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 earnings 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, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. So, Shiahari, you may begin your conference.

Thank you, and good afternoon, everyone. Welcome to NVIDIA's conference call for the first quarter of fiscal 2027. With me today from NVIDIA are Jensen Wong, President and Chief Executive Officer, and Colette Kress, Executive Vice President and Chief Financial Officer. 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 2027. 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 and business, please refer to the disclosure in today's earnings release, our most recent forms 10K and 10Q, and the reports that we may file on Form 8K with the Securities and Exchange Commission. All our statements are made as of today, May 20th, 2026, 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, Tashia. We delivered an exceptional quarter with revenue, operating income, and free cash flow exceeding our prior records. Total revenue of $82 billion was up 85% year-over-year and 20% sequentially. This marked our third consecutive quarter of year-over-year acceleration and the 14th straight quarter of sequential growth, a significant feat given the sheer size and complexity of our manufacturing operations. The $13.5 billion sequential revenue increase was also a record. We capitalized on the inflection in inference demand by ramping Blackwell systems across our diverse and customer base, from hyperscalers to model makers to AI cloud providers and sovereign customers. In Q1, we also allocated capital effectively across R&D, investments in our ecosystem, and share repurchases. We returned a record $20 billion to our shareholders while executing strategic investments, both upstream supply chain and downstream go-to-market ecosystem. This is critical to the market's development and our long-term position. Data center revenue of $75 billion was up 92% year-over-year and 21% sequentially, driven by sustained strength in our Blackwell architecture. And demand for GB300 and BL72 was particularly strong, with frontier model builders and hyperscalers each having cumulatively deployed hundreds and thousands of Blackwell GPUs, marking the fastest product ramp in our company's history. Race Blackwell is the fastest training system, as well as the lowest token generation cost at inference. SpectrumX, our end-to-end Ethernet platform purpose-built for AI, is now larger than all Ethernet network peers combined. InfiniBand has also had a very strong quarter, growing more than 4x year-over-year, driven by deployments of our next-generation XDR technology. For your models, data center computing revenue of 60 billion was up 77% year over year, while data center networking revenue of 15 billion nearly tripled year over year. Before we deep dive into data center, we'd like to brief you on our transition to a new reporting framework that better reflects our current and future growth drivers. We have two market platforms, Data Center and Edge Computing. Within Data Center, we will report to sub-markets, Hyperscale and ACIE, which incorporates AI Clouds, Industrial and Enterprise. Hyperscale will include revenue from the public cloud and the world's largest consumer internet companies, while ACIE addresses our growth opportunities in diverse AI purpose-built data centers and AI factories across industries and countries. Edge Computing highlights devices for agentic and physical AI, including PCs, gaming consoles, workstations, AI-ran-based stations, robotics, and automotive. For your reference, we have posted on our website a revenue breakdown based on our new platforms for the past nine quarters. Moving back to our data center results, hyperscale revenue of 38 billion was approximately 50% of data center revenue and increased 12% quarter over quarter. ACIE revenue was 37 billion and grew 31% quarter over quarter, including AI cloud revenue that more than tripled year over year. Our customers have enabled rapid stand-up of AI compute capacity. The number of partner data centers exceeding 10 megawatts has nearly doubled in just one year, now surpassing 80 sites. Sovereign revenue increased more than 80% year over year. NVIDIA AI infrastructure is now deployed across nearly 40 countries, representing $50 trillion in GDP. As evident to our Q1 results, our customer base is diverse and growing. Supported by our vast ecosystem and installed base, breadth of CUDA accelerated application, and the lowest token cost provider, we are well positioned to address a market opportunity that far exceeds that of any other AI computing platform. Demand for AI infrastructure continues to expand at an unprecedented pace. The build-out of AI factories is accelerating. The value of NVIDIA AI infrastructure is rising. The price of renting an H100 has risen 20% year to date, while A100 cloud pricing is up nearly 15%. Benefiting from the versatility of our platform and continuous performance enhancements enhanced by our software stack, customers are generating profitable revenue beyond the depreciable life of their GPUs. The vast and trusted marketplace for NVIDIA Compute is a critical foundation on which billions in AI infrastructure spending is being financed by the ecosystem. There are two primary drivers behind the accelerating build-out of AI infrastructure. First, from search and advertising to recommender systems and content understanding. the largest hyperscale workloads continue to transition from CPU to GPU-based accelerating computing. Second, the adoption of products and services native to AI is inflecting. Since the advent of ChatGPT, we have witnessed mainstream AI transition from one-shot inference to reasoning and to now agentic. AI is no longer a nice-to-have. AI is now a necessity for enhancing productivity across all industries and roles. This is propelling revenue acceleration across all layers of the AI cake, including energy, chips, infrastructure, models, and applications. Growth in the model layer, particularly at Anthropic and OpenAI, has been incredible with momentum continuing to accelerate, including breakout growth in OpenAI's codecs since the launch of GPT 5.5. With analysts now forecasting hyperscale CapEx to exceed 1 trillion in 2027 and agentic AI beginning to proliferate all industries, AI infrastructure spending is on track to reach 3 to 4 trillion annually by the end of this decade. Our Blackwell architecture is everywhere, adopted and deployed by every major hyperscaler, every cloud provider, and every major model maker. Last month, we celebrated OpenAI's launch of GPT 5.5, co-designed for, trained with, and served on Blackwell, currently positioned at the top of artificial analysis leaderboards. Microsoft's Fairwater, the world's most powerful AI data center, is now live, ahead of scheduled, powered by hundreds of thousands of Blackwell GPUs. Starting this year, AWS will add more than 1 million Blackwell and Rubin GPUs and are collaborating on spectrum networking. At Google, Blackwell will be offered to customers in the cloud, including confidential computing capability, a new foundation for secure, high-performance AI. Our share of frontier AI compute is increasing. We have deepened our collaboration with Anthropic and are delighted to be a strategic partner to expand their compute capacity. We will support the company's growth trajectory through AWS, Azure, CoreWeave, SpaceX AI, and more. Now, with the addition of Anthropic 2, OpenAI, Gemini, SpaceX XAI, Meta, MSL, Microsoft AI, TML, Reflection, Perplexity, Cursor, and other major Frontier labs already building on NVIDIA, our share of Frontier A models will grow significantly. Today's data centers are revenue generating AI factories. Constrained by power and capital, AI factory operators must choose the right architecture. With our extreme co-design approach, we deliver the industry's lowest token cost, the highest token throughput, and the highest ROI. MLPerf inference results are in, and once again, we swept every benchmark as Blackwell Ultra delivered the highest throughput across the broad set of models and deployment scenarios. Full-stack innovations drove the 2.7x increase in throughput and a 60% reduction in the cost per token on GB300 compared to just six months ago. NVIDIA Compute is not just the highest performance AI infrastructure, it is the most economic and financeable. Customers do not buy GPUs. They build AI factories. And the right economic metric is not the purchase price of the GPU. It is the lifetime cost of an AI factory producing intelligence, token per watt, tokens per dollar, uptime, utilization, time to production, software durability, and asset life. NVIDIA excels at all of them. Agentech AI and reinforcement learning represents new growth opportunities for CPUs. Building on the success of our gray CPU, Vera is arriving just in time to meet this inflection. Built on custom ARM cores and co-designed end-to-end with Rubin GPUs and NVLink, Vera will deliver up to 1.5x faster performance per core, 2x performance per watt, and 4x density per rack compared to x86-based alternatives. Vera CPU opens a brand new 200 billion TAM for NVIDIA, a market we have never addressed before. and every major hyperscale and system maker is partnering with us to get it deployed. We have visibility to nearly 20 billion in total CPU revenue this year, setting us up to become the world leading CPU supplier. Our annual product cadence, a pace that is unmatched, remains a key pillar supporting our market position. We are on track to commence production shipments of Vera Rubin in the second half of this year, starting in Q3. By integrating seven purpose-built chips across five accelerated racks, Vera Rubin will deliver up to 35x higher inference throughput and up to 10x greater AI factory revenue compared with Blackwell. As an early adopter, Google's A5X bare metal instances, which can support up to 960,000 Rubin GPUs across multiple sites, can enable customers to run their largest AI workloads on NVIDIA's optimized infrastructure. While the U.S. government has approved licenses for H-200 to be shipped to China-based customers, we have yet to generate any revenue, and we are uncertain whether any imports will be allowed into the country. As a result, consistent with last quarter, we are not including any China data center compute revenue in our outlook. Let me move to edge computing. Our edge computing market platform generated 6.4 billion, up 10% quarter over quarter and 29% year over year. Robust Blackwell workstation demand was a strong contributor to the growth while consumer demand fell modestly due to higher memory and system prices. Our physical AI continues to gain momentum, exceeding 9 billion in revenue over the last 12 months. Our partnership with Uber will power the Robotaxi fleet across nearly 30 cities and four continents by 2028. And in robotics, leading companies across a range of industrial, surgical, and humanoid applications are building on NVIDIA's technology to develop and deploy at scale. We remain front-footed in securing sufficient supply to support our customers' growth. In Q1, we increased total supply, inclusive of inventory, purchase commitments on prepaids to $145 billion. While we are not immune to supply challenges, remain confident in our ability to support the growth opportunity ahead. With our intense focus, scale, and longstanding partnerships with critical suppliers continuing to serve us well. Let me move to the rest of the P&L. Gap gross margin was 74.9% and non-gap gross margins was 75%. Largely flat sequentially by Blackwell Systems continued to account for most of our shipments. Gap and non-gap operating expenses were up 12% sequentially, primarily due to higher compensation and an increase in compute and infrastructure costs. Our non-GAAP effective tax rate of 16% came just below our prior outlook due to favorable geographic mix. And on our balance sheet, days sales outstanding was 45 days due to favorable timing of collections. We expect to return to the mid-50s in Q2. We generated record free cash flow, $49 billion, up from $35 billion in Q4. I'd now like to update you on our capital allocation plan. First, to reiterate, our intention is to prioritize R&D and strategic investment. Both will enable us to cultivate our ecosystem, drive market growth, and strengthen our market position. As a key enabler of AI, we will make investments necessary to deliver the industry's lowest cost per token and the highest token throughput, which will help our customers and partners scale and expand the AI frontier. Return program is another key component of our capital allocation strategy. Given confidence in our long term free cash flow outlook and our commitment to sharing our success with shareholders, we are increasing our quarterly dividend from one cent to 20 cents per share. We plan to review our dividend on a regular basis as we continue to scale our business. We are also announcing an 80 billion share repurchase authorization, which is in addition to the 39 billion remaining on our current plan. As we indicated at GTC, we plan to return roughly 50% of free cash flow to shareholders this year. Let me turn to the outlook for the second quarter. Total revenue is expected to be 91 billion plus or minus 2%. We expect sequential growth to be driven primarily by data center. We are continuing to work vigorously on our supply chain ecosystem to address the incredible demand we see ahead of us, giving us full confidence in the 1 trillion in Blackwell and Rubin revenue we foresee from 2025 through calendar 2027. Gap and non-gap gross margins are expected to be 74.9% and 75%, respectively, plus or minus 50 basis points. For the full year, we are still expecting to be in the mid-70s. Gap and non-gap operating expenses are expected to be approximately 8.5 billion and 8.3 billion, respectively. For the full year, we now expect OPEX growth to grow somewhere in the upper 40s on a year-over-year basis, driven by higher R&D and acceleration in the usage of AI tools to enhance productivity. For the full year 2027, we expect gap and non-gap tax rates to be between 16 and 18%, excluding any discrete items from material changes to our tax environment. This is lower than our prior expectation of 17 to 19 due to changes in geographic mix. That puts me at the end of this part, and I'm going to now turn this over to the Q&A with Toshio.