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Nvidia’s (ticker: NVDA) earnings release for its first quarter (Q1) of FY2027 on the 20th of May 2026 once again ostensibly beat expectations by delivering $81.62 billion in revenue versus a consensus expectation of $78.86 billion and adjusted earnings per share (EPS) of $1.87 versus an expectation of $1.76.
In the post-trading session, the stock didn’t rise in post-trading and went on to drop 2% on the 21st of May, marking it the fourth consecutive post-earnings slide for the stock. The reasons behind these are complex and related to ground conditions for AI.
Trend AnalysisIn Q1 2027, there is no stopping the company’s near-complete dependence on enterprise-driven AI boom, as seen in the “Compute & Networking” segment’s performance.
Source: Company Information; Leverage Shares analysis
The “Graphics” segment – which caters to consumers, gamers, and graphics designers et al to create its “persona” of computing excellence – is barely at 5% of operating income contribution and is trending to close FY2027 even lower.
Seasonality patterns in revenue – particularly pertinent given disciplined corporate spends – lends strongly to strong performance this quarter: if Q1 2027’s trend were to continue, FY2027 would close with a net 152% growth over FY2026.
Source: Company Information; Leverage Shares analysis
While net income per share is currently trending at a monstrous 220% growth, this needs to be tempered with the fact that the company has an extensive portfolio of investments with stakes in various AI companies (such as OpenAI), cloud platforms (such as CoreWeave), and other publicly-held equities, often with stake-for-sales arrangements that ensure a pipeline of sales. Market fervour in AI have impacted the valuation of privately-held companies particularly strongly: in FY2026, Nvidia’s portfolio was at $1 billion, which grew to $9 billion by FY2026. In Q1 2027 – three short months later – this now stands at $15.9 billion. After factoring out these investments, adjusted EPS is currently trending to show a 52% growth for FY2027 or three-fourth of the growth seen in FY2026. Considering seasonality factors in enterprise purchase decisions, the actual value might even be somewhat lower for the year.
Stock-based compensation, meanwhile, is bucking the steady 30-35% growth observed over the last three FYs and trending towards returning to the highs of FY2021 at 64% growth. However, even at this elevated level, it only constitutes 2% of Q1 2027 revenue.
Nvidia also sees no let-up in sales trends consolidating mostly into one region.
Source: Company Information; Leverage Shares analysis
In FY 2023, China and Taiwan combined – which would also encompass potential product flows between the two – accounted for nearly half of Nvidia’s revenue. In Q1 2027, it is slightly over a fifth. Practically no region other than the U.S. has shown growth in revenue. As a result, Nvidia is almost completely dependent on sales to American companies.
Complications in Growth OutlookThe battle for the “AI compute” market has been substantially more complex, given that AMD is now positioning much cheaper chips for the “inference” segment while still working on closing the gap with Nvidia for the “training” segment. Like Nvidia, AMD entered into stake-for-sales arrangements to push its chips forward, with the rest of addressable market likely to be more receptive when early success benchmarks are achieved.
It also isn’t a massive market to address, either. In Q1 2027, three direct customers accounted for 64% of all revenue. In In Q4 2026, three customers accounted for 56%.
At least in the present, inventory remains robust:
Source: Company Information; Leverage Shares analysis
While there’s a slight pile-up in raw material relative to the previous FY, this level is well within bounds of other full FYs.
In the Q1 2027 outlook that was presented in the Q4 2026 release, the company had forecasted a 15% increase in quarterly revenue, which was handily exceeded with a 20% growth instead. In its Q2 2027 outlook, it forecasts a 12% increase in quarterly revenue to $91 million. The company, however, acknowledges that their clients could potentially be rivals in the future, given they are “developing their own ASICs and other products, including designs optimized for certain workloads that may not require all of the features and functionality our data center systems provide”.
In ConclusionNvidia CEO Jensen Huang accompanied President Trump – as did a host of other tech magnates – to China potentially in a bid to drum up business in a region that is now in full-fledged decline. While numerous sources close to the President claimed confirmed sales of GPUs to China, none of these were referenced in the earnings release or in the forward outlook – which in itself is a sign that the visit potentially resulted in little by way of upside for Nvidia or the other tech companies whose heads accompanied Trump.
With no secular global growth, growing competition from its own clients, and trends indicating a slide in EPS growth, a new hook would be needed – and which CEO Huang attempted to deliver: Agentic AI. “The world is rebuilding computing for agentic AI and robotic physical AI,” Huang said in closing remarks during the call. “Nvidia sits at the center of these transitions.” In a bid to better showcase this, the company is transitioning into reporting that will two platforms: Data Center and Edge Computing. The latter will highlight data processing devices for agentic and physical AI.
No matter how data is sliced to highlight performance, the potential deflation of growth is likely to rattle markets, towards which end the company is making substantial commitments. In a bid to shore up stock valuations, the company reported spending $20 billion in stock repurchases across Q1 2027, with another $38.5 billion in capital remaining authorized. This has been topped with another $80 billion with no expiration date. Also announced – and likely in a bid to keep investors interest – the company announced a 25X jump in quarterly dividends from $0.01 to $0.25.
For purely dividend-driven investors, the dividend announcement is unlikely to be a particularly attractive incentive. Furthermore, the massive dry powder being stocked for stock repurchases is very likely to muddy actual market valuation in the year to come (at the very least). Much like its privately-held investments, it introduces volatility that is likely to mask true conviction in the company’s business.
Professional investors in Europe might consider the +3x Long NVIDIA ETP (NVD3) and the -3x Short NVIDIA ETP (NV3S) during bullish and bearish trends in NVDA’s price. To potentially capitalize on major tech stocks seemingly driving the market currently, the 5x Long Magnificent 7 ETP (MAG7) and the -3x Short Magnificent 7 ETP (MAGS) are at hand.
Furthermore, the NVIDIA Options ETP (LSE ticker: NVDI) seeks to generate monthly income by buying NVIDIA shares and selling put options on them. Also available is the Magnificent 7 Options ETP (MAGO), which invests in each Magnificent 7 constituent’s respective Options ETP in an equally-weighted manner.
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