I frequently write about SEC comment letters, but over the past few quarters, I have published less on the topic simply because there has been less activity to analyze.

As shown in the updated chart below, we’ve seen a sharp decline in comment-letter conversations posted on EDGAR, which began earlier in the year and continued into the fourth quarter. October through December 2025 remained well below historical seasonal levels, reflecting not only fewer comment letters issued and cleared but also delays in releasing completed correspondence. Some of the decline may reflect fewer reviews leading to fewer comments, or a narrower focus due to shifting Corp Fin review priorities or staffing levels. However, the continued drop in the final months of the year – with zero conversations released in October 2025 - is at least partially attributable to the SEC shutdown, which disrupted both review activity and the timing of public releases on EDGAR.

Figure 1 – SEC Comment Letters Released on EDGAR between January and December, 2023-2025

Source: Ideagen Audit Analytics Comment Letters Database, analysis by Deep Quarry.

That said, January 2026 has already produced several interesting new SEC comments worth digging into, as they supplement financial statements by providing new incremental information or by explaining why the new information was included. Note that while the comment letters discussed below were issued in 2025, they were publicly released on EDGAR in January 2026.

The distinction between disclosures added voluntarily by management and those prompted by SEC comments matters, because information disclosed only after Staff intervention reflects a judgment of materiality by the SEC - particularly noteworthy in a period of reduced comment activity.

SEC comments released in January 2026 include:

• SEC comments to Nvidia, seeking clarity on why a $4.5 billion inventory-related non-GAAP adjustment is appropriate.
• SEC comments to The Bancorp Inc., seeking clarity on credit enhancement arrangements contained within third-party agreements for consumer fintech loans.
• SEC comments to Goodyear Tire & Rubber Company, seeking clarity on the implications of a “little r” revision on internal control and procedures.

SEC Comments to Nvidia (NVDA)

On July 22, 2025, the SEC asked Nvidia to justify excluding a $4.5 billion inventory charge from its non-GAAP margin and EPS, questioning whether the adjustment complied with Question 100.01 of the Non-GAAP C&DIs. The C&DIs guidance prohibits the removal of “normal, recurring, cash operating expenses” necessary to operate the business. The Staff specifically asked Nvidia to explain the nature of the charge and why it did not represent a normal operating cost, including whether the affected H20 products could be sold to alternative customers or had other uses.

In its July 31, 2025, response, Nvidia argued that the charge was unique and unprecedented, stemming from an April 2025 U.S. government decision imposing indefinite export-license requirements on its H20 product, which had been designed specifically for the Chinese market under prior export controls. Nvidia maintained that H20 had minimal alternative use outside China and was tied to its older Hopper architecture, while demand had shifted to the newer Blackwell platform.

Subsequently, however, Nvidia disclosed in its Form 10-Q for the quarter ended July 27, 2025, that it recognized approximately $650 million of H20 revenue from a sale to a non-China customer, releasing $180 million of previously reserved inventory. In my view, that partial reversal does not fundamentally undermine Nvidia’s argument but highlights how fact-specific and judgment-driven these non-GAAP determinations can be.

Nvidia’s Comments Fit a Broader SEC Reviews Pattern of Inventory-Related Non-GAAP Adjustments

Nvidia’s exchange with the SEC fits squarely within a recurring pattern: the Staff closely scrutinizes non-GAAP adjustments tied to inventory write-downs, especially when companies characterize them as non-recurring or externally driven.

Inventory impairments are typically viewed by the SEC as part of the normal risks of operating a product-based business, even when triggered by tariffs, regulatory changes, demand shifts, or geopolitical developments. As seen in prior reviews, including the SEC’s comments to Newell Brands, the Staff draws a careful distinction between (1) truly extraordinary, regulation-driven events that render inventory unsalable and (2) business-model or restructuring-related write-downs that reflect ongoing operational risk. While the former adjustments might be allowed, the latter are usually seen by the SEC as normal, recurring, cash operating expenses prohibited by the C&DIs. 

This is an abridged version of the analysis. The full Deep Quarry post - available to Substack Deep Quarry subscribers - explores SEC comment letters to The Bancorp, Inc., and Goodyear Tire & Rubber Company.

Investment, Tax and Legal Disclaimer: This article is for informational purposes only and does not constitute investment, tax, or legal advice. The content contained herein is not to be relied upon as the basis for any investment or other decision. Nothing herein should be construed as a solicitation, recommendation, endorsement, or offer to buy or sell any particular security, product, or service. The author has not taken into account the specific investment objectives, financial situation, or particular needs of any specific person who may read this material. Investing involves inherent risks, and there can be no guarantee that any investment or company mentioned will be suitable or profitable for any investor's investment portfolio. Readers are strongly advised to conduct their own thorough research and consult with a qualified and licensed financial professional and legal counsel before making any investment decisions. Past performance is not indicative of future results. 

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¹ SEC comment letter to Nvidia dated July 22, 2025, and the Company’s response, dated July 31, 2025, available on EDGAR:

² SEC C&DIs on Non-GAAP Financial Measures: https://www.sec.gov/corpfin/non-gaap-financial-measures.htm

³ Nvidia’s 10-Q for the quarter ending July 27, 2025: https://www.sec.gov/ix?doc=/Archives/edgar/data/1045810/000104581025000209/nvda-20250727.htm

⁴ For additional discussion of SEC inventory-related non-GAAP comments, see “Tariffs, inventory accounting, and non-GAAP metrics: which non-GAAP metrics are misleading?”, by Deep Quarry, available on Substack: https://deepquarry.substack.com/p/tariffs-inventory-accounting-and

⁵ SEC comment letters to Newell Brands and the Company’s responses, including Newell Brands’ October 4, 2024, response, available on EDGAR: https://www.sec.gov/Archives/edgar/data/814453/000119312524233062/filename1.htm