Nvidia Beats Estimates Again, but Shares Dip on AI Durability Questions

Nvidia (NVDA) has once again surpassed quarterly revenue estimates and lifted its guidance, but it slipped 1.6% in extended trading as investors questioned the long-term durability of the artificial intelligence (AI) build-out. CEO Jensen Huang aimed to reassure the market that the world's most valuable chipmaker can sustain its blockbuster growth through a broad base of customers and new product lines.

The company expects second-quarter revenue of $91 billion, plus or minus 2%, exceeding Wall Street estimates of $86.8 billion, compiled by LSEG. Nvidia also announced an $80 billion share repurchase programme and increased its quarterly cash dividend to $0.25 per share from $0.01.

"Nvidia delivered another beat, but at this point that's essentially priced in as it keeps beating quarter after quarter," said eMarketer analyst Jacob Bourne. "The lingering question is whether it can convince investors the AI build-out has durability into 2027 and 2028, especially as the narrative shifts toward inference workloads and competing silicon from Google, Amazon, AMD and Intel."

AI Spending Continues to Surge

Spending on AI infrastructure continues to grow rapidly, with US tech giants including Alphabet, Amazon, and Microsoft expected to spend more than $700 billion on AI this year, a sharp jump from approximately $400 billion in 2025. Nvidia's chips are used in virtually every major data centre worldwide, powering the largest and most advanced AI models.

Huang told analysts that he believes Nvidia will grow faster than its "hyperscale" customers, pointing to a new sub-segment of customers in its data centre business that includes AI-specific cloud firms. Sales to those customers were roughly equal to the large cloud players but grew faster quarter-over-quarter. "We should be growing faster than hyperscale capex," Huang said.

Competition and New Products

While many of Nvidia's biggest customers rely heavily on its expensive processors, they are also pouring funds into developing their own custom chips — posing a risk to Nvidia's long-held dominance. Nvidia also faces competition from Intel and AMD, which have touted large revenue opportunities from selling CPUs for the inference market.

Nvidia has made moves to defend its position, unveiling a new central processor and AI system built on technology from Groq, a chip start-up specialising in inference, in March. During the conference call, Huang said Nvidia's new "Vera" CPUs give it access to a new $200 billion market. Nvidia expects $20 billion in revenue from Vera chip sales by the end of this fiscal year, which Huang confirmed was not included in the company's earlier $1 trillion estimate of "Blackwell" and "Rubin" AI chips between 2025 and 2027.

"I expect Vera to be the second largest sales contributor beyond the $1 trillion in Blackwell and Rubin chips," Huang said. "All of our customers are quite excited about Vera."

However, Huang also conceded that "my sense is that we'll be supply-constrained through the entire life of Vera Rubin," referring to a technology platform combining both chips that will launch later this year.

First-Quarter Results

Nvidia reported first-quarter revenue of $81.6 billion, beating analysts' average estimate of $78.9 billion. Data centre revenue came in at $75.2 billion, compared with estimates of $72.8 billion. On an adjusted basis, the company earned $1.87 per share, above market estimates of $1.76.

It is spending heavily to avoid supply-chain snags during a global memory chip crunch. The company said its supply rose to $119 billion in the fiscal first quarter, up from $95.2 billion the previous quarter.

Nvidia also disclosed $30 billion worth of cloud computing agreements, up sequentially from $27 billion, which it said would help its research and development efforts.

Market Sentiment: 

The sentiment is cautiously optimistic, reflecting a classic "beat but not enough" reaction. Nvidia's fundamentals remain exceptionally strong — a $91 billion revenue forecast, $80 billion buyback, and dividend increase would normally drive shares higher. However, the 1.6% after-hours decline indicates that investors are increasingly focused on the long-term narrative: can Nvidia maintain its growth trajectory as competition intensifies from custom chips (Google TPUs, Amazon Trainium), rival GPUs (AMD), and inference-specialised hardware (Intel, Groq)? The Vera CPU announcement addresses this by expanding Nvidia's addressable market by $200 billion, potentially offsetting share losses in core AI training chips. The supply constraint warning, while familiar, suggests demand remains insatiable but also highlights execution risk. Rising gasoline prices, while not directly impacting Nvidia, could feed into broader inflation concerns that affect tech valuations. For now, Nvidia remains the undisputed leader in AI silicon, but the market is now pricing in a future where that dominance is contested. The $1 trillion sales forecast through 2027 provides a multi-year growth runway, but the incremental upside will need to come from new products like Vera and successful navigation of the inference shift. Investors are watching not just for beats, but for evidence that Nvidia can expand its moat. This quarter delivered that evidence, but the market's muted reaction suggests a higher bar going forward.

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