What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-26 · 134 added, 149 removed, 158 unchanged (64% of the section changed)

5 unchanged sentences

Since our original focus on PC graphics, we have expanded to several other large and important computationally intensive fields.

Fueled by the sustained demand for exceptional 3D graphics and the scale of the gaming market, NVIDIA has leveraged its GPU architecture to create platforms for scientific computing, AI, data science, AV, robotics, and digital twin applications.

NVIDIA is now a data center scale AI infrastructure company reshaping all industries.

Our two operating segments are "Compute & Networking" and "Graphics." Refer to Note 16 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.

1 unchanged sentence

Recent Developments, Future Objectives and Challenges

Demand and Supply

Revenue growth in fiscal year 2026 was driven by data center compute and networking platforms for accelerated computing and AI solutions.

Demand for our Hopper architecture drove our significant growth for the full year.

We began shipping production systems of the Blackwell architecture in the fourth quarter of fiscal year 2025.

Demand estimates for our products, applications, and services can be incorrect and create volatility in our revenue or supply levels.

We may not be able to generate significant revenue from them.

Advancements in accelerated computing and generative AI models, along with the growth in model complexity and scale, have driven increased demand for our Data Center systems.

We continue to increase our supply and capacity purchases with existing and new suppliers to support our demand projections and increasing complexity of our data center products.

With these additions, we have also entered and may continue to enter into prepaid manufacturing and capacity agreements to supply both current and future products.

The increased purchase volumes and integration of new suppliers and contract manufacturers into our supply chain creates more complexity in managing multiple suppliers with variations in production planning, execution and logistics.

Our expanding product portfolio and varying component compatibility and quality may lead to increased inventory levels.

We have incurred and may in the future incur inventory provisions or impairments if our inventory or supply or capacity commitments exceed demand for our products or demand declines.

Product Transitions and New Product Introductions

Product transitions are complex and we often ship both new and prior architecture products simultaneously as our channel partners prepare to ship and support new products.

We are generally in various stages of transitioning the architectures of our Data Center, Gaming, Professional Visualization, and Automotive products.

The computing industry is experiencing a broader and faster launch cadence of accelerated computing platforms to meet a growing and diverse set of AI opportunities.

We have introduced a new product and architecture cadence of our Data Center solutions where we seek to complete new computing solutions each year and provide a greater variety of Data Center offerings.

The increased frequency of these transitions and the larger number of products and product configurations may magnify the challenges associated with managing our supply and demand which may further create volatility in our revenue.

The increased frequency and complexity of newly introduced products could result in quality or production issues that could increase inventory provisions, warranty, or other costs or result in product delays.

We incur significant engineering development resources for new products, and changes to our product roadmap may impact our ability to develop other products or adequately manage our supply chain cost.

Customers may delay purchasing existing products as we increase the frequency of new products or may not be able to adopt our new products as fast as forecasted, both impacting the timing of our revenue and supply chain cost.

While we have managed prior product transitions and have sold multiple product architectures at the same time, these transitions are difficult, may impair our ability to predict demand and impact our supply mix, and may cause us to incur additional costs.

In August 2022, the USG announced licensing requirements that, with certain exceptions, impact exports to China (including Hong Kong and Macau) and Russia of our A100 and H100 integrated circuits, DGX or any other systems or boards which incorporate A100 or H100 integrated circuits.

In July 2023, the USG informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East.

In October 2023, the USG announced new and updated licensing requirements that became effective in our fourth quarter of fiscal year 2024 for exports to China and Country Groups D1, D4, and D5 (including but not limited to Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of our products exceeding certain performance thresholds, including, but not limited to, the A100, A800, H100, H800, L4, L40, L40S and RTX 4090.

The licensing requirements also apply to the export of products exceeding certain performance thresholds to a party headquartered in, or with an ultimate parent headquartered in, Country Group D5, including China.

On October 23, 2023, the USG informed us that the licensing requirements were effective immediately for shipments of our A100, A800, H100, H800, and L40S products (removing the grace period granted by the official rule).

Blackwell systems, such as GB200 NVL 72 and NVL 36 as well as B200 are also subject to these requirements and therefore require a license for any shipment to certain entities and to China and Country Groups D1, D4 and D5, excluding Israel.

To date, we have not received licenses to ship these restricted products to China.

Additionally, we understand that partners and customers have also not received a license to ship these restricted products.

We expanded our Data Center product portfolio to offer new solutions, including those for which the USG does not require a license or advance notice before each shipment.

We ramped new products designed specifically for China that do not require an export control license.

Our Data Center revenue in China grew in fiscal year 2025.

As a percentage of total Data Center revenue, it remains well below levels seen prior to the onset of export controls in October 2023.

The market in China for datacenter solutions remains competitive.

We will continue to comply with export controls while serving our customers.

To the extent that a customer requires products covered by the licensing requirements, we may seek a license for the customer but have no assurance that the USG will grant such a license, or that the USG will act on the license application in a timely manner or at all.

On January 15, 2025, the USG published the “AI Diffusion” IFR in the Federal Register.

After a 120-day delayed compliance period, the IFR will, unless modified, impose a worldwide licensing requirement on all products classified under Export Control Classification Numbers, or ECCNs, 3A090.a, 4A090.a, or corresponding .z ECCNs, including all related software and technology.

Any system that incorporates one or more of the covered integrated circuits, or ICs, (including but not limited to NVIDIA DGX, HGX, and MGX systems) will be covered by the new licensing requirement.

The licensing requirement will include future NVIDIA ICs, boards, or systems classified with ECCN 3A090.a or 4A090.a, or corresponding .z ECCNs, achieving certain total processing performance and/or performance density.

Unless a license exception is available, the worldwide licensing requirements will apply to the following NVIDIA products, and any others we develop that meet the characteristics of 3A090.a or 4A090.a, including but not limited to:

A100, A800, H100, H200, H800, B100, B200, GB200, L4, L40S, and RTX 6000 Ada.

Our competitive position has been harmed by the existing export controls, and our competitive position and future results may be further harmed, over the long term, if there are further changes in the USG’s export controls.

Given the increasing strategic importance of AI and rising geopolitical tensions, the USG has changed and may again change the export control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results.

In the event of such change, we may be unable to sell our inventory of such products and may be unable to develop replacement products not subject to the licensing requirements, effectively excluding us from all or part of the China market, as well as other impacted markets, including the Middle East and countries designated “Tier 2” by the AI Diffusion IFR.

In addition to export controls, the USG may impose restrictions on the import and sale of products that incorporate technologies developed or manufactured in whole or in part in China.

For example, the USG is considering restrictions on the import and sale of certain automotive products in the United States, which if adopted and interpreted broadly, could impact our ability to develop and supply solutions for our automotive customers.

While we work to enhance the resiliency and redundancy of our supply chain, which is currently concentrated in the Asia-Pacific region, new and existing export controls or changes to existing export controls could limit alternative manufacturing locations and negatively impact our business.

Refer to “Item 1A.

Risk Factors – Risks Related to Regulatory, Legal, Our Stock and Other Matters” for a discussion of this potential impact.

Macroeconomic Factors

Macroeconomic factors, including inflation, interest rate changes, capital market volatility, global supply chain constraints, tariffs, and global economic and geopolitical developments, may have direct and indirect impacts on our results of operations, particularly demand for our products.

While difficult to isolate and quantify, these macroeconomic factors impact our supply chain and manufacturing costs, employee wages, costs for capital equipment and value of our investments.

Our Blackwell architectures represented the majority of our Data Center revenue.

The availability of data centers, energy, and capital to support the buildout of NVIDIA AI infrastructure by our customers and partners is crucial, and any shortage of these or other necessary resources could impact our future revenue and financial performance.

Expanding energy capacity to meet demand is a complex, multi-year process that involves significant regulatory, technical, and construction challenges.

In addition, access to capital can be particularly constrained for less-capitalized companies, which may face difficulties securing financing for large-scale infrastructure projects.

These limitations could delay customer and partner deployments or reduce the scale of accelerated computing and AI adoption.

We continue to execute Data Center compute product introductions, bringing new advanced architectures on a one-year product cadence, including our Rubin platform.

We began shipping production units of our new Blackwell Ultra platforms including GB300 in the second quarter of fiscal year 2026.

The complexity of our product transitions and sophisticated system configurations has and may in the future cause delays in production and create challenges in managing supply and demand.

This could further result in revenue volatility, quality issues, increased inventory provisions, decreases in product yields and higher material costs, and/or increased warranty costs.

Customers may postpone purchasing new architectures or may adopt new technologies more gradually than anticipated, affecting our revenue timing and supply chain expenses.

In April 2025, the USG informed us that a license is required for exports of our H20 product into the China market.

As a result of these requirements, we incurred a $4.5 billion charge in the first quarter of fiscal year 2026 associated with H20 for excess inventory and purchase obligations, as the demand for H20 diminished.

In August 2025, the USG granted licenses that would allow us to ship certain H20 products to certain China-based customers.

We generated approximately $60 million in H20 revenue under those licenses.

In February 2026, the USG granted a license that would allow us to ship small amounts of H200 products to specific China-based customers.

To date, we have not generated any revenue under the H200 licensing program, and do not yet know whether any imports will be allowed into China.

The license requires that the H200s go through an inspection process in the United States prior to any shipment to the customer.

As a result, any H200 shipped under the new licensing program will be subject to a 25% tariff upon importation into the United States.

The recent rise in high-quality open-source foundation models is making advanced AI capabilities broadly accessible.

Open-source AI is dependent on developer adoption and if deployed on our competitors’ platforms, it could reduce demand for our products and services.

While currently our supply chain is mainly concentrated in Asia, we are expanding into the U.S.

and Latin America.

These moves are expected to strengthen our supply chain, add resiliency and redundancy, and meet the growing demand for AI infrastructure.

Our ability to increase manufacturing capabilities will depend on the local region's manufacturing ecosystem's capacity to ramp production supply to the required volume and on a timely basis.

We have made, and expect to continue making, investments that support our technology roadmap and the broader AI ecosystem.

In fiscal year 2026, we made the following investments:

• We invested $17.5 billion in private companies and infrastructure funds, primarily to support early‑stage startups.

These investments include AI model makers that purchase our products directly or through CSPs.

Many of these investments are illiquid and non‑marketable.

The related early-stage startups may not become profitable in the near term, or at all, and there can be no assurance that we will realize a return on our investments.

• We made investments in publicly-held equity securities where the value may fluctuate significantly due to changes in stock prices and could adversely affect our financial results.

• To support the build-out of complex datacenter infrastructures, we enter into commercial arrangements, including guarantees with partners.

We provided $3.5 billion in land, power, and shell guarantees to early‑stage companies, generally over multi‑year periods.

If the escrow and the partners' operating activities are not sufficient to cover an event of default under these guarantees, we may elect to assume the underlying leases for internal use or sublease them to third parties.

Macroeconomic factors, including tariffs, inflation, interest rate changes, capital market volatility, global supply chain constraints, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations, particularly demand for our products.

While difficult to isolate and quantify, these macroeconomic factors impact our supply chain and manufacturing costs, employee wages, costs for capital equipment, the value of our investments, revenue and competitive position.

Our product and solution pricing generally does not fluctuate with short-term changes in our costs.

Within our supply chain, we continuously manage product availability and costs with our vendors.

Israel and Regional Conflicts

We are monitoring the impact of the geopolitical conflict in and around Israel on our operations, including the health and safety of our approximately 4,700 employees in the region who primarily support the research and development, operations, and sales and marketing of our networking products.

Our global supply chain for our networking products has not experienced any significant impact.

Some of our employees in the region have been on active military duty for an extended period and may continue to be absent, which may cause disruption to our product development or operations.

We have not experienced significant impact or expense to our business;

however, if the conflict is further extended or expanded, it could impact future product development, operations, and revenue or create other uncertainty for our business.

Refer to “Item 1A.

Risk Factors – Risks Related to Regulatory, Legal, Our Stock and Other Matters” for a further discussion of the potential impact of these factors on our business.

Fiscal Year 2026 Summary

2 unchanged sentences

Revenue $ 215,938 $ 130,497 Up 65%

Gross margin 75.0 % 72.7 % Up 2.3 pts

Gross margin 71.1 % 75.0 % -3.9 pts

Operating expenses $ 23,076 $ 16,405 Up 41%

2 unchanged sentences

Net income per diluted share $ 4.90 $ 2.94 Up 67%

We specialize in markets where our computing platforms can provide tremendous acceleration for applications.

These platforms incorporate processors, interconnects, software, algorithms, systems, and services to deliver unique value.

Our platforms address four large markets where our expertise is critical:

Data Center, Gaming, Professional Visualization, and Automotive.

Revenue for fiscal year 2026 was $215.9 billion, up 65% from a year ago.

Data Center revenue for fiscal year 2026 was up 68% from a year ago.

The strong year-on-year growth was driven by demand for our Hopper architecture accelerated computing platform used for large language models, recommendation engines, and generative AI applications.

We began shipping production systems of the Blackwell architecture in the fourth quarter of fiscal year 2025.

Gaming revenue for fiscal year 2025 was up 9% from a year ago, driven by sales of our GeForce RTX 40 Series GPUs.

Professional Visualization revenue for fiscal year 2025 was up 21% from a year ago, driven by the continued ramp of Ada RTX GPU workstations for use cases such as generative AI-powered design, simulation, and engineering.

Automotive revenue for fiscal year 2025 was up 55% from a year ago, driven by sales of our self-driving platforms.

Gross margin increased in fiscal year 2025 driven by a higher mix of Data Center revenue.

Operating expenses for fiscal year 2025 were up 45% from a year ago, driven by higher compensation and benefits expenses due to employee growth and compensation increases, and engineering development, compute and infrastructure costs for new product introductions.

The strong year-on-year growth was driven by the major platform shifts – accelerated computing and AI.

Gaming revenue for fiscal year 2026 was up 41% from a year ago, driven by strong Blackwell demand.

We expect supply constraints to be a headwind to Gaming in the first quarter of fiscal 2027 and beyond.

Professional Visualization revenue for fiscal year 2026 was up 70% from a year ago, driven by exceptional demand for Blackwell as well as the launch of our new DGX Spark.

Automotive revenue for fiscal year 2026 was up 39% from a year ago, driven by continued adoption of our self-driving platforms.

Gross margin decreased in fiscal year 2026 as our business model transitioned from offering Hopper HGX systems to Blackwell full-scale datacenter solutions.

The gross margin decrease was also impacted by a $4.5 billion charge associated with H20 excess inventory and purchase obligations.

Operating expenses for fiscal year 2026 were up 41% from a year ago, driven by higher compensation and benefits expenses due to employee growth and compute and infrastructure costs.

Critical Accounting Estimates

2 unchanged sentences

Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and could have a material impact on our financial condition or results of operations.

We have critical accounting estimates in the areas of inventories, income taxes, and revenue recognition.

We have critical accounting estimates in the areas of inventories, income taxes, non-marketable equity securities, and revenue recognition.

Refer to Note 1 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for a summary of significant accounting policies.

We charge cost of sales for inventory provisions to write-down our inventory to the lower of cost or net realizable value or for obsolete or excess inventory, and for excess product purchase commitments.

Most of our inventory provisions relate to excess quantities of products or components, based on our inventory levels and future product purchase

commitments compared to assumptions about future demand and market conditions, which requires management judgment.

Most of our inventory provisions relate to excess quantities of products or components, based on our inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions, which requires management judgment.

Situations that may result in excess or obsolete inventory or excess product purchase commitments include changes in business and economic conditions, changes in market conditions, sudden and significant decreases in demand for our products, including potential cancellation or deferral of customer purchase orders, inventory obsolescence because of changing technology and customer requirements, new product introductions resulting in less demand for existing products or inconsistent spikes in demand, failure to estimate customer demand properly, ordering in advance of historical lead-times, government regulations and the impact of changes in future demand, or increase in demand for competitive products, including competitive actions.

17 unchanged sentences

Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Non-Marketable Equity Securities

Non-marketable equity securities consist of investments in private companies without readily determinable fair values.

They are measured at cost minus impairment, if any, and are adjusted for observable price changes in orderly transactions for a similar investment in the same issuer (the measurement alternative).

These adjustments may require use of unobservable inputs.

We assess impairment quarterly based on qualitative and quantitative factors, including the investee’s operating performance and market trends.

Revenue Recognition

5 unchanged sentences

We account for customer programs, which involve rebates and marketing development funds, or MDFs, as a reduction in revenue and accrue for such programs based on the amount we expect to be claimed by customers.

Certain customer programs include distributor price incentives or other channel programs for specific products and customer classes which require judgement as to whether the applicable incentives will be attained.

Certain customer programs include distributor price incentives or other channel programs for specific products and customer classes which require judgment as to whether the applicable incentives will be attained.

Estimates for customer program accruals include a combination of historical attainment and claim rates and may be adjusted based on relevant internal and external factors.

License and Development Arrangements

Revenue from License and Development Arrangements is recognized over the period in which the development services are performed.

Each fiscal reporting period, we measure progress to completion based on actual cost incurred to date as a percentage of the estimated total cost required to complete each project.

Estimated total cost for each project includes a forecast of internal engineer personnel time expected to be incurred and other third-party costs as applicable.

Contracts with Multiple Performance Obligations

Our contracts may contain more than one performance obligation.

Judgement is required in determining whether each performance obligation within a customer contract is distinct.

Judgment is required in determining whether each performance obligation within a customer contract is distinct.

Except for License and Development Arrangements, NVIDIA products and services function on a standalone basis and do not require a significant amount of integration or interdependency.

1 unchanged sentence

We allocate the total transaction price to each distinct performance obligation in an arrangement with multiple performance obligations on a relative standalone selling price basis.

In certain cases, we can establish standalone selling price based on directly observable prices of products or services sold separately in comparable circumstances to similar customers.

In most cases, we can establish standalone selling price based on directly observable prices of products or services sold separately in comparable circumstances to similar customers.

If standalone selling price is not directly observable, such as when we do not sell a product or service separately, we determine standalone selling price based on market data and other observable inputs.

14 unchanged sentences

Interest expense (0.1) (0.2)

Other, net 0.8 0.4

Other income (expense), net 2.0 1.4

Other income, net

Total other income, net

Income before income tax 65.5 64.4

6 unchanged sentences

Compute & Networking

$ 193,479 $ 116,193 $ 77,286 67 %

Graphics 22,459 14,304 8,155 57 %

4 unchanged sentences

Compute & Networking

$ 130,141 $ 82,875 $ 47,266 57 %

Graphics 9,156 5,085 4,071 80 %

All Other (6,507) (4,890) (1,617) 33 %

Total $ 139,297 $ 87,960 $ 51,337 58 %

Compute & Networking revenue – The year over year increase was due to strong demand for our accelerated computing and AI solutions.

Revenue from Data Center computing grew 162% driven primarily by demand for our Hopper computing platform used for large language models, recommendation engines, and generative AI applications.

Revenue from Data Center networking grew 51% driven by Ethernet for AI revenue, which includes Spectrum-X end-to-end ethernet platform.

Graphics revenue – The year over year increase was driven by sales of our GeForce RTX 40 Series GPUs.

Reportable segment operating income – The year over year increase in Compute & Networking segment operating income was driven by growth in revenue.

The year over year decrease in Graphics segment operating income was driven by an increase of 44% in segment operating expenses, partially offset by growth in revenue.

All Other operating loss – The year over year increase was due to an increase in stock-based compensation expense reflecting employee growth and compensation increases.

Compute & Networking revenue – The year over year increase was driven by the major platform shifts – accelerated computing and AI.

Revenue from Data Center computing grew 59% driven by demand for our Blackwell computing platform.

Revenue from Data Center networking grew 142% driven by the introduction and continued ramp of NVLink compute fabric for GB200 and GB300 systems and the growth of Ethernet and InfiniBand platforms.

Graphics revenue – The year over year increase was driven by sales of our Blackwell architecture.

Reportable segment operating income – The year over year increase in Compute & Networking segment operating income was driven by growth in revenue, partially offset by a $4.5 billion charge associated with H20 excess inventory and purchase obligations in the first quarter of fiscal year 2026.

The year over year increase in Graphics segment operating income was driven by the growth in revenue.

Concentration of Revenue

We refer to customers who purchase products directly from NVIDIA as direct customers, such as AIBs, distributors, ODMs, OEMs, and system integrators.

We have certain customers that may purchase products directly from NVIDIA and may use either internal resources or third-party system integrators to complete their build.

We also have indirect customers, who purchase products through our direct customers;

indirect customers include CSPs, consumer internet companies, enterprises, and public sector entities.

Direct Customers – Sales to direct customers which represented 10% or more of total revenue, all of which were primarily attributable to the Compute & Networking segment, are presented in the following table:

Jan 26, 2025 Jan 28, 2024

Direct Customer A 12 % *

Direct Customer B 11 % 13 %

Direct Customer C 11 % *

* Less than 10% of total revenue.

No customer represented 10% or more of total revenue for fiscal year 2023.

We refer to customers who purchase products directly from NVIDIA as direct customers, such as AIBs, distributors, ODMs, OEMs, CSPs, AI model makers, and system integrators.

Certain direct customers may use either internal resources or third-party system integrators to complete their build.

We refer to indirect customers as those who purchase products through our direct customers;

indirect customers include CSPs, Neocloud builders, AI model makers, enterprises, and public sector entities.

Our revenue is concentrated among a limited number of direct and indirect customers and this trend may continue.

Direct Customers – For fiscal year 2026, sales to one direct customer represented 22% of total revenue and sales to another direct customer represented 14% of total revenue, all of which were primarily attributable to the Compute & Networking segment.

For fiscal year 2025, sales to one direct customer represented 12% of total revenue and sales to two direct customers each represented 11% of total revenue, all of which were primarily attributable to the Compute & Networking segment.

For fiscal year 2024, sales to one direct customer represented 13% of total revenue, and were primarily attributable to the Compute & Networking segment.

Indirect Customers – Indirect customer revenue is an estimation based upon multiple factors including customer purchase order information, product specifications, internal sales data, and other sources.

Actual indirect customer revenue may differ from our estimates.

For fiscal year 2025, an indirect customer which primarily purchases our products through system integrators and distributors, including through Direct Customer B, is estimated to represent 10% or more of total revenue, attributable to the Compute & Networking segment.

We have experienced periods where we receive a significant amount of our revenue from a limited number of customers, and this trend may continue.

Revenue by geographic region is designated based on the billing location even if the revenue may be attributable to indirect customers in a different location.

Revenue from sales to customers outside of the United States accounted for 53% and 56% of total revenue for fiscal years 2025 and 2024, respectively.

Indirect customers primarily purchase our products through system integrators and distributors.

We generate a significant amount of our revenue from a limited number of indirect customers, some individually representing 10% or more of our revenue.

Certain companies purchase cloud and related services through various direct and indirect customers.

We estimate that one AI research and deployment company contributed to a meaningful amount of our revenue purchasing cloud services from our customers in fiscal year 2026.

Revenue by geographic region is designated based on the location of the headquarters of direct customers.

The end customer and shipping location may be different from our customers' headquarters location.

Revenue from sales to customers headquartered outside of the United States accounted for 31% and 41% of total revenue for fiscal years 2026 and 2025, respectively.

Gross Profit and Gross Margin

Gross profit consists of total net revenue less cost of revenue.

Cost of revenue consists primarily of the cost of semiconductors, including wafer fabrication, assembly, testing and packaging, board and device costs, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, inventory and warranty provisions, memory and component costs, tariffs, and shipping costs.

Cost of revenue consists of the cost of semiconductors, including wafer fabrication, assembly, testing and packaging, board and device costs, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, inventory and warranty provisions, memory and component costs, tariffs, and shipping costs.

Cost of revenue also includes acquisition-related intangible amortization expense, costs for license and development and service arrangements, IP-related costs, and stock-based compensation related to personnel associated with manufacturing operations.

Gross margins increased to 75.0% in fiscal year 2025 from 72.7% in fiscal year 2024.

The year over year increase was primarily driven by a higher mix of Data Center revenue.

Provisions for inventory and excess inventory purchase obligations totaled $3.7 billion and $2.2 billion for fiscal years 2025 and 2024, respectively.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $689 million and $540 million for fiscal years 2025 and 2024, respectively.

Gross margins decreased to 71.1% in fiscal year 2026 from 75.0% in fiscal year 2025 as our business model transitioned from offering Hopper HGX systems to Blackwell full-scale datacenter solutions and a $4.5 billion charge associated with H20 excess inventory and purchase obligations in the first quarter of fiscal year 2026.

Provisions for inventory and excess inventory purchase obligations totaled $7.2 billion and $3.7 billion for fiscal years 2026 and 2025, respectively, including $4.5 billion associated with H20 excess inventory and purchase obligations for the first quarter of fiscal year 2026.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $1.5 billion and $689 million for fiscal years 2026 and 2025, respectively.

The net effect on our gross margin was an unfavorable impact of 2.6% and 2.3% in fiscal years 2026 and 2025, respectively.

2 unchanged sentences

($ in millions)

Research and development expenses $ 12,914 $ 8,675 $ 4,239 49 %

% of net revenue 9.9 % 14.2 %

Sales, general and administrative expenses 3,491 2,654 837 32 %

% of net revenue 2.7 % 4.4 %

Research and development $ 18,497 $ 12,914 $ 5,583 43 %

Sales, general and administrative 4,579 3,491 1,088 31 %

Total operating expenses $ 23,076 $ 16,405 $ 6,671 41 %

% of net revenue 12.6 % 18.6 %

The increases in research and development expenses for fiscal year 2025 were driven by a 32% increase in compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases, a 100% increase in compute and infrastructure, and a 234% increase in engineering development costs for new product introductions.

The increases in sales, general and administrative expenses for fiscal year 2025 were primarily driven by compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases.

Other Income (Expense), Net

The increases in research and development expenses for fiscal year 2026 were driven by a 29% increase in compensation and benefits expense, including stock-based compensation, reflecting employee growth and compensation increases and a 79% increase in compute and infrastructure.

The increases in sales, general and administrative expenses for fiscal year 2026 were primarily driven by compensation and benefits expense, including stock-based compensation, reflecting employee growth and compensation increases.

Total Other Income, Net

Jan 25, 2026 Jan 26, 2025 $

2 unchanged sentences

Interest expense (259) (247) (12)

Other, net 1,034 237 797

Other income (expense), net $ 2,573 $ 846 $ 1,727

The increase in interest income was primarily due to growth in cash, cash equivalents, and marketable securities.

Interest expense is comprised of coupon interest and debt discount amortization related to our notes.

Other, net consists of realized or unrealized gains and losses from investments in non-marketable equity securities, publicly-held equity securities, and the impact of changes in foreign currency rates.

The change in Other, net, compared to fiscal year 2024, was primarily driven by an increase in fair value of our non-marketable equity securities and publicly-held equity securities.

Refer to Note 8 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information regarding our non-marketable equity securities.

Other income, net

9,022 1,034 7,988

Total other income, net

$ 11,063 $ 2,573 $ 8,490

The increase in interest income was primarily due to growth in cash, cash equivalents, and debt securities.

Interest expense is primarily comprised of coupon interest and debt discount amortization related to our notes.

Other income, net primarily consists of realized or unrealized gains and losses from investments in non-marketable equity securities, publicly-held equity securities, and the impact of changes in foreign currency rates.

The change in Other income, net, compared to fiscal year 2025, was primarily driven by unrealized gains in non-marketable and publicly-held equity securities, including gains from our previously announced investment in Intel’s common stock.

Refer to Note 7 and 8 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information regarding our non-marketable equity securities.

Income tax expense was $21.4 billion and $11.1 billion for fiscal years 2026 and 2025, respectively.

Income tax as a percentage of income before income tax was an expense of 15.1% and 13.3% for fiscal years 2026 and 2025, respectively.

The effective tax rate increased primarily due to higher pre-tax income and a prior year discrete benefit due to an audit resolution.

The effective tax rate increased primarily due to a lower percentage of tax benefits from stock-based compensation, FDDEI, and U.S.

federal research tax credit relative to the increase in income before income tax.

Our effective tax rates for fiscal years 2026 and 2025 were lower than the U.S.

federal statutory rate of 21% due primarily to tax benefits from the FDII deduction, stock-based compensation, the U.S.

federal research tax credit, and income earned in jurisdictions that are subject to taxes at rates lower than the U.S.

federal statutory tax rate.

Our effective tax rate for fiscal year 2024 was additionally benefited by the audit resolution.

Given our current and possible future earnings, we believe that we may release the valuation allowance associated with certain state deferred tax assets in the near term, which would decrease our income tax expense for the period the release is recorded.

The timing and amount of the valuation allowance release could vary based on our assessment of all available information.

federal statutory rate of 21.0% primarily due to tax benefits from FDDEI, stock-based compensation, income earned in jurisdictions that are subject to taxes at rates lower than the U.S.

federal statutory tax rate, and the U.S.

federal research tax credit.

In July 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law and contains several changes to key U.S.

federal income tax laws.

We have recognized the tax effects of currently effective OBBBA provisions in our results for fiscal year 2026.

We will continue to evaluate the impact of these legislative changes as tax authorities provide additional guidance and interpretation.

As of January 25, 2026, based on recent jurisdictional taxable income and expected future earnings, we concluded certain state deferred tax assets are more likely than not realizable and released $711 million of valuation allowance.

Refer to Note 13 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.

10 unchanged sentences

Net cash used in financing activities $ (48,474) $ (42,359)

Our investment policy requires the purchase of highly-rated fixed income securities, the diversification of investment types and credit exposures, and certain maturity limits on our portfolio.

Cash provided by operating activities increased in fiscal year 2025 compared to fiscal year 2024, due to growth in revenue.

Cash used in investing activities increased in fiscal year 2025 compared to fiscal year 2024, primarily driven by net purchases of marketable securities, and purchase of land, property and equipment.

Cash used in financing activities increased in fiscal year 2025 compared to fiscal year 2024, mainly due to higher share repurchases and higher tax payments related to RSUs.

Our fixed income security investments include highly rated, diversified investment types and credit exposures with shorter maturities.

Cash provided by operating activities increased in fiscal year 2026 compared to fiscal year 2025, due to higher revenue.

Cash used in investing activities increased in fiscal year 2026 compared to fiscal year 2025, primarily driven by higher purchases of equity investment securities and the execution of a non-exclusive license agreement with Groq.

Cash used in financing activities increased in fiscal year 2026 compared to fiscal year 2025, mainly due to higher share repurchases.

Our primary sources of liquidity include cash, cash equivalents, marketable securities, and cash generated by our operations.

As of January 25, 2026, we had $62.6 billion in cash, cash equivalents, and marketable securities.

We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months and thereafter for the foreseeable future, including our future supply obligations and share purchases.

We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months and for the foreseeable future, including our future obligations.

We continuously evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance future capital requirements.

8 unchanged sentences

federal income taxes.

Our first quarter of any fiscal year (including fiscal year 2027) generally does not include any estimated federal and state income tax payments and our second quarter of any fiscal year (including fiscal year 2027) generally includes two estimated federal and state income tax payments.

Capital Return to Shareholders

On August 26, 2024, our Board of Directors approved an additional $50 billion to our share repurchase authorization, without expiration.

On August 26, 2025, our Board of Directors approved an additional $60.0 billion in share repurchase authorization, without expiration.

In fiscal year 2026, we repurchased 282 million shares of our common stock for $40.4 billion.

1 unchanged sentence

From January 26, 2026 through February 20, 2026, we repurchased 8 million shares for $1.5 billion pursuant to a pre-established trading plan.

Our share repurchase program aims to offset dilution from shares issued to employees while maintaining adequate liquidity to meet our operating requirements.

We may pursue additional share repurchases as we weigh market factors and other investment opportunities.

We may execute repurchases from time to time, subject to market conditions, operating requirements, and other investment opportunities, in the open market, in privately negotiated transactions, pursuant to a Rule 10b5-1 trading plan or in structured share repurchase agreements in compliance with Rule 10b-18 of the Exchange Act.

Our share repurchase program may be suspended at any time at our discretion.

In fiscal year 2026, we paid cash dividends to our shareholders of $974 million.

10 unchanged sentences

Unamortized debt discount and issuance costs (32)

Net long-term carrying amount $ 8,463

We have a $575 million commercial paper program to support general corporate purposes.

As of January 26, 2025, we had no commercial paper outstanding.

Net carrying amount

Less short-term portion 999

Total long-term portion $ 7,469

In January 2026, we increased the amount of our commercial paper program, pursuant to which we may issue unsecured commercial paper notes from time to time or all at once up to $25.0 billion.

As of January 25, 2026, no commercial paper was outstanding.

We will continue to evaluate issuing commercial paper as a component of our overall liquidity strategy.

Refer to Note 11 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for further discussion.

Material Cash Requirements and Other Obligations

For a description of our long-term debt, purchase obligations, and operating lease obligations, refer to Note 11, Note 12, and Note 17 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K, respectively.

For descriptions of our facility lease guarantees, long-term debt, purchase commitments, and operating lease obligations, refer to Note 10, Note 11, Note 12, and Note 17 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K, respectively.

We expect to continue investing in our ecosystem.

We are finalizing an investment and partnership agreement with OpenAI.

There is no assurance that we will enter into an investment and partnership agreement with OpenAI or that a transaction will be completed.

Refer to Item 1A.

Risk Factors for additional information regarding our investments.

During fiscal year 2026 and fiscal year 2025, we spent $6.1 billion and $3.4 billion on capital expenditures, respectively.

2 unchanged sentences

We are unable to estimate the timing of any potential tax liability, interest payments, or penalties in individual years due to uncertainties in the underlying income tax positions and the timing of the effective settlement of such tax positions.

We are currently under examination by the Internal Revenue Service for our fiscal years 2023 and 2024.

Refer to Note 13 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for further information.

Climate Change

To date, there has been no material impact to our results of operations associated with global sustainability regulations, compliance, costs from sourcing renewable energy or climate-related business trends.

Adoption of New and Recently Issued Accounting Pronouncements

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis