Should you buy Nvidia’s shares following Q1 results?
Despite a strong set of results, Nvidia's share price fell following its latest earnings release. Is now a good time to buy Nvidia stock?
Nvidia, the world’s largest company and the widely-regarded leader of the artificial intelligence (AI) revolution, continues to grow its revenue and profits by huge amounts. So why has its share price dropped?
Frequently one of the most popular stocks ever since the rise of artificial intelligence (AI) and the emergence of the ‘Magnificent 7’ group of perceived beneficiaries, Nvidia (NASDAQ:NVDA) has within the last year become the first company in the world to achieve a market value of $5 trillion.
Nvidia’s share price gained 64% in the 12 months to 22 May 2026 – but that figure might have been higher were it not for a slightly surprising market response to the company’s latest results.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
On 20 May, Nvidia announced record quarterly revenue of $81.6 billion during the first quarter (Q1) of its 2027 financial year (i.e. the three months to 26 April 2026) – 85% higher than in the same period the year before.
Over the same period, quarterly earnings per share (EPS) rose 140% to $1.87.
Analysts polled by market data provider LSEG had yielded consensus revenue and EPS expectations of $78.85 billion and $1.76 respectively.
“These were blockbuster results, even by its increasingly absurd standards, with… both revenue and earnings exceeding already high expectations,” said Matt Britzman, senior equity analyst at investment platform Hargreaves Lansdown.
Despite these gains, Nvidia’s shares fell 1.8% on 21 May – the session after its results.
Why did investors sell after the results, and does the drop-off present a buying opportunity?
Nvidia’s results: buybacks and volatility
Besides the business performance growth, another eye-catching element of Nvidia’s Q1 results was that Nvidia also announced two measures to return some of the vast amounts of capital it is making to investors.
One of these was to boost its dividend from $0.01 per share to $0.25.
The other was the approval of an additional $80 billion worth of share buybacks, with $20 billion worth of stock having been bought during Q1.
Given these moves, paired with the strong results, it is surprising that Nvidia stock sold off following the results.
Vivek Arya, research analyst at Bank of America Securities, suggested in a research report that the company’s Q2 guidance might have underwhelmed the market.
“Its $91 billion [Q2 revenue] outlook is in line with bullish expectations, leading to usual post-call volatility,” he said, adding that Nvidia’s share price has declined following three of its last four earnings announcements.
“We ignore this noise,” he said, adding that he instead focuses on Nvidia’s unique position within the AI ecosystem which he called ”the largest, fastest growing tech market of all time”.
Can Nvidia keep increasing its earnings?
At present, Nvidia is benefitting from its position as the leading designer of AI chips and the proliferation of AI products across personal and business life. But this would have to remain the case for many years to come, given that Nvidia stock currently trades at more than 30 times its profits over the last 12 months.
“The question from here is not whether demand is strong today, but how long this level of growth can keep outrunning expectations,” said Hargreaves Lansdown’s Britzman.
Other companies are working hard to eat into Nvidia’s dominance of AI chips. Broadcom is seen by many as a clear direct rival for Nvidia, and even some of its own customers – like Alphabet – are developing their own chips for use in AI products.
Nvidia’s huge profit margins reflect the fact that, at present, it has almost complete pricing power, but if viable alternatives emerge that could change quickly.
Are Nvidia’s shares good value?
Nvidia’s shares currently trade at around 25 times its expected earnings, as of 26 May. That is a little higher than the average for the S&P 500 index (22 times), but not by a lot.
With a stock like Nvidia, given how much focus and attention it receives, there is always the risk of volatility, so you will need to decide how much risk you are willing to take and where it fits in your investment strategy before buying Nvidia stock.
However, despite trading at close to the highest face value they’ve ever seen, Nvidia’s shares have a much more reasonable trailing price/earnings ratio now than they did two years ago, when they traded at over 50 times earnings over the last year (compared to around 33 times as of 26 May).
