Market watches Nvidia's 75% gross margin, China sales

2026-05-20

Day-after share declines continue

Nvidia will announce results for the February-April 2026 quarter on the U.S. West Coast on the 20th (21st in Japan time). Investors have grown used to strong earnings, shifting the focus to whether it can maintain a 75% gross margin. In the market, the stock has fallen the day after earnings for three straight quarters.

According to QUICK and FactSet, revenue for the February-April 2026 quarter is expected to rise 79% from a year earlier to $78.9 billion, while net profit is forecast to more than double to $42.4 billion. Buoyed by investment in AI, strong revenue and profit growth are viewed as almost certain.

Gross margin, China sales in focus

Nvidia has topped market expectations for revenue in all quarterly results over the past four years. Even so, the stock market has already priced in another leg up, and the question now is less about beating forecasts than about whether it can sustain high-value businesses. The company holds an 80% share of the AI chip market, with major tech firms buying its GPUs. It is also expected to disclose gross margin guidance for the May-July 2026 quarter alongside this report, and market estimates put both quarters at 75%.

In February, the U.S. government allowed limited exports of H200 high-performance semiconductors to Chinese customers, while the Chinese government is said not to permit domestic companies to use them. Chief Executive Jensen Huang accompanied U.S. President Donald Trump on his visit to China from 13 to 15, but the outlook for H200 sales remains unclear. If China's market exclusion drags on, it could give local players such as Huawei-affiliated companies room to gain ground.

Competition also spans memory

AI investment by U.S. big tech remains strong. Combined capital expenditure for 2026 at the four U.S. companies Google under Alphabet, Amazon.com, Meta and Microsoft is expected to rise 76% year on year to $725 billion, with much of it directed toward AI infrastructure such as Nvidia semiconductors.

Even so, investors are also broadening their focus to memory-related companies. Revenue for South Korea's SK Hynix, which makes HBM, tripled in the January-March 2026 quarter from a year earlier, while revenue at AMD for the same period rose 40%. The combined market capitalization of the five memory companies SK Hynix, Samsung Electronics, Micron Technology, SanDisk and Kioxia Holdings has more than doubled from the end of 2025.

Nvidia shares hit a record high at the end of April for the first time in about six months, but its market capitalization has risen by just under 20% since the end of 2025. To maintain its position as the world's largest company with a market value of about $5.5 trillion, Nvidia will need earnings that meet expectations and progress in China sales.

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