NVIDIA's Explosive Earnings Report: Won the Numbers, Lost the Sentiment?

Author | Eric

The global AI chip leader $NVIDIA (NVDA.US)$After-hours release of the highly anticipated FY26 Q4 earnings report showed all financial metrics significantly surpassing expectations. Moreover, management provided guidance far exceeding market expectations. However, after-hours share prices closed lower as investors continued the previous earnings' 'sell-the-news' sentiment.

Let’s take a look at how impressive this earnings report truly is.

Three key highlights of the earnings report:

1. Network revenue has broken through the $10 billion mark ahead of schedule, marking another growth curve for NVLink.

NVIDIA's network revenue this quarter10.98 billion USD, growing by263%，exceeded the $10 billion threshold for the first time, outpacing market consensus by two quarters. Notably, since acquiring Mellanox, NVIDIA’s network revenue has grown more than tenfold.

This quarter, NVIDIA announced that it will provide $Amazon (AMZN.US)$ AWS has enabled NVLink to integrate with its in-house chips, while Spectrum-X Ethernet demonstrates strong scale-up and scale-across network momentum. Each rack is equipped with nine switching nodes, each containing two NVLink chips, and this number will increase in the future. The switching capacity corresponding to each rack is astonishing, marking another growth trajectory for NVLink.

Invested $95.2 billion to secure supply chain capacity, surging 89% quarter-over-quarter, and raised data center revenue guidance to $500 billion.

At last year’s GTCDC, NVIDIA's official keynote remains unforgettable. Starting from FY26Q1 (calendar Q1 2025) as mentioned in the keynote, according to financial reports, NVIDIA's FY26 data center business totaled $193.7 billion, which includes Hopper architecture products, implying that the potential revenue space for FY27 data center operations still has significant upside.$306.3 billion。This quarter, management explicitly stated that current order levels have exceeded the previous $500 billion revenue guidance.Since the advent of ChatGPT, data center revenue has grown nearly 13 times.It is expected that data centers will achieve quarter-over-quarter growth throughout FY27.

To ensure shipments of Blackwell and subsequent Rubin series, this quarter’s total supply-related commitments reached$95.2 billion, skyrocketing 89% quarter-over-quarter, pre-securing including $Taiwan Semiconductor (TSM.US)$ Including wafer and CoWoS packaging capacity, as well as Samsung, SK Hynix, $Micron Technology (MU.US)$ Including HBM, DRAM, and NAND production capacity.

3. Rarely proactively tightened Non-GAAP standards, reducing the gap between GAAP and Non-GAAP profits

NVIDIA has historically offered substantial stock incentives to employees,The proportion of stock incentives to revenue far exceeds that of other semiconductor companies, and its share of operating expenses is significant. Because stock incentives are typically excluded when calculating Non-GAAP metrics, this has led to a significant difference between NVIDIA’s GAAP and Non-GAAP net profits.

But includingBuffettvalue-oriented investors frequently criticize Non-GAAP and EBITDA financial metrics, arguing that stock incentives should also be reflected in the income statement as part of company expenditures.NVIDIA announced that starting from next quarter, the company’s Non-GAAP metrics will no longer exclude stock incentive figures, tightening the Non-GAAP standards, which reflects management’s confidence in future profit growth.

Core financial indicators for FY26 Q4:

- RevenueUSD 68.1 billion, growing by73%, up 20% quarter-over-quarter, significantly surpassing the market consensus expectation of $65.9 billion, with prior guidance at $65 billion.

- GAAP gross margin75%, up 2 percentage points year-over-year and 1.6 percentage points quarter-over-quarter, slightly above the market consensus expectation of 74.9%, with prior guidance at 74.8%; Non-GAAP gross margin75.2%, up 1.7 percentage points year-over-year and 1.6 percentage points quarter-over-quarter, slightly above the market consensus expectation of 75%, with prior guidance also at 75%.

- GAAP net profit$43 billion, growing by94%, up 35% quarter-over-quarter, far exceeding the market consensus expectation of $36.3 billion, with prior guidance at $35.21 billion; Non-GAAP net profitUSD 39 billion, growing by77%, up 26% quarter-over-quarter, far exceeding the market consensus expectation of $37.5 billion, with prior guidance at $36.73 billion.

FY26 Q4 Business Segment Performance:

- Revenue from the data center business, represented by AI computing chips and networking chipsUSD 62.3 billion, growing by75%, accounted for 92% of total revenue; among which, revenue from AI computing chips51.3 billion US dollars, growing by58%, network chip revenue11 billion US dollars , growing by263%。

- Gaming business revenue represented by desktop/laptop graphics cards and Switch console chips3.7 billion US dollars, growing by47%, accounting for 6% of total revenue.

- Professional visualization business revenue represented by workstation graphics cards and AI software1.3 billion US dollars, growing by159%, accounting for 2% of total revenue.

- Automotive business revenue represented by autonomous driving chips and robotics edge AI chips600 million US dollars, growing by6%, accounting for 1% of total revenue.

FY27 Q1 Guidance:

Management expects Q1 revenue to reachUSD 78 billion(excluding China data centers), significantly surpassing market consensus of USD 72.8 billion, driven primarily by the ramp-up of Blackwell.77%

GAAP gross margin74.9%, up 14.4 percentage points year-over-year and down 0.1 percentage points quarter-over-quarter. Non-GAAP gross margin75%, up 14.2 percentage points year-over-year and down 0.1 percentage points quarter-over-quarter.

GAAP net profit41.6 billion US dollars, growing by122%, higher than the market consensus expectation of 40.1 billion US dollars. Non-GAAP net profit41.8 billion US dollars, growing by119%, higher than the market consensus expectation of 41.4 billion US dollars.

Options Update:

From the options market perspective, the pre-earnings report expected volatility was around 6%, but after-hours trading closed with only a slight increase of 0.18%. If the market opens with this level of volatility, both call and put options would face significant IV Crush impacts, with the implied volatility (IV) of near-term expiring options falling more significantly.

If you remain bullish on NVIDIA's medium-term outlook, considering upcoming catalysts like the GTC conference and product roadmap announcements in March, a better approach is often not to chase short-term call options at the open. Instead, wait for the near-term implied volatility to drop from its earnings premium, then establish long exposure using longer-dated LEAPS calls, shifting the trading focus from betting on overnight volatility to profiting from trends.

If you already hold the underlying stock and expect it to trade range-bound in the short term, a more suitable post-earnings strategy is: when the stock price approaches the upper bound of the range or key psychological levels, sell slightly out-of-the-money (OTM) short-term call options to offset the time decay costs during the consolidation period. If the stock price remains range-bound without breaking out effectively, the above strategy can often generate income from option premiums within the trading range.

Summary

Overall, NVIDIA's earnings report once again refuted the notion of an AI bubble and responded to market concerns about older card depreciation and gross margin declines. It continued to support the AI semiconductor narrative in U.S. stocks, though NVIDIA itself remained a victim of the 'sell-the-news' sentiment.

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《NVIDIA Earnings Preview: Can GB300 Scaling and Rubin Acceleration Dispel the AI Bubble Debate?》

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