NVIDIA (NVDA): Review of Q1 Fiscal Year 2027 - The Emperor's New Rhythm?

Stacy A. Rasgon, Ph.D.+1 213 559 5917stacy.rasgon@bernsteinsg.comAlrick Shaw+1 917 344 8454alrick.shaw@bernsteinsg.comArpad von Nemes+1 917 344 8461arpad.vonnemes@bernsteinsg.com U.S. SemiconductorsNVIDIA Corp Rating Outperform Price Target NVDA 315.00 USD(300.00OLD) NVIDIA (NVDA): FQ127 recap - The emperor's new groove? NVIDIA's FQ1 results solidly beat ($81.6B/$1.87 vs Street at $79.2B/$1.77). Datacenterbeat with strength in both compute (up 18% QoQ and 77% YoY) and networking (up~35% QoQ and tripling YoY). The company is now giving more disclosure into Datacenter(hyperscale vs non-hyperscale), the former grew 12% QoQ and 115% YoY while the lattergrew 31% QoQ and 74% YoY. They are now collecting all the other segments into a catch-all Close Date20 May 2026NVDA Close Price (USD)223.47Price Target (USD)315.00Upside/(Downside)41%52-Week Range236.54/129.16SPX7,432.97FYEJanDiv Yield0.4%Market Cap (USD) (B)5,412.56EV (USD) (B)5,361.42 Guidance was once again well above expectations ($91.0B/~$2.06 vs Street $87.5B/$1.96), with bulk of the ~$10B incremental growth once again coming from datacenter,putting it in the ballpark of ~$85B+ (well above Street at ~$81B). Everything appears ontrack for both continued Blackwell momentum as well as the Rubin ramp beginning in the2H (Q3). Gross margins are seen remaining at ~75% and “mid 70’s” for the year, with opex The quarter was strong and on the surface was actually fairly quiet (for NVIDIA at least),with the typically powerful results that investors have grown to expect, as well as the capitalreturn (both buyback and dividend) that we believe some shareholders have been waitingfor. And yet there was also plenty to keep things moving here. Demand clearly remains offthe charts for Blackwell, with Rubin on track to launch in Q3 and with continued confidencein the $1T Blackwell/Rubin trajectory into CY27. The new datacenter segmentation givesmore color and clarity into an increasingly diverse customer base with both hyperscale and Given the growth potential and current valuations we continue to believe there is opportunityfor NVDA to re-rate relative to the “AI constraint” names that have been running instead of it.Raising estimates, price target to $315 (25x, unchanged applied to higher FY28/CY27 EPS). DETAILS Our updated model can be found here: NVDA Model. NVIDIA's FQ1 results solidly beat ($81.6B/$1.87 vs Street at $79.2B/$1.77). Datacenter beat on continued Blackwellmomentum with strength in both compute (up 18% QoQ and 77% YoY) and networking (up ~35% QoQ and triplingYoY). The company is now giving more disclosure into Datacenter (hyperscale vs non-hyperscale), the formergrew 12% QoQ and 115% YOY while the latter grew 31% QoQ and 74% YoY. They are now collecting all the other •Revenues of $81,615M were above consensus expectations($79,186M), and guidance ($78,000M) (Exhibit 1). Thebeat overall was driven by Datacenter, though Edge Computing revenues were also above consensus. •Datacenter segment revenuesof $75,246M, were up 21% QoQ (~$13B) and up 92% YoY and were above consensusrevenue expectations at $73,504M as Blackwell and Blackwell Ultra continue to ramp meaningfully, and networking showsstrength. Hyperscale revenue of $37.9B was up ~12% QoQ and 115% YoY, with ACIE revenues of $37.4B up ~31% QoQand 74% YoY, including AI Cloud revenue that more than tripled YoY. Compute revenues were up ~18% QoQ and ~77% YoYto ~$60B, and Networking revenues rose ~35% QoQ and ~199% YoY to ~$15B. •Edge computing segment revenues(which includes Gaming, ProVis, Auto, and Other) were $6,369M, up ~10% QoQ andup ~29% YoY, and above consensus expectations of $5,656M. Management noted robust Blackwell workstation demand,while consumer demand fell modestly due to higher memory and system prices. Physical AI revenues exceeded $9 billion in Non-GAAP Gross marginof 75.0%was inline with guidance of 75.0% and roughly inline with consensus at 75.1% Non-GAAP Opex of $7,449Mwas above consensus ($7,336M) and below guidance at $7.5B. •Non-GAAP Operating margin of 65.9%was in-line to a touch above consensus of 65.8% (Exhibit 4). Non-GAAP tax rate came in at 16%,below guidance of 18.0%. •Non-GAAP EPS of $1.87, was above consensus at $1.78. •Inventory dayswere flattish at ~114 days, and inventory dollars increased to $25,797M vs $21,403M last quarter asmanagement builds to support product ramps (Exhibit 5). •China made up only 6% of sales in FQ127down from ~10% in FQ426 and low given the current geopolitical headwinds(Exhibit 6). The company noted H200 approvals from the US government but that they have yet to generate any Chinarevenues from the parts as there is uncertainty around the allowance of these parts into the country. Guidance was once again well above expectations ($91.0B/~$2.06 vs Street $87.5B/$1.96), with bulk of the ~$10Bincremental growth once again coming from datacenter, putting it in the ballpark of ~$85B+ (well above Street at ~$81B). Everything appears on