Why Did NVDA Shares Fall Despite Strong Quarterly Results?

NVIDIA Corporation (NVDA) shares tumbled roughly 5% on Thursday, February 26, 2026, even as the AI chip giant delivered yet another quarter of better-than-expected earnings and revenue. The company reported Q4 fiscal year 2026 adjusted earnings per share of $1.62, beating analyst estimates of $1.53, while revenue surged 94% year-over-year to $68.13 billion, topping the $66.21 billion consensus.

Despite issuing an upbeat Q1 revenue outlook of approximately $78 billion, well above Wall Street’s $72.60 billion estimate, investors appeared unmoved, sending the stock sharply lower in morning trading. The selloff reflects a broader shift in market sentiment, as investors increasingly question whether Nvidia’s record-setting momentum can be sustained amid growing competition, customer concentration risks, and uncertainty over the long-term trajectory of AI infrastructure spending.

Earnings Beat Fails to Lift Shares

Nvidia posted its fourteenth consecutive quarter of beating revenue estimates, yet the market reaction told a different story. Investors, who had grown accustomed to blowout results from the company, were reportedly disappointed by what many characterized as an “uneventful” report, one that was even released 10 minutes later than expected.

As Ken Mahoney, CEO at Mahoney Asset Management, noted, it was a good beat-and-raise quarter in the classic Nvidia mold, but a great deal of optimism had already been priced into the stock ahead of the announcement.

A key flashpoint during the post-earnings conference call was the question of shareholder returns. UBS analyst Tim Arcuri pointedly asked Nvidia executives whether the company planned to return to shareholders a portion of the roughly $100 billion in cash it was expected to generate in the current year, noting that despite strong results, the stock had not gained much ground.

CFO Colette Kress responded that Nvidia intended to continue reinvesting in the AI ecosystem rather than prioritizing buybacks or dividends, a stance that appeared to disappoint income-focused investors.

J.P. Morgan analysts captured the market’s mood succinctly, saying the response reflected “continued uncertainty around the growth trajectory for Nvidia’s data center business in CY27,” particularly as hyperscalers dramatically expand their own capital expenditure budgets.

The stock, which had closed at a three-month high on Wednesday ahead of the print, slid to around $185–$186 in Thursday morning trading, dragging on the broader Nasdaq index in the process.

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Rising Competitive and Geopolitical Pressures

Beyond investor sentiment, there are mounting structural risks to Nvidia’s dominant position in the AI chip market. Rival AMD is preparing to launch a new flagship AI server and has already secured deals with several of Nvidia’s most important customers, including Meta Platforms.

Meanwhile, Alphabet’s Google has emerged as a credible alternative chip supplier, having struck a deal to provide Anthropic, the maker of the Claude AI chatbot, with its proprietary TPU chips, and is reportedly in talks to supply Meta as well. Big Tech’s accelerating push to develop in-house silicon further threatens to erode Nvidia’s long-term market share.

Customer concentration also remains a lingering concern. During fiscal year 2026, just two customers accounted for 36% of Nvidia’s total sales, up from three customers representing 34% the prior year – a trend that signals increasing dependence on a handful of hyperscalers whose own priorities are rapidly evolving.

On the China front, Nvidia’s Q1 guidance deliberately excluded any revenue from data-center chip sales to China, though the company noted it had recently received U.S. government licenses to ship small quantities of its H200 chips to Chinese customers following prior export restrictions.

Despite these headwinds, Nvidia’s fundamental metrics remain extraordinary. The company reported trailing twelve-month revenue of $187.14 billion, a profit margin above 53%, and a return on equity exceeding 107%. Nvidia also affirmed it had secured sufficient chip inventory and manufacturing capacity from TSMC to meet demand well beyond the next several quarters.

With the average analyst price target sitting at $256.25, representing significant upside from current levels, and Keybanc reiterating its Overweight rating and $275 price target on the same day as the selloff, Wall Street’s long-term conviction in Nvidia’s AI infrastructure story remains broadly intact, even as short-term sentiment cools.

NVDA Stock Brief: Live Price and Key Metrics

As of Thursday morning trading, NVDA was changing hands at approximately $185.02, down $10.60 or roughly 5.42% from its previous close of $195.62. The stock opened the session at $194.21 and touched a day’s range of $187.96 to $194.21, well below its 52-week high of $212.19, though comfortably above the 52-week low of $86.62.

With a market capitalization of approximately $4.59 trillion, Nvidia remains the world’s most valuable publicly traded company. The stock carries a trailing price-to-earnings ratio of 46.52 and a forward P/E of 29.94, with a PEG ratio of 1.00 suggesting the market views its growth as fairly valued relative to long-term earnings expectations.

From a performance standpoint, NVDA is up roughly 1% year-to-date as of February 26, broadly in line with the S&P 500’s 1.09% gain over the same period. Over the past year, however, the stock has returned an impressive 43.55%, far outpacing the S&P 500’s 16.18% gain.

On a three-year basis, NVDA has delivered a staggering 709.91% return compared to the index’s 74.30%, and over five years, shares have risen more than 1,277% versus the broader market’s 81.57%. The company’s next earnings date is scheduled for May 20, 2026, with analysts projecting continued strong results driven by relentless demand for AI data center infrastructure.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.