NVIDIA Corporation

Good afternoon. My name is Sarah and I will be your conference operator today. At this time, I would like to welcome everyone to NVIDIA's first quarter fiscal 2026 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. Toshiya Hari, you may begin your conference.

Thank you. Good afternoon, everyone, and welcome to NVIDIA's conference call for the first quarter of fiscal 2026. With me today from NVIDIA are Jensen Wong, President and Chief Executive Officer, and Colette Kress, Executive Vice President and Chief Financial Officer. I'd like to remind you that our call is being webcast live on NVIDIA's Investor Relations website. The webcast will be available for replay until the conference call to discuss our financial results for the second quarter of fiscal 2026. The content of today's call is NVIDIA's property. It can't be reproduced or transcribed without our prior written consent. During this call, we may make forward-looking statements based on current expectations. These are subject to a number of significant risks and uncertainties, and our actual results may differ materially. For a discussion of factors that could affect our future financial results in business, please refer to the disclosure in today's earnings release, our most recent forms 10-K and 10-Q, and the reports that we may file on Form 8-K with the Securities and Exchange Commission. All our statements are made as of today, May 28th, 2025, based on information currently available to us. Except as required by law, we assume no obligation to update any such statements. During this call, we will discuss non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our CFO commentary, which is posted on our website. With that, let me turn the call over to Colette.

Thank you, Toshio. We delivered another strong quarter with revenue of $44 billion, up 69% year over year, exceeding our outlook in what proved to be a challenging operating environment. Data center revenue of 39 billion grew 73% year on year. AR workloads have transitioned strongly to inference and AI factory build outs are driving significant revenue. Our customers commitments are firm. On April 9th, the US government issued new export controls on H20, our data center GPU designed specifically for the China market. We sold H20 with the approval of the previous administration. Although our H20 has been in the market for over a year and does not have a market outside of China, the new export controls on H20 did not provide a grace period to allow us to sell through our inventory. In Q1, we recognized $4.6 billion in H-20 revenue, which occurred prior to April 9th, but also recognized a $4.5 billion charge as we wrote down inventory and purchase obligations tied to orders we had received prior to April 9th. We were unable to ship 2.5 billion in H-20 revenue in the first quarter due to the new export controls. The 4.5 billion charge was less than what we initially anticipated as we were able to reuse certain materials. We are still evaluating our limited options to supply data center compute products compliant with the US government's revised export control rules. Losing access to the China AI accelerator market, which we believe will grow to nearly 50 billion, would have a material adverse impact on our business going forward and benefit our foreign competitors in China and worldwide. Our Blackwell ramp, The fastest in our company's history drove a 73% year-on-year increase in data center revenue. Blackwell contributed nearly 70% of data center compute revenue in the quarter with a transition from Hopper nearly complete. The introduction of GB 200 NBL was a fundamental architectural change to enable data center scale workloads and to achieve the lowest cost per inference token. While these systems are complex to build, we have seen a significant improvement in manufacturing yields and rack shipments are moving to strong rates to end customers. GB200 NBL racks are now generally available for model builders, enterprises, and sovereign customers to develop and deploy AI. On average, major hyperscalers are each deploying nearly 1,000 NBL72 racks or 72,000 Blackwell GPUs per week and are on track to further ramp output this quarter. Microsoft, for example, has already deployed tens of thousands of Blackwell GPUs and is expected to ramp to hundreds of thousands of GB200s with OpenAI as one of its key customers. Key learnings from the GB200 ramp will allow for a smooth transition to the next phase of our product roadmap, Blackwell Ultra. Sampling of GB300 systems began earlier this month at the major CSPs, and we expect production shipments to commerce later this quarter. GB300 will leverage the same architecture, same physical footprint, and the same electrical and mechanical specifications as GB200. The GB300 drop-in design will allow CSPs to seamlessly transition their systems and manufacturing used for GB200 while maintaining high yields. B300 GPUs with 50% more HBM will deliver another 50% increase in dense FP4 inference compute performance compared to the B200. We remain committed to our annual product cadence with our roadmap extending through 2028, tightly aligned with the multiple year planning cycles of our customers. We are witnessing a sharp jump in inference demand. OpenAI, Microsoft, and Google are seeing a step function leap in token generation. Microsoft processed over 100 trillion tokens in Q1. a five-fold increase on a year-over-year basis. This exponential growth in Azure OpenAI is representative of strong demand for Azure AI Foundry, as well as other AI services across Microsoft's platform. Inference-serving startups are now serving models using B200, tripling their token generation rate and corresponding revenues for high-value reasoning models such as DeepSeek R1, as reported by Artificial Analysis. NVIDIA Dynamo on Blackwell NVL72 turbocharges AI inference throughput by 30x for the new reasoning models sweeping the industry. Developer engagements increased with adoption ranging from LLM providers such as Perplexity to financial services institutions such as Capital One, who reduced agentic chatbot latency by 5x with Dynamo. In the latest MLPerf inference results, we submitted our first results using GB200 and BL72, delivering up to 30x higher inference throughput compared to our 8 GPU H200 submission on the challenging LAMA 3.1 benchmark. This feat was achieved through a combination of tripling the performance per GPU, as well as 9x more GPUs. all connected on a single NVLink domain. And while Blackwell is still early in its life cycle, software optimizations have already improved its performance by 1.5x in the last month alone. We expect to continue improving the performance of Blackwell through its operational life as we have done with Hopper and Ampro. For example, we increased the inference performance of Hopper by four times over two years. This is the benefit of NVIDIA's programmable CUDA architecture and rich ecosystem. The pace and scale of AI factory deployments are accelerating with nearly 100 NVIDIA-powered AI factories in flight this quarter, a two-fold increase year-over-year, with the average number of GPUs powering each factory also doubling in the same period. And more AI factory projects are starting across industries and geographies. NVIDIA's full stack architecture is underpinning AI factory deployments as industry leaders like AT&T, BYD, Capital One, Foxconn, MediaTek, and Telenor are strategically vital sovereign clouds like those recently announced in Saudi Arabia, Taiwan, and the UAE. We have a line of sight to projects requiring tens of gigawatts of NVIDIA AI infrastructure in the not too distant future. The transition from generative to agentic AI, AI capable of perceiving, reasoning, planning, and acting will transform every industry, every company and country. We envision AI agents as a new digital workforce capable of handling tasks ranging from customer service to complex decision-making processes. We introduced the LAMA NEMOTRON family of open reasoning models designed to supercharge identic AI platforms for enterprises. Built on the LAMA architecture, these models are available as NIMS or NVIDIA inference microservices with multiple sizes to meet diverse deployment needs. Our post-training enhancements have yield a 20% accuracy boost and a 5x increase in inference speed. Leading platform companies, including Accenture, Cadence, Deloitte, and Microsoft, are transforming work with our reasoning models. NVIDIA, NEMO microservices are generally available across industries or being leveraged by leading enterprises to build, optimize, and scale AI applications. With NEMO, Cisco increased model accuracy by 40% and improved response time by 10x in its code assistant. NASDAQ realized a 30% improvement in accuracy and response time in its AI platforms search capabilities. And Shell's custom LLM achieved a 30% increase in accuracy when trained with NVIDIA NEMO. NEMO's parallelism techniques accelerated model training time by 20% when compared to other frameworks. We also announced a partnership with Yum! Brands, the world's largest restaurant company, to bring NVIDIA AI to 500 of its restaurants this year and expanding to 61,000 restaurants over time to streamline order taking, optimize operations, and enhance service across its restaurants. For AI-powered cybersecurity, leading companies like Check Point, CloudStrike, and Palo Alto Networks are using NVIDIA's AI security and software stack to build, optimize, and secure agentic workflows, with CloudStrike realizing 2x faster detection triage with 50% less compute cost. Moving to networking, sequential growth in networking resumed in Q1 with revenue up 64% quarter over quarter to 5 billion. Our customers continue to leverage our platform to efficiently scale up and scale out AI factory workloads. We created the world's fastest switch, NVLink. For scale up, our NVLink compute fabric in its fifth generation offers 14x the bandwidth of PCIe Gen 5. NVLink 72 carries 130 terabytes per second of bandwidth in a single rack, equivalent to the entirety of the world's peak internet traffic. NVLink is a new growth vector and is off to a great start, with Q1 shipments exceeding a billion dollars. At Computex, we announced NVLink Fusion. Hyperscale customers can now build semi-custom CCUs and accelerators that connect directly to the NVIDIA platform with NVLink. We are now enabling key partners, including ASIC providers, such as MediaTek, Marvell, Alchip Technologies, and Astera Labs, as well as CPU suppliers, such as Fujitsu, and Qualcomm to leverage NVLink Fusion to connect our respective ecosystems. For scale-out, our enhanced Ethernet offerings deliver the highest throughput, lowest latency networking for AI. SpectrumX posted strong sequential and year-on-year growth and is now annualizing over $8 billion in revenue. Adoption is widespread across major CSPs and consumer internet companies, including CoreWeave, Microsoft Azure, Oracle Cloud, and XAI. This quarter, we added Google Cloud and Meta to the growing list of SpectrumX customers. We introduced Spectrum X and Quantum X, silicon photonics switches featuring the world's most advanced co-package optics. These platforms will enable next level AI factory scaling to millions of DPUs through the increasingly power efficiency by 3.5X and network resiliency by 10X while accelerating customer time to market by 1.3X. Transitioning to a quick summary of our revenue by geography. China, as a percentage of our data center revenue, was slightly below our expectations and down sequentially due to H20 export licensing controls. For Q2, we expect a meaningful decrease in China data center revenue. As a reminder, while Singapore represented nearly 20% of our Q1 build revenue, as many of our large customers use Singapore for centralized invoicing, our products are almost always shipped elsewhere. Note that over 99% of H100, H200, and Blackwell data center compute revenue billed to Singapore was for orders from US-based customers. Moving to gaming and AI PCs. Gaming revenue was a record 3.8 billion, increasing 48% sequentially and 42% year on year. Strong adoption by gamers, creatives, and AI enthusiasts have made Blackwell our fastest ramp ever. Against a backdrop of robust demand, we greatly improved our supply and availability in Q1 and expect to continue these efforts in Q2. AI is transforming PC and creator and gamers. With a 100 million user installed base, GeForce represents the largest footprint for PC developers. This quarter, we added to our AI PC laptop offerings, including models capable of running Microsoft's CoPilot Plus. This past quarter, we brought Blackwell architecture to mainstream gaming with its launch of GeForce RTX 5060 and 5060 Ti starting at just $299. The RTX 5060 also debuted in laptops starting at $1,099. These systems that double the frame rate and slash latency. These GeForce RTX 5060 and 5060 Ti desktop GPUs and laptops are now available. In console gaming, the recently unveiled Nintendo Switch 2 leverages NVIDIA's neural rendering and AI technologies, including next generation custom RTX GPUs with DLSS technology to deliver a giant leap in gaming performance to millions of players worldwide. Nintendo has shipped over 150 million Switch consoles to date, making it one of the most successful gaming systems in history. Moving to pro visualization, revenue of 509 million was flat sequentially and up 19% year on year. Tariff related uncertainty temporarily impacted Q1 systems and demand for our AI workstations is strong and we expect sequential revenue growth to resume in Q2. NVIDIA DGX Spark and Station revolutionize personal computing by putting the power of an AI supercomputer in a desktop form factor. DGX Spark delivers up to one petaflop of AI compute while DGX Station offers an incredible 20 petaflops and is powered by the GB300 super chip. DGX Spark will be available in calendar Q3 and DGX Station later this year. We have deepened Omniverse's integration and adoption into some of the world's leading software platforms, including Databricks, SAP, and Schneider Electric. New Omniverse blueprints such as MEGA for at-scale robotic fleet management are being leveraged in Kion Group, Pegatron, Accenture, and other leading companies to enhance industrial operations. At Computex, we showcased Omniverse's great traction with technology manufacturing leaders, including TSMC, Quanta, Foxconn, Pegatron. Using Omniverse, TSMC saves months in work by designing fabs virtually. Foxconn accelerates thermal simulations by 150x, and Pegatron reduced assembly line defects rates by 67%. Lastly, with our automotive group, revenue was 567 million, down 1% sequentially, but up 72% year-on-year. Year-on-year growth was driven by the ramp of self-driving across a number of customers and robust end demand for NEVs. We are partnering with GM to build the next-gen vehicles, factories, and robots using NVIDIA AI, simulation, and accelerated computing. And we are now in production with our full-stack solution for Mercedes-Benz, starting with the new CLA, hitting roads in the next few months. We announced Isaac Group N1, the world's first open, fully customizable foundation model for humanoid robots. enabling generalized reasoning and skill development. We also launched new open NVIDIA Cosmo World Foundation models. Leading companies include 1X, Agility Robots, Robotics, Figure AI, Uber, and Wabi. We've begun integrating Cosmos into their operations for synthetic data generation, while Agility Robotics, Boston Dynamics, and XPEN Robotics are harnessing Isaac Simulation to advance their humanoid efforts. GE Healthcare is using the new NVIDIA ISAAC platform for healthcare simulation built on NVIDIA Omniverse and using NVIDIA Cosmos, the platform speeds development of robotic imaging and surgery systems. The era of robotics is here. Billions of robots, hundreds of millions of autonomous vehicles and hundreds of thousands of robotic factories and warehouses will be developed. All right, moving to the rest of the P&L. Gap gross margins and non-gap gross margins were 60.5% and 61%, respectively. Excluding the $4.5 billion charge, Q1 non-gap gross margins would have been 71.3%, slightly above our outlook at the beginning of the quarter. Sequentially, gap operating expenses were up 7% and non-gap operating expenses were up 6%, reflecting higher compensation and employee growth. Our investments include expanding our infrastructure capabilities and AI solutions, and we plan to grow these investments throughout the fiscal year. In Q1, we returned a record $14.3 billion to shareholders in the form of share repurchases and cash dividends. Our capital return program continues to be a key element of our capital allocation strategy. Let me turn to the outlook for the second quarter. Total revenue is expected to be 45 billion, plus or minus 2%. We expect modest sequential growth across all of our platforms. In data center, we anticipate the continued ramp of Blackwell to be partially offset by a decline in China revenue. Note, our outlook reflects a loss in H20 revenue of approximately $8 billion for the second quarter. Gap and non-gap gross margins are expected to be 71.8% and 72% respectively, plus or minus 50 basis points. We expect better Blackwell profitability to drive modest sequential improvement in gross margins. We are continuing to work towards achieving gross margins in the mid-70s range late this year. Gap and non-gap operating expenses are expected to be approximately 5.7 billion and 4 billion respectively. And we continue to expect full year fiscal year 26 operating expense growth to be in the mid 30% range. Gap and non-gap other income and expenses are expected to be an income of approximately 450 million, excluding gays and losses from non-marketable and publicly held equity securities. Gap and non-gap tax rates are expected to be 16.5%, plus or minus 1%, excluding any discrete items. Further financial details are included in the CFO commentary and other information available on our IR website, including a new financially information AI agent. Let me highlight upcoming events for the financial community. We will be at the B of A Global Technology Conference in San Francisco on June 4th, the Rosenblatt Virtual AI Summit and NASDAQ Investor Conference in London on June 10th, and GTC Paris at VivaTech on June 11th in Paris. We look forward to seeing you at these events. Our earnings call to discuss the results of our second quarter of fiscal 2026 is scheduled for August 27. Well, now let me turn it over to Jensen to make some remarks.