Nvidia Q2 sales guidance could miss by billions on China chip ban, analysts warn

Nvidia Corp (NASDAQ:NVDA, ETR:NVD) may issue a weaker-than-expected sales outlook for its July quarter due to a sharp drop in China demand due to US export restrictions, according to Bank of America analysts.

Nvidia will report its fiscal first quarter earnings after US markets close on Wednesday. 

The analysts warned that the impact from the H20 chip ban could result in fiscal Q2 revenue guidance as low as $41 billion, significantly below consensus estimates of $46 billion.

“We flag the disconnect between Nvidia's ‘$15bn in lost China sales’ with the lower $10 billion to $12 billion recent revision in our/investors' fiscal year 2026/calendar year 2025 sales expectations, and even lower $3.8 billion in consensus revisions,” the analysts wrote.

They project a $4 billion to $5 billion headwind in Q2 alone if Nvidia’s original shipment plans were front-loaded in the year.

“Applying that same 47% proportion to Nvidia's $15 billion full-year China headwind implies a $7 billion fiscal Q2 headwind to the unaffected (pre-H20 ban) consensus $48 billion sales,” Bank of America wrote.

Nvidia is still expected to post a “modest” revenue beat on guidance of $43 billion for fiscal Q1, though gross margins may fall short of expectations due to a large inventory write-off.

The company has guided gross margins of 71%, but the analysts flagged that the $5.5 billion inventory write-off related to H20 ban will likely lower gross margins to about 58%, with the headwind expected but not yet reflected in the consensus.

Earnings per share for Q1 are projected to be about $0.74, compared to consensus estimates of $0.88.

No material impact from the H20 ban is expected in the Q1 results, but any early pull-ins of shipments are unlikely to improve investor sentiment, the analysts believe.

For fiscal 2026, the bank’s analysts project EPS in the range of $3.90 to $4, roughly 10% below the Street consensus.

“All else equal, we estimate a $15 billion sales headwind to unaffected (pre-H20 ban) fiscal year 2026/calendar year 2025 can drive sales to $190 billion, 6% below consensus and pro-forma EPS to $3.93, 10% below current $4.38 consensus,” the analysts wrote.

Despite the near-term headwinds, Bank of America maintained its ‘Buy’ rating on Nvidia and continues to view it as a top sector pick, citing its long-term positioning in AI infrastructure and a potential recovery in China through redesigned, compliant products later in the year.

A stronger ramp of Nvidia’s next-generation Blackwell chips outside of China could also help offset weakness in the second half, analysts added.

The bank's analysts have a $160 price target on Nvidia, which traded hands at about $135 on Wednesday afternoon.