Nvidia Earnings Shoot the Lights Out (Again) – How Much Higher Could the Stock Go?

Despite the stock market’s ho-hum reaction, Nvidia (NVDA) reported an outstanding first-quarter 2026, continuing to grow sales and earnings at a brisk pace. At some point, it becomes too tough to top an investing story as extraordinary as Nvidia’s has been over the past five years. Even though Nvidia sports a market cap of more than $5 trillion, the stock still trades at a reasonable valuation.

The numbers that Nvidia keeps putting up are almost unfathomable. In the latest quarter, the company grew sales to $81.6 billion, an 85% year-over-year increase. That turned into operating income of $53.5 billion – up 147% – as operating margins somehow climbed to 65.6%.

To put that another way, almost two of every three dollars of sales turn into pre-tax profit.

In the process, Nvidia topped analysts’ expectations for the quarter for both sales and earnings. It also provided a second-quarter forecast that exceeded analysts’ estimates.

Management expects sales of about $91 billion in the current quarter. At an estimated gross margin of 74.9% and operating expenses of $8.5 billion, Nvidia looks set to turn in an operating profit of $59.7 billion – good for a 65.6% margin.

It looks like Nvidia is running as lean and mean as it can, keeping expenses as low as possible while sales of its graphics processing units (“GPUs”) just keep exploding.

All those profits have been piling up, and Nvidia has been returning big chunks of them to investors through share repurchases, investing in other businesses, and boosting its dividend.

Nvidia returned $20 billion to investors in the quarter, $19.3 billion of it in the form of buybacks. The company had $38.5 billion remaining on its repurchase authorization at quarter-end but reloaded its elephant gun. It added a further $80 billion authorization for buybacks with no expiration.

The repurchases, while large in an absolute sense, are only chipping away at the share count of the $5.4 trillion company. The remaining authorization of $118.5 billion is about 2% of the company’s market cap. The announcement helps keep the stock’s momentum, too.

Nvidia has also poured its cash flow into investments. At quarter-end, it reported $30.2 billion in publicly traded securities and $43.4 billion in private companies.

Nvidia’s anemic dividend got a significant boost, at least percentagewise. The board moved the $0.01 quarterly payout up to $0.25. At current prices, the yield is about 0.4%. Investors won’t retire on the dividend, but it shows that the company is working to deploy its substantial excess cash.

Still, the market always climbs a “wall of worry.” And the biggest worry is likely how long Nvidia can sustain such incredible growth while holding such massive margins.

Is the Competition Getting Hotter for Nvidia?

Those huge margins are the envy of any business, but they offer plenty of incentives for rivals to come up with a “better mousetrap” and take some of those profits for themselves. They may be building chips for themselves or others, but they’re looking for a way around Nvidia.

Alphabet (GOOGL) has its tensor processing units, while Tesla (TSLA) is building Terafab, a $20+ billion semiconductor facility for AI chips. Meanwhile, OpenAI has begun working with Broadcom (AVGO) to design its own AI accelerator chips, and Anthropic has been exploring the possibility of designing its own chips, though the plans are still in early stages.

Then there’s Cerebras (CBRS), a newly public company that offers wafer-scale chips that it says are “up to 15 times faster than leading GPU-based solutions as benchmarked on leading open-source models.” Those leading GPU-based solutions are, of course, made by Nvidia. Cerebras would love to break off a piece of Nvidia’s margins, as AI workloads shift to inference.

One of the first places that competition is likely to show up on Nvidia’s financial statements is in its gross margin. If Nvidia must trim prices or give special terms, it can show up there. So, Nvidia pointedly includes its gross margin in the second paragraph of its earnings release, after only the key details of its sales growth. Nvidia is well aware of what investors are closely watching.

The table below shows Nvidia’s sales, gross margin, and operating margin for the latest quarter and the prior four years.

Source: Macrotrends and Nvidia’s first-quarter 2026 release

Nvidia’s latest quarter looks as good or better than any recent set of annual figures. Of course, quarterly sales are at an all-time high, but gross margin is right near its highest levels, too. Meanwhile, operating margin at 65.6% far exceeds even previous outstanding years.

These figures attest to a business that’s generating cash with eyepopping efficiency. Analysts are projecting that the good times will continue to roll through 2027.

Are Nvidia Shares Too Expensive?

With Nvidia’s market capitalization well above $5 trillion, investors may be wondering how much higher it can go. But investors tend to focus too heavily on some new psychological level, whether that’s $100 billion, $1 trillion, or more. It’s much more useful to assess a company’s earnings sustainability and the multiples investors are willing to pay for them.

A number of analysts have raised price targets on the stock in May, with the most aggressive seeing Nvidia with 40%-plus upside from its recent price of around $220. For example, Wells Fargo boosted its target from $265 per share to $315, on earnings estimates of $8.45 this year.

On this basis, Nvidia at $223 per share trades at a price-to-earnings ratio of 26.4 times. That’s not expensive for a company growing sales the way Nvidia is, and doing so while maintaining its margins.

But the multiples look even more attractive if the company hits Wells Fargo’s earnings target of $11.95 per share for next year. That translates into a P/E ratio of less than 19 times.

Analysts keep raising their forecasts for this year and next, with earnings targets have been moving steadily higher over the past 90 days, 60 days, 30 days, and 7 days, according to Yahoo Finance. The more it exceeds estimates now, the higher future estimates for 2026 and 2027 are likely to grow.

So investors should expect to see Nvidia growing into its price target as it beats and raises its forecasts for this year. It remains the name to watch for any turns in the AI megatrend.

Nvidia’s valuation suggests the stock is attractive if you believe it will meet analysts’ earnings targets. Regardless of how phenomenal the company’s performance has been, it seems to keep raising the bar quarter after quarter. Nvidia’s growth will have to slow at some point, but that point doesn’t appear to be now.

Regards,

James Royal, Ph.D.

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