Nvidia Shares Drop on Earnings Beat

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NVIDIA shares fell ~4-5% in after-hours trading erasing some pre-earnings gains despite the overall beat.

This reaction stems from a mix of high market expectations, subtle misses, and broader concerns.
Slight Miss on Key Segment: Data Center revenue ($41.1B) came in just below estimates (~$41.2-41.3B), which is the core driver of NVIDIA’s growth.

At NVIDIA’s elevated valuation (50x forward P/E), even a solid beat wasn’t enough. The revenue and EPS tops were modest (1-4% above consensus), and guidance, while strong, didn’t exceed the most optimistic forecasts

Market sentiment was primed for a “perfect” report, amplified by pre-earnings hype and options implying a ~6% move.

Broader worries about an AI bubble or plateauing investments contributed. Recent reports (e.g., MIT study showing 95% of firms see no ROI on AI) and competitive pressures from China.

NVIDIA stock has averaged a ~7% drop in the week post-earnings over the last four quarters, often due to “sell-the-news” dynamics

NVIDIA’s outlook for the third quarter of fiscal 2026 is as follows:

Revenue is expected to be $54.0 billion, plus or minus 2%. The company has not assumed any H20 shipments to China in the outlook.
GAAP and non-GAAP gross margins are expected to be 73.3% and 73.5%, respectively, plus or minus 50 basis points. The company continues to expect to exit the year with non-GAAP gross margins in the mid-70% range.
GAAP and non-GAAP operating expenses are expected to be approximately $5.9 billion and $4.2 billion, respectively. Full year fiscal 2026 operating expense growth is expected to be in the high-30% range.
GAAP and non-GAAP other income and expense are expected to be an income of approximately $500 million, excluding gains and losses from non-marketable and publicly-held equity securities.
GAAP and non-GAAP tax rates are expected to be 16.5%, plus or minus 1%, excluding any discrete items.

Expectations for Q3 FY2026 China H20 Sales

H20 chips, designed as a China-specific variant to comply with U.S. export controls (by throttling performance from the H100), face a complex landscape. No sales are expected in Q3 as there is uncertainty on both the US and the China side.