NVDA · 10-K · 2026A · Full report
Inventory Provisions and H20 Charge
NVIDIA CORP · 2026-02-25 · Importance 77 · Surprise 82
Provisions for inventory and excess inventory purchase obligations totaled $7.2 billion in fiscal 2026 and $3.7 billion in fiscal 2025, and included a $4.5 billion charge associated with H20 excess inventory and purchase obligations recorded in Q1 FY2026. Sales of previously reserved inventory and settlements of excess purchase obligations resulted in provision releases of $1.5 billion in FY2026 and $689 million in FY2025. Management attributes the H20 charge to diminished demand after USG export licensing requirements were imposed in April 2025. The inventory provisions contributed materially to the decline in gross margins and to volatility in cost of revenue for FY2026.
Key facts
- The net effect on gross margin from inventory provisions and sales of items previously written down was an unfavorable impact of 2.6% in fiscal year 2026.
- NVIDIA incurred a $4.5 billion charge in the first quarter of fiscal year 2026 associated with H20 excess inventory and purchase obligations.
- The net effect on gross margin from inventory provisions and sales of items previously written down was an unfavorable impact of 2.3% in fiscal year 2025.
- Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $1.5 billion in fiscal year 2026.
- NVIDIA generated approximately $60 million in H20 revenue under the August 2025 licenses.
- The $4.5 billion charge associated with H20 excess inventory and purchase obligations in the first quarter of fiscal year 2026 negatively impacted gross margin.
- Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $689 million in fiscal year 2025.
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| margin | negative | realized | -2.6% | The net effect on gross margin from inventory provisions and sales of items previously written down was an unfavorable impact of 2.6% in… |
| operating_income | negative | realized | -2.1% | NVIDIA incurred a $4.5 billion charge in the first quarter of fiscal year 2026 associated with H20 excess inventory and purchase… |
| operating_income | positive | realized | +0.7% | Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $1.5… |
| revenue | positive | realized | +0.0% | NVIDIA generated approximately $60 million in H20 revenue under the August 2025 licenses. |
| margin | negative | realized | — | The $4.5 billion charge associated with H20 excess inventory and purchase obligations in the first quarter of fiscal year 2026 negatively… |