NetApp, Inc.
NTAP · Nasdaq
Next quarter
Expected to report Nov 24, 2026 — estimated from last year’s reporting date.
Consensus is $2.10 EPS for Oct 2026 across 8 estimates, ranging $1.86 to $2.29.
NTAP Jul 2026
- 21.51%
- +2.55%
- $1.72
- $2.09
- —
- $2.02B
Reported results
- $2.02B
- 70.07%
- $484.00M
- 23.90%
- $375.00M
- $1.88
Highlights
- Record revenue: Q1 FY2027 net revenue was $2.025 billion, up 30% year over year and approximately 18% above the latest reported quarter on file, Q3 FY2026 revenue of $1.71 billion.
- EPS beat: The supplied consensus comparison lists reported EPS of $2.09 versus $1.72 expected, a 21.51% surprise; NetApp’s release reports $1.88 GAAP diluted EPS and record non-GAAP EPS of $2.58, up 63% and 66% year over year, respectively.
- All-flash acceleration: All-flash revenue reached a record $1.309 billion, up 47% year over year, lifting all-flash to 72% of Hybrid Cloud revenue from 64%.
- Billings strength: Billings rose 36% year over year to $2.057 billion, ahead of revenue growth and versus $1.511 billion in the prior-year quarter.
- Cloud growth: Public Cloud revenue increased 28% to $206 million, with gross margin expanding to 86.4% from 80.1% as cost optimization reduced depreciation.
- Operating leverage: GAAP operating income rose 57% to $484 million and operating margin expanded to 23.9% from 19.8%; non-GAAP operating margin increased to 31.9% from 25.7%.
- Raised outlook: Fiscal 2027 revenue guidance increased to $7.975 billion-$8.225 billion, with non-GAAP EPS guidance of $9.73-$10.03 and GAAP EPS guidance of $7.35-$7.65.
- Cash conversion: Operating cash flow fell 25% to $503 million and free cash flow declined 35% to $401 million, partly reflecting a $176 million inventory build and $102 million of capital expenditures.
- AI investment: NetApp acquired DataPelago for $193 million, including $87 million paid at closing and $106 million of contingent consideration, to address AI and analytics data-processing bottlenecks.
Analysis
NetApp’s Q1 FY2027 was a sharply stronger-than-expected start to the year, led by all-flash systems and a favorable product mix. Revenue reached a record $2.025 billion, up 30% from $1.559 billion a year ago and above the latest reported quarter on file, Q3 FY2026’s $1.71 billion. The supplied consensus comparison shows EPS of $2.09 against $1.72 expected, while the company’s release reports $1.88 in GAAP diluted EPS and $2.58 in non-GAAP EPS, versus $1.15 and $1.55, respectively, a year earlier.
The defining feature was product-led growth: product revenue jumped 51% to $987 million, with all-flash revenue up 47% to $1.309 billion. Public Cloud also grew 28% to $206 million, and billings increased 36% to $2.057 billion. Gross margin was broadly stable at 70.1% as higher pricing offset component inflation, while operating leverage drove GAAP operating margin to 23.9% from 19.8%, despite a $56 million restructuring charge. Management materially raised full-year guidance, now targeting $7.975 billion-$8.225 billion of revenue and $9.73-$10.03 of non-GAAP EPS. Cash generation was weaker, with free cash flow down to $401 million from $620 million, as inventory rose and capital spending increased.
All-flash and billings
Growth was concentrated in the higher-value all-flash portfolio rather than broad-based expansion across legacy categories. Hybrid Cloud revenue rose 30% to $1.819 billion, but all-flash revenue increased 47% to $1.309 billion, while hybrid-flash and other revenue was approximately flat at $510 million. Product revenue grew 51% to $987 million, supported by price increases implemented in the prior quarter. Billings of $2.057 billion, up 36%, also exceeded recognized revenue growth and included a $32 million increase in deferred revenue.
- Mix shift: All-flash represented 72% of Hybrid Cloud revenue, up from 64% a year earlier.
- Services base: Support revenue grew 11% to $720 million, while professional and other services rose 15% to $112 million.
- Calendar benefit: The 14-week quarter added approximately $65 million of services revenue, including $50 million from support and $15 million from Public Cloud.
Margins and restructuring
NetApp converted the revenue step-up into substantial operating leverage. GAAP gross profit rose 29% to $1.419 billion, although gross margin edged down to 70.1% from 70.4% as higher memory and other component costs offset pricing. Product gross margin improved to 54.4% from 53.8%, while services gross margin increased to 85.0% from 82.4%.
- Operating leverage: GAAP operating income increased to $484 million from $309 million, and operating margin expanded 410 basis points to 23.9%.
- Non-GAAP profitability: Non-GAAP operating income reached $645 million versus $401 million, with margin rising to 31.9% from 25.7%.
- Restructuring: A plan to redirect resources to higher-return activities generated $56 million of charges, versus $2 million a year earlier; the activities are expected to be substantially complete by fiscal year-end.
Public Cloud and AI
Public Cloud remained smaller than Hybrid Cloud but grew faster and became more profitable. Revenue increased 28% to $206 million, while segment gross profit rose to $178 million from $129 million. Gross margin expanded six percentage points to 86.4%, primarily because cost optimization reduced fixed-asset depreciation. NetApp also acquired DataPelago on July 16 to extend its AI infrastructure capabilities.
- DataPelago terms: The acquisition price was $193 million, comprising $87 million of cash paid at closing and $106 million of contingent consideration.
- Accounting impact: NetApp recorded $151 million of goodwill and a $22 million developed-technology intangible asset with an estimated five-year useful life.
- Strategic rationale: DataPelago is intended to reduce data-processing bottlenecks and improve infrastructure efficiency for AI and analytics workloads; its contribution was not material to Q1 results.
Raised fiscal outlook
The strength of the quarter prompted a significant increase in full-year guidance. The outlook implies continued confidence in demand for all-flash, cloud and AI-related infrastructure, although the company continues to flag elevated component costs and tight supply for certain products.
- Fiscal 2027 revenue: $7.975 billion-$8.225 billion, with GAAP operating margin of 24.3%-25.3% and non-GAAP operating margin of 30.3%-31.3%.
- Fiscal 2027 EPS: GAAP EPS of $7.35-$7.65 and non-GAAP EPS of $9.73-$10.03.
- Q2 outlook: Revenue of $2.025 billion-$2.175 billion, GAAP EPS of $1.97-$2.07 and non-GAAP EPS of $2.54-$2.64.
Cash and capital allocation
Cash generation did not keep pace with earnings. Operating cash flow declined to $503 million from $673 million, and free cash flow fell to $401 million from $620 million. The company attributed the working-capital pressure primarily to strategic component purchases and higher finished-goods inventory intended to meet demand.
- Liquidity: Cash, cash equivalents and short-term investments were $3.576 billion at July 31, broadly unchanged from $3.584 billion at the end of fiscal 2026.
- Inventory: Inventory increased to $375 million from $198 million, while inventory turns fell to 6 from 14.
- Shareholder returns: NetApp repurchased 1.5 million shares for $200 million and paid $102 million of dividends; $1.302 billion remained under the repurchase authorization.
- Commitments: Purchase commitments totaled $2.3 billion, including $1.9 billion for inventory, with $2.1 billion due within 12 months.
