NVDA · 10-Q · 2026Q2 · Full report

H20 Inventory Charge

NVIDIA CORP · 2026-05-20 · Importance 76 · Surprise 82

Management attributes a large portion of the year-over-year gross margin improvement to the absence in FY2027 of the prior year's $4.5 billion charge associated with H20 excess inventory and purchase obligations. Provisions for inventory and excess purchase obligations were $1.1 billion in Q1 FY2027 and $5.3 billion in Q1 FY2026, with the FY2026 amount including the $4.5 billion H20 position. Sales of previously reserved inventory and settlements produced provision releases of $103 million in Q1 FY2027 and $436 million in Q1 FY2026. NVIDIA quantifies the net effect on gross margin as an unfavorable impact of 1.2% in Q1 FY2027 and 11.0% in Q1 FY2026, underscoring the material impact of the H20-related charge on margins.

Key facts

• The first quarter of fiscal year 2026 included a $4.5 billion charge associated with H20 excess inventory and purchase obligations. source