NVIDIA's Q1 Report Was Flawless, Except for One Thing!

NVIDIA's latest quarterly financial report delivered a performance that can be described as flawless. However, behind the financial data that far exceeded expectations and the strong capital return plan, the market is diverging on the narrative of its future growth drivers, with some investors becoming increasingly cautious.

The AI chip giant's first-quarter revenue and profit both significantly surpassed Wall Street expectations, while providing equally strong guidance for the second quarter. Additionally, the company announced an $80 billion stock buyback plan and substantially increased its dividend, sending a strong signal of confidence in capital allocation and underlying unit economics to the market.

However, beneath the impressive figures, management's statements in certain areas appeared more defensive than in the past. According to Zhuifeng Trading Desk, Barclays pointed out in its latest research report that the unexpected business unit restructuring, discussions on the reasonableness of the $20 billion CPU revenue target, and concerns about potential delays to the next-generation Rubin architecture have made the company's new growth narrative less clear, which has somewhat affected investors' short-term sentiment.

Although Wall Street investment banks such as Goldman Sachs and Morgan Stanley remain highly optimistic about the sustainability of NVIDIA's capital expenditures and valuation advantages, the subtle shift in market focus indicates that investors have moved from simply chasing earnings beats to more rigorously examining the execution of its product roadmap and competitive moats.

Both Earnings and Guidance Exceeded Expectations

According to the financial report, NVIDIA's first-quarter revenue reached $81.6 billion, significantly higher than the Wall Street expectation range of $78.8 billion. Of this, data center business revenue reached $75.2 billion, with gross margin stabilizing at 75.0%. For the second quarter, the company provided a midpoint revenue guidance of $91 billion, which also far exceeded the market expectation range of $86.1 billion.

In terms of capital returns, NVIDIA announced an additional $80 billion stock buyback program on top of existing authorizations and substantially increased its quarterly dividend from $0.01 per share to $0.25 per share.

Goldman Sachs pointed out in its research report that the strong guidance combined with optimized capital allocation provides a clearer path for the stock to outperform the broader market in the coming months. Morgan Stanley also believed that this was a clean "beat-and-raise" report across all metrics.

Barclays Highlights Concerns: New Narrative Faces Four Key Questions

Although overall end-market commentary remained positive and the company reiterated its cumulative revenue expectation of $1 trillion for Blackwell, Rubin, and networking businesses for the calendar years 2025 to 2027, Barclays explicitly stated in its research report that some investors may view this financial report with a more cautious attitude.

Barclays pointed out that NVIDIA's growth narrative feels "less clean," and raised four concerns that are prompting market scrutiny.

First, management proposed achieving at least $20 billion in standalone CPU revenue this year, but Barclays believes this figure is difficult to justify through rough estimates, suggesting the actual number should be closer to the tens of billions range.

Second, management's stance on the LPU market appeared more hesitant.

Third, the company unexpectedly reorganized its business segments, integrating existing gaming and professional visualization businesses into an Edge Computing department.

Finally, management mentioned more frequently in the financial report the successful position of leading supercomputing service providers in custom chip (ASIC) projects, with an overall tone that was slightly defensive.

Wall Street Consensus and Divergence: Rubin Architecture Becomes the Focus

There is a subtle information gap among Wall Street investment banks regarding the delivery timeline of the next-generation architecture, Vera Rubin.

Barclays stated that its Asian supply chain surveys indicate that Rubin's delivery might be delayed until the end of this year, although NVIDIA officially reaffirmed that shipments will begin in the third quarter.

In contrast, Morgan Stanley is more optimistic about Rubin's progress.

Morgan Stanley pointed out that Vera Rubin is proceeding as scheduled and is expected to be delivered in the third quarter, which will provide strong answers to key competitive issues, proving NVIDIA hardware's leading position in AI factory economics. Goldman Sachs also expects the Rubin platform to ramp up strongly in the second half of the year, with initial revenue recognized in the third fiscal quarter.

Market Impact: Valuation Advantages Coexist with Cautious Sentiment

Despite the flaws in the clarity of the new narrative, Wall Street generally agrees on the attractiveness of NVIDIA's valuation.

Morgan Stanley emphasized that considering a price-to-earnings ratio of less than 17 times for next year, NVIDIA still holds outstanding value compared to its semiconductor peers. Barclays also acknowledged that despite the aforementioned concerns, the stock remains cheap relative to peers, and NVIDIA continues to hold an indispensable position in AI infrastructure construction.

Overall, NVIDIA's financial fundamentals remain rock-solid. Its drive to reduce token costs by more than 70% year-over-year continues to improve customers' underlying economic benefits. However, as market expectations continue to rise, investors are becoming more picky.

In the coming quarters, whether NVIDIA can successfully meet its $20 billion CPU revenue target and whether the Rubin architecture can be delivered on schedule will be key to determining whether it can completely dispel market caution.