Earnings test: Nvidia’s $46 billion quarter meets China roadblock
Export curbs, tariffs, and Beijing pushback weigh on AI chipmaker’s growth story.
Nvidia’s business in China will be a key focus for investors when the AI chipmaker reports earnings on Wednesday, following an unusual deal with the Trump administration and Beijing’s subsequent push to stall imports.
Caught in the crossfire of Washington and Beijing’s escalating trade war, the fate of Nvidia’s China operations hinges on how the world’s two largest economies resolve disputes over tariffs and chip export curbs.
The artificial intelligence chip pioneer recently agreed to pay the U.S. federal government 15% of its China sales in exchange for export licenses, a move that has drawn bipartisan criticism.
Despite China’s huge appetite for Nvidia’s chips, Beijing has urged domestic companies to limit purchases over security concerns. Reports suggest Nvidia has told some suppliers to suspend production of its China-specific H20 chips, though Reuters reported that the company is developing a new and more powerful chip for the market.
“We’ve got to get clarity from both governments first—whether China wants the chips and whether the administration is going to allow it,” said Jamie Meyers, senior analyst at Nvidia shareholder Laffer Tengler Investments. “And if so, how is that going to work?”
China accounted for 13% of Nvidia’s revenue last year. For the second quarter ended July 2025, many analysts did not factor in H20 revenue from China, given that U.S. approval came late in the quarter while Beijing’s pushback complicates forecasts for the year.
In May, Nvidia warned that the restrictions would cut $8 billion from July-quarter sales, following a $4.5 billion charge in the prior three-month period.
Overall, Nvidia is expected to report second-quarter revenue rising 53.2% to $46.02 billion, according to LSEG data, still a slowdown from the triple-digit growth it posted for many consecutive quarters.
Analysts said the broader AI chip business remains robust, with strong demand from tech giants such as Meta and Microsoft, which have expanded capital spending. Positive commentary from CEO Jensen Huang on AI demand could boost stocks in the sector, which have recently sold off amid concerns over high valuations.
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Nvidia shares have risen more than a third so far in 2025, a slower pace than the previous two years but still outpacing the 15% gain in the broader chip index and the nearly 10% rise in the S&P 500. Nvidia remains the world’s most valuable company.
For the third quarter, analysts expect Nvidia to guide revenue to $52.96 billion, up 51% year-on-year. About $6 billion of that could come from China, according to Piper Sandler, with further growth projected at 12%–15%.
However, Nvidia could face a 5 to 15 percentage point hit to gross margins on China-bound chips due to the federal deal, with Bernstein estimating it could shave one point from overall margins. Adjusted gross margin is expected to drop nearly 4 points to 72.1% in the second quarter, and contract by nearly 2 points to 73.2% in the October quarter.
