Nvidia Q1 Earnings in Focus as U.S. Export Curbs to China Threaten Billions in Revenue
All eyes are on Nvidia’s Q1 2025 earnings report, expected Wednesday, as investors await answers on the financial impact of U.S. export restrictions to China. The AI chipmaker, a dominant player in global semiconductors, faces mounting pressure from lost revenue tied to export bans on its H20 chip, previously one of the few products it could legally sell to China.
Nvidia Faces $5.5 Billion in Charges from Halted H20 Chip Sales
In a bid to restrict China’s access to advanced AI technology, the U.S. government placed export restrictions on Nvidia’s H20 chip last month. The company revealed it walked away from $15 billion in potential Chinese sales, as it expects $5.5 billion in write-downs related to the discontinued shipments.
China accounted for 13% of Nvidia’s total revenue in 2024, making the impact of the U.S. export ban significant. Analysts from Wedbush Securities and Susquehanna Financial estimate that quarterly revenue losses due to the ban could range from $3 billion to $4.5 billion, starting in the current fiscal year.
Key Investor Questions Ahead of Nvidia’s Earnings Report
- Can Nvidia offset losses in China?
Analysts are looking at whether sales from other regions or products can compensate for the revenue lost from China. - Is a new China-specific AI chip in the works?
Sources suggest Nvidia plans to launch a new Blackwell-based AI chip tailored to meet U.S. export compliance, offering a potential path forward in China. - What will margins look like?
Nvidia’s adjusted gross margin is expected to drop by over 11 points to 67.7%, with H20-related write-downs possibly shaving off 12.5%.
Nvidia Revenue Still Expected to Soar Despite China Setback
Despite these challenges, Nvidia is forecasted to post Q1 2025 revenue of $43.28 billion, up 66.2% year-over-year, according to LSEG data. However, analysts caution that Nvidia’s era of massive earnings beats may be tapering off.
- In fiscal year 2024, Nvidia exceeded revenue expectations by an average of 4.9%
- In fiscal 2023, it beat revenue estimates by an average of 12.5%
“China will probably be the biggest swing factor for Nvidia’s quarter,” said Gil Luria, analyst at D.A. Davidson.
AI Spending from Tech Giants Could Help Cushion the Blast
Nvidia continues to find support from major cloud service providers like Google (Alphabet), which have pledged to increase investment in AI infrastructure. These commitments may ease investor anxiety about declining Chinese sales and help Nvidia regain momentum.
“I don’t think investor expectations are very high going into the results,” said Ivana Delevska, CIO of Spear Invest, which holds Nvidia stock in an actively managed ETF.
