday. The company maintained its adjusted gross margin target at 75%, consistent with the most recent quarter and alleviating concerns about margin compression, yet this was still insufficient to drive the stock higher.
Ryan Lee, Senior Vice President of Products and Strategies at Direxion, wrote, 'The market demands perfection from the world’s largest companies.' Jake Behan, Head of Capital Markets at Direxion, added that when expectations are already so elevated, even a strong earnings report may weigh on the stock if it does not meaningfully raise long-term outlooks.
Results beat expectations across the board, but the element of surprise is no longer scarce.
Nearly all of NVIDIA’s core metrics for the quarter surpassed Wall Street expectations. Revenue growth accelerated to 85% year-over-year from 73.2% in the prior quarter and also exceeded the 62% year-over-year growth recorded in the November quarter last year. Adjusted earnings per share likewise exceeded market forecasts.
Data Center remains the largest pillar. Data Center revenue for the first fiscal quarter reached $75.2 billion, up 92% year-over-year and 21% sequentially, surpassing the FactSet expectation of $73.1 billion. The company attributed the growth to sustained strong demand for its Blackwell architecture.
Thomas Monteiro, analyst at Investing.com, considers this 'the cleanest beat in several quarters' for NVIDIA, as the results not only cleared a very high bar but also addressed some of the broader market concerns surrounding AI-related trades. He sees no clear signs of weakening demand at present.
However, investor sentiment turned more cautious. Jeffrey Favuzza, trader analyst at Jefferies, described the after-hours move as a 'knife fight.' He believes that following this earnings report, buy-side analysts may not significantly raise their profit forecasts for 2027 and 2028.
Data Center continues to accelerate, with networking business emerging as a key driver.
The quality of NVIDIA's growth is increasingly reflected in the internal structure of its data center business. Beyond GPU demand, networking is becoming a more significant source of revenue.
The company reported record data center networking revenue of $14.8 billion this quarter, up 199% year-over-year and 35% quarter-over-quarter, exceeding analysts’ expectations of $14 billion. More broadly, computing and networking revenue totaled $75.6 billion, up 88% year-over-year and 21% quarter-over-quarter.
CFO Colette Kress stated during the earnings call that the Blackwell architecture has become 'ubiquitous,' having been adopted and deployed by major hyperscale cloud providers, cloud service providers, and leading model developers. She also noted that OpenAI’s new GPT-5.5 model relies on Blackwell.
This matters to the market. AI infrastructure spending is no longer limited to purchasing individual chips but is shifting toward systems, networking, and cluster capabilities. According to Monteiro, NVIDIA is capturing a larger share of AI infrastructure spending, as customers are buying not only chips but also the systems that connect and scale them.
Wall Street Seeks a New Narrative: CPUs, Inference, and Agentic AI
NVIDIA’s most familiar investment narrative has been GPUs, but Wall Street is now demanding more. Frank Lee of HSBC Holdings previously wrote that GPU momentum has become a 'relatively less meaningful' investment narrative, as cloud companies’ AI capital expenditures are shifting toward other areas, including memory, networking, and server CPUs.
NVIDIA is attempting to outline new growth trajectories. As AI shifts from training to inference and further evolves into agentic AI, the importance of CPUs is rising. During the earnings call, Jensen Huang stated that billions of AI agents could emerge in the future, driving increased demand for inference hardware. He explained that 'thinking' occurs on GPUs, while orchestration primarily runs on CPUs.
Colette Kress said that NVIDIA’s Vera CPU has opened up an entirely new $200 billion addressable market for the company. She added that NVIDIA already has visibility into nearly $20 billion in CPU revenue for this year, which will lay the foundation for NVIDIA to become a global leader in CPU supply.
NVIDIA’s Vera CPU will work in tandem with its next-generation Rubin GPU. Jensen Huang stated that the company expects to sell 'millions of Rubin units,' with one Vera CPU connected to every two Rubin GPUs. This indicates that CPUs are not simply replacing GPUs but are integrated into NVIDIA’s system-level sales model.
Shareholder returns have increased substantially, yet some still consider it insufficient.
NVIDIA is simultaneously seeking to broaden its investor base through capital returns. The company announced an increase of $80 billion to its share repurchase program, adding to the remaining $38.5 billion from prior authorizations, thereby further expanding its buyback capacity.
In the first quarter of the fiscal year, NVIDIA repurchased $19.31 billion worth of shares—more than four times the $3.82 billion in the prior quarter and a 37% increase year-over-year. The company also raised its quarterly dividend from $0.01 to $0.25 per share, lifting the implied dividend yield from 0.02% to 0.45%.
This move addresses some investor concerns. Vivek Arya of BofA previously noted that NVIDIA stock is already held by approximately 78% of active fund managers, and such high existing ownership could pose challenges for future share price appreciation; other large technology firms have previously used higher cash returns to attract dividend- and income-oriented investors.
However, the scale of returns still falls short of full market expectations. Jeffrey Favuzza remarked that the $80 billion buyback was 'slightly below expectations' for some investors. According to data from Birinyi Associates as of mid-April, only Apple has ever announced a larger repurchase authorization.
The greater test lies in long-term expectations.
This earnings report showed no signs of slowing AI demand or margin pressure, yet it did not fully alleviate Wall Street’s long-term concerns.
John Belton, portfolio manager at Gabelli Funds, previously stated that NVIDIA is a primary beneficiary of AI-related capital spending, but the key question over the next few years is whether this spending will generate returns. He noted that following the latest earnings reports, trends in AI spending by hyperscale cloud providers point to approximately $700 billion for this year.
Customer concentration also poses a risk. Belton indicated that roughly half of NVIDIA’s revenue comes from a small number of hyperscale clients, who are significantly drawing down their free cash flow. Investors will be watching closely to see whether NVIDIA can expand its customer base.
NVIDIA is also adjusting its disclosure framework. The company has restructured its reporting segments into two main categories: 'Data Center' and 'Edge Computing,' with Data Center further broken down into hyperscale cloud providers and ACIE—AI Cloud, Industrial, and Enterprise. Michael Monaghan, portfolio manager at Founder ETFs, said this change reflects Jensen Huang’s view on growth vectors, noting that sovereign AI, enterprise, and physical AI have become substantial enough to warrant separate disclosure.
Thus, NVIDIA’s issue is not weak performance, but rather that its strength has already been fully priced in. For Wall Street, the next step is not another earnings beat, but new evidence robust enough to reset and elevate the long-term growth trajectory.
Editor/Rocky