Nvidia Shares Dip Despite Stellar Earnings and Upbeat Forecast

Nvidia posted record Q4 revenue and strong guidance but shares fell 5% as high expectations were already priced in. Data center sales dominate, driving 73% revenue growth.

Even a record-breaking quarterly performance failed to satisfy the market's lofty expectations for Nvidia. Following the release of its fourth-quarter results for fiscal 2026, the chipmaker's stock declined by approximately 5%. Analysts at Goldman Sachs characterized the sell-off as a classic "buy the rumor, sell the news" event, noting that the company's exceptional trajectory was already reflected in its valuation. The underlying financial data, however, continues to underscore Nvidia's commanding market position.

Financial Performance Exceeds Estimates

The company reported quarterly revenue of $68.13 billion, a 73% surge compared to the prior year and comfortably ahead of the consensus estimate of $65.56 billion. Earnings per share came in at $1.62, beating the $1.54 analysts had projected. Net income for the quarter doubled year-over-year to $42.96 billion, supported by a robust gross margin of 75%.

For the full fiscal year 2026, total revenue reached $215.9 billion, representing annual growth of 65%. The data center segment remains the undisputed growth engine, contributing $62.3 billion, or 91%, of total sales in the fourth quarter alone. While the gaming division posted a 41% annual increase to $16.0 billion, its relative contribution to the top line continues to diminish.

Guidance Surpasses Expectations Amid Headwinds

Management provided first-quarter revenue guidance for fiscal 2027 of approximately $78 billion, significantly above the market's forecast of $72.1 billion. Notably, this outlook assumes zero revenue from its data center business in China due to ongoing export restrictions. The company emphasized that its next-generation AI architectures, Blackwell and Rubin, will be critical in sustaining demand from hyperscale customers.

In a related strategic development, the structure of Nvidia's partnership with OpenAI has been clarified. Instead of a previously speculated $100 billion investment, a $30 billion direct capital infusion into OpenAI has been confirmed. This funding round, which also includes participation from Amazon and SoftBank, grants OpenAI exclusive access to three gigawatts of inference and two gigawatts of training capacity on upcoming Vera Rubin platforms.

Supportive Market Backdrop and Mixed Signals

Investment in AI infrastructure by major hyperscalers is projected to climb to a total of $700 billion in 2026. Continued strong demand from Microsoft, Meta, Google, and Amazon is expected to drive orders for Nvidia's hardware. Following the earnings report, the analysis firm Wall Street Zen upgraded the stock to a "Buy" rating, setting a price target of $271.86. However, corporate insiders sold 1.61 million shares worth about $291.6 million over the preceding 90 days, presenting a contrasting signal.