Nvidia reported its fiscal first-quarter results after the bell on Wednesday, topping analysts’ expectations on the top and bottom lines and offering a better-than-anticipated Q2 outlook.

Top AI chip manufacturing company Forecast second-quarter revenue above Wall Street expectations on Wednesday and announced an $80 billion share repurchase program.

NVIDIA stock initially fell more than 2% on the news.

Shares ‌of the company ticked down 0.2% in extended trading, but now the world's most valuable company expects revenue of $91 billion, plus or minus 2%, compared with estimates of $86.84 billion, according to data compiled by LSEG.

Nvidia's results are largely considered a barometer for the AI market's health, as its chips are used in virtually every major data center in the world, powering the largest and most advanced AI models.

"Nvidia delivered another beat, but at this point that's essentially priced in as it keeps beating quarter after quarter," said eMarketer analyst Jacob Bourne.

 "The lingering question is whether it can convince investors the AI buildout has durability into 2027 and 2028, especially as the narrative shifts toward inference workloads and competing silicon from Google, Amazon, AMD, and Intel."

The company also said it would increase its quarterly cash dividend to 25 cents per share from 1 cent.

Spending on AI infrastructure continues to grow rapidly, with U.S. tech giants, including Alphabet, Amazon and Microsoft expected to spend more than $700 billion on AI this year, a sharp jump from around $400 billion in 2025.

Rising competition from customer chips:

While heavily relying on Nvidia's expensive processors, the companies are also pouring funds into developing their own custom chips to run models, posing a risk to Nvidia's long-held dominance over the chip industry.

Those chips are targeted at inference, the process by which AI responds to user queries which represents a much larger market than training.

Nvidia is facing competition not only from Big Tech but also from other chip rivals, including Intel and Advanced Micro Devices, which have touted a ‌large revenue opportunity from the inference market.

Nvidia stables position:

In the company's quarterly results call with financial analysts, Nvidia's finance chief, Colette Kress, said the market for Nvidia's central processors, or CPUs, is roughly $200 billion and the company has "visibility into nearly $20 billion in total CPU revenue" this fiscal year.

The company is also spending heavily to ensure it does not hit supply-chain snags during a global memory chip crunch. Nvidia said on Wednesday that its supply rose to $119 billion in the fiscal first quarter, up from $95.2 billion the previous quarter.

Nvidia reported first-quarter revenue of $81.62 billion, beating analysts' average estimate of $78.86 billion, according to data compiled by LSEG.

Data center revenue in the quarter came in at $75.2 billion, compared with the average analyst estimate of $72.8 billion.

On an adjusted basis, the firm earned $1.87 per share, compared with market estimates of $1.76.

Nvidia also disclosed $30 billion worth of cloud computing agreements, up sequentially from $27 billion, which it said were to help its research and development efforts.

Seaport analyst Jay Goldberg said in a research note last year that such commitment likely represents “backstops” in which Nvidia agrees to pay cloud computing companies that buy its hardware for excess capacity from those companies running Nvidia systems.