Core Insights - NetApp, Inc. (NTAP) reported first-quarter fiscal 2026 non-GAAP earnings of $1.55 per share, exceeding the Zacks Consensus Estimate by 0.7%, but down 0.6% year over year [1][9] - Revenues for the quarter were $1.56 billion, reflecting a 1% increase year over year and beating the consensus mark by 1.2% [2][9] - Management reaffirmed its fiscal 2026 outlook, expecting revenues between $6.625 billion and $6.875 billion, and non-GAAP earnings per share between $7.60 and $7.90 [3][9] Financial Performance - Revenues from the Hybrid Cloud segment increased 1% year over year to $1.4 billion, while Public Cloud segment revenues improved 1% to $161 million [6] - Product revenues within the Hybrid Cloud segment decreased 2% year over year to $654 million, accounting for 46.8% of segment revenues [7] - Support Contracts revenues totaled $647 million, up 3% year over year, and Professional and Other Services revenues amounted to $97 million, up 18% [10] Operational Metrics - Non-GAAP gross margin was 71.1%, down 110 basis points from the prior year, with the Hybrid segment's gross margin at 70% and Public Cloud segment at 80.1% [12] - Non-GAAP operating income decreased 0.5% year over year to $401 million, with a non-GAAP operating margin of 25.7% [13] - Total billings rose 4% year over year to $1.51 billion, and deferred revenues totaled $4.5 billion, up 8.6% [11] Cash Flow and Shareholder Returns - Net cash from operations was $673 million, slightly down from $675 million in the previous year [14] - Free cash flow was $620 million, with a free cash flow margin of 39.8%, compared to $640 million in the prior year [15] - The company returned $404 million to shareholders through dividends and share repurchases, with a dividend of 52 cents per share announced [16][15] Guidance - For the second quarter, the company anticipates revenues in the range of $6.625 billion to $6.875 billion, reflecting a 3% growth at the midpoint [17] - Non-GAAP EPS is projected to be between $1.84 and $1.94, with a midpoint of $1.89 [18]

Financial Data and Key Metrics Changes - The company achieved revenue of $1,560 million in Q1, which is above the midpoint of guidance and represents a 1% year-over-year increase [5][22] - Excluding the divested spot business, total revenue increased by 3% year-over-year [22] - Q1 hybrid cloud revenue was $1,400 million, up 1% year-over-year, driven by support revenue growth of 3% and professional services revenue growth of 18% [22] - Consolidated gross margin improved by 1.6 percentage points sequentially to 71.1% [24] - Operating profit was $400 million with an operating margin of 25.7% [26] - The company ended Q1 with $4,530 million in deferred revenue, up 9% year-over-year [23] Business Line Data and Key Metrics Changes - All flash array revenue grew 6% year-over-year to $893 million, with a run rate of $3,600 million [10] - Public cloud revenue increased by 1% year-over-year to $161 million, and excluding spot, it was up 18% year-over-year [23] - Professional services revenue grew 18% year-over-year, driven by the Keystone offering, which increased approximately 80% compared to the same period last year [22][24] Market Data and Key Metrics Changes - The Americas enterprise performance offset declines in the U.S. Public sector and EMEA [6][21] - The company secured approximately 125 AI infrastructure and data lake modernization deals across various geographies and industries in Q1 [17] Company Strategy and Development Direction - The company is focused on helping customers modernize their data infrastructure and advance cloud transformations, particularly in the emerging enterprise AI market [7][19] - The strategy includes enhancing profitability and free cash flow while consistently delivering value to customers and shareholders [28] - The company aims to maintain its leadership position in the all flash market and expand its cloud services [19][20] Management's Comments on Operating Environment and Future Outlook - Management noted some macro-related spending caution but highlighted strong demand for AI solutions and cloud transformations [7][19] - The company expects revenue for Q2 to be $1,690 million, implying 2% growth year-over-year at the midpoint [27] - Full-year guidance for fiscal year 2026 remains between $6,625 million and $6,875 million, reflecting 3% growth year-over-year [28] Other Important Information - The company redeemed senior notes due in June 2025 for $757 million and returned $404 million to shareholders through share repurchases and dividends [26] - The balance sheet remains strong with $3,300 million in cash and short-term investments and $2,500 million in total debt, resulting in a net cash position of approximately $840 million [27] Q&A Session Summary Question: All flash revenue growth has decelerated from double digits to just 5%. What is driving this? - Management indicated that softness in the U.S. Public sector and EMEA contributed to the lower growth, but they anticipate improvement for the rest of the year [34][36] Question: How should we think about the seasonality into January? - Management expressed confidence in the outlook for the year, noting that Q2 is typically a strong budget spending quarter for the U.S. public sector [48] Question: What is the competitive landscape for all flash? - Management acknowledged a competitive environment but expressed confidence in their competitive position and did not see any specific adverse patterns in the quarter [102] Question: Can you elaborate on the AI wins and their magnitude? - Management reported over 125 AI wins in the quarter, with a mix of smaller and larger scale deployments, indicating strong momentum in AI adoption [41][66] Question: What is the strategy regarding hypervisor offerings? - The company supports a broad range of hypervisors and aims to continue providing support based on customer demand [125]

Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $1,560 million, up 1% year over year, exceeding the midpoint of guidance [21] - Excluding the divested spot business, total revenue increased by 3% year on year [21] - Q1 hybrid cloud revenue was $1,400 million, also up 1% year over year [21] - Product revenue decreased by 2% year over year to $654 million [21] - Public cloud revenue increased by 1% year over year to $161 million, and excluding spot, it was up 18% year over year [21] - Q1 consolidated gross margin improved by 1.6 percentage points sequentially to 71.1% [23] - Operating profit was $400 million with an operating margin of 25.7% [25] - Diluted EPS was $1.55, aligned with expectations [25] Business Line Data and Key Metrics Changes - All flash array revenue grew 6% year over year to $893 million, with an annualized run rate of $3,600 million [8] - Professional services revenue grew 18% year over year to $97 million, driven by Keystone, which was up approximately 80% compared to the same period last year [21] - Recurring support business maintained a gross margin of 92.3% [23] - Public cloud gross margin was 80.1%, up 80 basis points sequentially and nine percentage points year over year [24] Market Data and Key Metrics Changes - Strong performance in The Americas enterprise offset declines in the U.S. Public sector and EMEA [5] - The company secured approximately 125 AI infrastructure and data lake modernization deals across various geographies and industries in Q1 [15] - The emerging enterprise AI market is driving urgency among customers to modernize data infrastructure [6] Company Strategy and Development Direction - The company is focused on helping customers modernize their data infrastructure and advance cloud transformations [5] - The strategy includes enhancing profitability and free cash flow while delivering value to customers and shareholders [27] - The company aims to capitalize on growing opportunities in the enterprise AI sector [18] Management's Comments on Operating Environment and Future Outlook - Management noted some macro-related spending caution but emphasized strong demand for AI solutions [6] - The company expects revenue for Q2 to be $1,690 million, implying 2% growth year over year at the midpoint [26] - Full year guidance for fiscal year 2026 remains between $6,625 million and $6,875 million, reflecting 3% growth year over year [27] Other Important Information - The company ended Q1 with $4,530 million in deferred revenue, up 9% year over year [22] - Cash flow from operations reached a record $673 million in Q1 [25] - The company redeemed senior notes due in June 2025 for $757 million [25] Q&A Session Summary Question: All flash revenue growth has decelerated from double digits to just 5%. What is driving this? - Management indicated that softness in the U.S. Public sector and EMEA contributed to lower growth, but they anticipate improvement for the rest of the year [34][36] Question: What is the outlook for enterprise AI adoption? - Management reported strong momentum with over 125 AI wins in Q1, indicating a shift from proof of concept to production [40] Question: How does the availability of 128 terabyte QLC based NAND impact search solutions for AI applications? - Management stated that they have a broad range of NAND technologies available and do not feel gated by any specific technology [44] Question: What is the competitive landscape for all flash storage? - Management expressed confidence in their competitive position despite challenges in certain markets, noting that high-performance flash outgrew capacity flash year on year [110] Question: Can you elaborate on the gross margin guidance for public cloud business? - Management explained that improvements in gross margin are driven by depreciation roll-off and increased software content in revenue [57]

Financial Performance - NetApp achieved Q1 FY26 revenue of $1.56 billion, a 1.2% year-over-year increase[44] - Billings for Q1 FY26 reached $1.51 billion, representing a 4.3% year-over-year growth[44] - The company's Q1 FY26 Non-GAAP gross margin was 71.1%, a decrease of 110 bps year-over-year[44] - Non-GAAP earnings per share for Q1 FY26 were $1.55, a 0.6% decrease year-over-year[44] - NetApp's Q1 FY26 free cash flow was $620 million, resulting in a free cash flow margin of 39.8%[43, 44] Segment Performance - Public Cloud Services gross margin long-term target range raised to 80%-85%[43] - Public Cloud Segment Net Revenues is $161 million[84] - Hybrid Cloud Segment Net Revenues is $1.398 billion[84] Future Outlook - NetApp reaffirmed its FY26 revenue guidance of $6.625 billion to $6.875 billion[82] - The company projects a Non-GAAP gross margin of 71% to 72% and a Non-GAAP operating margin of 28.8% to 29.8% for FY26[82]

PART I — FINANCIAL INFORMATION This section presents NetApp's unaudited condensed consolidated financial statements and detailed notes for Q1 FY26 [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section details NetApp's unaudited condensed consolidated financial statements and accompanying notes for the first fiscal quarter [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents NetApp's condensed consolidated balance sheets, detailing assets, liabilities, and equity at quarter-end | ASSETS (in millions) | July 25, 2025 | April 25, 2025 | | :--------------------- | :------------ | :------------- | | Cash and cash equivalents | $2,085 | $2,742 | | Short-term investments | $1,239 | $1,104 | | Accounts receivable | $787 | $1,246 | | Inventories | $133 | $186 | | Other current assets | $443 | $573 | | **Total current assets** | **$4,687** | **$5,851** | | Property and equipment, net | $570 | $563 | | Goodwill | $2,734 | $2,723 | | Purchased intangible assets, net | $37 | $43 | | Other non-current assets | $1,651 | $1,643 | | **Total assets** | **$9,679** | **$10,823** | | **LIABILITIES AND STOCKHOLDERS' EQUITY (in millions)** | | | | Accounts payable | $404 | $511 | | Accrued expenses | $895 | $1,122 | | Current portion of long-term debt | $— | $750 | | Short-term deferred revenue and financed unearned services revenue | $2,270 | $2,279 | | **Total current liabilities** | **$3,569** | **$4,662** | | Long-term debt | $2,485 | $2,485 | | Other long-term liabilities | $394 | $379 | | Long-term deferred revenue and financed unearned services revenue | $2,256 | $2,257 | | **Total liabilities** | **$8,704** | **$9,783** | | Total stockholders' equity | $975 | $1,040 | | **Total liabilities and stockholders' equity** | **$9,679** | **$10,823** | - Total assets decreased by **$1,144 million** (**10.57%**) from **$10,823 million** on April 25, 2025, to **$9,679 million** on July 25, 2025, primarily driven by a decrease in cash and cash equivalents and accounts receivable[14](index=14&type=chunk) - Total liabilities decreased by **$1,079 million** (**11.03%**) from **$9,783 million** to **$8,704 million**, largely due to the repayment of the current portion of long-term debt[16](index=16&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents NetApp's condensed consolidated statements of income, detailing revenues, costs, and net income | (in millions, except per share amounts) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | Change (YoY) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | **Revenues:** | | | | | Product | $654 | $669 | (2.24)% | | Services | $905 | $872 | 3.78% | | **Net revenues** | **$1,559** | **$1,541** | **1.17%** | | **Cost of revenues:** | | | | | Cost of product | $302 | $269 | 12.27% | | Cost of services | $159 | $174 | (8.62)% | | **Total cost of revenues** | **$461** | **$443** | **4.06%** | | **Gross profit** | **$1,098** | **$1,098** | **0.00%** | | **Operating expenses:** | | | | | Sales and marketing | $461 | $471 | (2.12)% | | Research and development | $242 | $252 | (3.97)% | | General and administrative | $84 | $75 | 12.00% | | Restructuring charges | $2 | $17 | (88.24)% | | Acquisition-related expense | $— | $1 | (100.00)% | | **Total operating expenses** | **$789** | **$816** | **(3.29)%** | | **Income from operations** | **$309** | **$282** | **9.57%** | | Other (expense) income, net | $(5) | $17 | (129.41)% | | **Income before income taxes** | **$304** | **$299** | **1.67%** | | Provision for income taxes | $71 | $51 | 39.22% | | **Net income** | **$233** | **$248** | **(6.05)%** | | **Net income per share:** | | | | | Basic | $1.16 | $1.20 | (3.33)% | | Diluted | $1.15 | $1.17 | (1.71)% | - Net revenues increased by **1%** year-over-year to **$1,559 million**, driven by a **4%** increase in services revenues, partially offset by a **2%** decrease in product revenues[19](index=19&type=chunk)[121](index=121&type=chunk) - Gross profit remained flat at **$1,098 million**, while income from operations increased by **10%** to **$309 million** due to a **3%** reduction in total operating expenses[19](index=19&type=chunk) - Net income decreased by **6%** to **$233 million**, and diluted EPS decreased by **2%** to **$1.15**, primarily due to higher provision for income taxes and a shift from other income to other expense[19](index=19&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents NetApp's condensed consolidated statements of comprehensive income, including net income and other components | (in millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net income | $233 | $248 | | Other comprehensive income: | | | | Foreign currency translation adjustments | $26 | $1 | | Unrealized losses on available-for-sale securities | $(1) | $— | | Unrealized losses on cash flow hedges | $(1) | $(1) | | Reclassification adjustments for losses included in net income | $2 | $— | | **Other comprehensive income** | **$26** | **$—** | | **Comprehensive income** | **$259** | **$248** | - Comprehensive income increased to **$259 million** from **$248 million** year-over-year, primarily driven by a significant increase in foreign currency translation adjustments, which contributed **$26 million** in other comprehensive income for the current period[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents NetApp's condensed consolidated statements of cash flows, detailing operating, investing, and financing activities | (in millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $673 | $341 | | Net cash used in investing activities | $(181) | $(51) | | Net cash used in financing activities | $(1,157) | $(548) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $7 | $8 | | **Net change in cash, cash equivalents and restricted cash** | **$(658)** | **$(250)** | | Cash, cash equivalents and restricted cash, beginning of period | $2,749 | $1,909 | | Cash, cash equivalents and restricted cash, end of period | $2,091 | $1,659 | - Net cash provided by operating activities significantly increased to **$673 million** from **$341 million** year-over-year, primarily due to a **$466 million** decrease in accounts receivable and a **$54 million** increase in inventories[24](index=24&type=chunk)[158](index=158&type=chunk) - Net cash used in investing activities increased to **$181 million** from **$51 million**, mainly due to higher net purchases of investments (**$143 million** vs. **$10 million**) and increased capital expenditures[24](index=24&type=chunk)[159](index=159&type=chunk) - Net cash used in financing activities more than doubled to **$1,157 million** from **$548 million**, driven by a **$750 million** debt repayment and **$300 million** in common stock repurchases[24](index=24&type=chunk)[160](index=160&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section presents NetApp's condensed consolidated statements of stockholders' equity, detailing changes in equity components | (in millions, except per share amounts) | Balances, April 25, 2025 | Net Income | Other Comprehensive Income | Issuance of Common Stock (net of taxes) | Repurchase of Common Stock | Stock-Based Compensation | Cash Dividends Declared | Balances, July 25, 2025 | | :-------------------------------------- | :----------------------- | :--------- | :------------------------- | :-------------------------------------- | :------------------------- | :----------------------- | :---------------------- | :---------------------- | | Common Stock and Additional Paid-in Capital | $1,106 | $— | $— | $(3) | $(67) | $83 | $(104) | $1,015 | | Retained Earnings | $— | $233 | $— | $— | $(233) | $— | $— | $— | | Accumulated Other Comprehensive Loss | $(66) | $— | $26 | $— | $— | $— | $— | $(40) | | **Total Stockholders' Equity** | **$1,040** | **$233** | **$26** | **$(3)** | **$(300)** | **$83** | **$(104)** | **$975** | - Total stockholders' equity decreased from **$1,040 million** to **$975 million** during the three months ended July 25, 2025, primarily due to **$300 million** in common stock repurchases and **$104 million** in cash dividends, partially offset by **$233 million** in net income and **$83 million** in stock-based compensation[26](index=26&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to NetApp's condensed consolidated financial statements, explaining policies and disclosures [1. Description of Business and Significant Accounting Policies](index=8&type=section&id=1.%20Description%20of%20Business%20and%20Significant%20Accounting%20Policies) This note describes NetApp's business and outlines significant accounting policies used in financial statement preparation - NetApp, Inc. provides enterprise-class software, systems, and services to help customers transform their data infrastructures across various data types, workloads, and environments[28](index=28&type=chunk) - The fiscal year is a 52- or 53-week year ending on the last Friday in April; fiscal years 2026 and 2025 are both 52-week years with 13 weeks per quarter[29](index=29&type=chunk) - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information, reflecting normal recurring adjustments and management's estimates[30](index=30&type=chunk)[31](index=31&type=chunk) [2. Recent Accounting Pronouncements](index=8&type=section&id=2.%20Recent%20Accounting%20Pronouncements) This note discusses recent accounting pronouncements and their potential impact on the company's financial disclosures - The company is evaluating the effect of ASU 2024-03 (effective for fiscal years beginning after December 15, 2026) on disclosures, which requires additional disaggregation of income statement expenses[32](index=32&type=chunk) - The company will adopt ASU 2023-09 (effective for fiscal years beginning after December 15, 2026) on a prospective basis in its Form 10-K for the year ending April 24, 2026, which expands income tax disclosures[33](index=33&type=chunk) [3. Goodwill and Purchased Intangible Assets, Net](index=8&type=section&id=3.%20Goodwill%20and%20Purchased%20Intangible%20Assets%2C%20Net) This note details the company's goodwill and purchased intangible assets, including segment allocation and amortization | Goodwill by Segment (in millions) | July 25, 2025 | April 25, 2025 | | :-------------------------------- | :------------ | :------------- | | Hybrid Cloud | $1,714 | $1,714 | | Public Cloud | $1,020 | $1,009 | | **Total Goodwill** | **$2,734** | **$2,723** | - Total goodwill increased by **$11 million** to **$2,734 million** as of July 25, 2025, primarily due to the impact of foreign currency translation on the Public Cloud segment[34](index=34&type=chunk) | Purchased Intangible Assets, Net (in millions) | July 25, 2025 | April 25, 2025 | | :--------------------------------------------- | :------------ | :------------- | | Developed technology | $19 | $22 | | Customer contracts/relationships | $18 | $21 | | Other purchased intangibles | $— | $— | | **Total purchased intangible assets** | **$37** | **$43** | - Amortization expense for purchased intangible assets decreased from **$14 million** in Q1 FY25 to **$6 million** in Q1 FY26[35](index=35&type=chunk) [4. Supplemental Financial Information](index=9&type=section&id=4.%20Supplemental%20Financial%20Information) This note provides supplemental financial information on cash, inventories, deferred revenue, and other income/expense items | Cash and Cash Equivalents (in millions) | July 25, 2025 | April 25, 2025 | | :-------------------------------------- | :------------ | :------------- | | Cash and cash equivalents | $2,085 | $2,742 | | Restricted cash | $6 | $7 | | **Total cash, cash equivalents and restricted cash** | **$2,091** | **$2,749** | | Inventories (in millions) | July 25, 2025 | April 25, 2025 | | :------------------------ | :------------ | :------------- | | Purchased components | $66 | $81 | | Finished goods | $67 | $105 | | **Total Inventories** | **$133** | **$186** | - Other non-current assets include a **$93 million** equity interest in Lenovo NetApp Technology Limited (LNTL) as of July 25, 2025, which is integral to the company's sales channel strategy and product localization in China[39](index=39&type=chunk) | Deferred Revenue and Financed Unearned Services Revenue (in millions) | July 25, 2025 | April 25, 2025 | | :------------------------------------------------------------------ | :------------ | :------------- | | Deferred product revenue | $69 | $66 | | Deferred services revenue | $4,417 | $4,428 | | Financed unearned services revenue | $40 | $42 | | **Total** | **$4,526** | **$4,536** | | Short-term | $2,270 | $2,279 | | Long-term | $2,256 | $2,257 | - The company recognized **$714 million** in revenue during the three months ended July 25, 2025, from deferred revenue balances at the beginning of the period, an increase from **$670 million** in the prior year[44](index=44&type=chunk) - Remaining performance obligations totaled **$4.9 billion** as of July 25, 2025, with approximately **49%** expected to be recognized as revenue in the next 12 months[45](index=45&type=chunk) | Other (Expense) Income, Net (in millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | | Interest income | $36 | $36 | | Interest expense | $(29) | $(16) | | Other, net | $(12) | $(3) | | **Total other (expense) income, net** | **$(5)** | **$17** | [5. Financial Instruments and Fair Value Measurements](index=12&type=section&id=5.%20Financial%20Instruments%20and%20Fair%20Value%20Measurements) This note details the company's financial instruments and fair value measurements, including investment classifications - The company uses a three-level hierarchy for fair value measurements, with Level 1 for quoted prices in active markets, Level 2 for observable inputs other than Level 1, and Level 3 for unobservable inputs[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) | Investments (in millions) | July 25, 2025 | April 25, 2025 | | :------------------------ | :------------ | :------------- | | U.S. Treasury and government debt securities | $1,239 | $2,025 | | Money market funds | $1,419 | $1,126 | | Certificates of deposit | $33 | $24 | | Mutual funds | $48 | $41 | | **Total debt and equity securities** | **$2,739** | **$3,216** | - All debt investments as of July 25, 2025, are due to mature in one year or less[56](index=56&type=chunk) - The fair value of long-term debt decreased from **$3,143 million** on April 25, 2025, to **$2,443 million** on July 25, 2025, based on observable market prices in a less active market[59](index=59&type=chunk) [6. Financing Arrangements](index=14&type=section&id=6.%20Financing%20Arrangements) This note describes the company's financing arrangements, including long-term debt, credit facilities, and repayment activities | Long-Term Debt (Senior Notes, in millions) | July 25, 2025 | April 25, 2025 | | :----------------------------------------- | :------------ | :------------- | | **1.875% Senior Notes** Due June 2025 | $— | $750 | | 2.375% Senior Notes Due June 2027 | $550 | $550 | | 2.70% Senior Notes Due June 2030 | $700 | $700 | | 5.50% Senior Notes Due June 2032 | $625 | $625 | | 5.70% Senior Notes Due June 2035 | $625 | $625 | | **Total principal amount** | **$2,500** | **$3,250** | | Less: Unamortized discount and issuance costs | $(15) | $(15) | | **Total senior notes** | **$2,485** | **$3,235** | | Less: Current portion of long-term debt | $— | $(750) | | **Total long-term debt** | **$2,485** | **$2,485** | - On June 23, 2025, the company repaid the **1.875% Senior Notes** due June 2025 for an aggregate of **$757 million**, including principal and unpaid interest[61](index=61&type=chunk) - The company has a **$1.0 billion** commercial paper program and a **$1.0 billion** revolving unsecured credit facility, both of which had no outstanding amounts drawn as of July 25, 2025, and the company was in compliance with all covenants[64](index=64&type=chunk)[65](index=65&type=chunk) [7. Leases](index=15&type=section&id=7.%20Leases) This note provides information on the company's lease arrangements, including operating lease costs and balance sheet impacts - The company leases real estate, equipment, and automobiles, with real estate leases forming the majority of ROU assets and liabilities, having terms up to 16 years[66](index=66&type=chunk) | Operating Lease Costs (in millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | | Operating lease cost | $13 | $13 | | Variable lease cost | $4 | $4 | | **Total lease cost** | **$17** | **$17** | | Operating Lease Balance Sheet Information (in millions) | July 25, 2025 | April 25, 2025 | | :---------------------------------------------------- | :------------ | :------------- | | Total operating lease ROU assets | $244 | $241 | | Total operating lease liabilities | $260 | $256 | | Weighted Average Remaining Lease Term | 8.2 years | 8.5 years | | Weighted Average Discount Rate | 3.5% | 3.4% | [8. Stockholders' Equity](index=17&type=section&id=8.%20Stockholders%27%20Equity) This note details changes in stockholders' equity, including stock-based compensation, share repurchases, and dividends - The company granted **3 million** restricted stock units (RSUs), including performance-based RSUs (PBRSUs), with a weighted average grant date fair value of **$103.99** per share during the three months ended July 25, 2025[69](index=69&type=chunk) - PBRSUs granted to executives cliff-vest after a three-year performance period, with settlement amounts ranging from **0%** to **200%** based on Total Stockholder Return (TSR) relative to peers and the company's billings result average[70](index=70&type=chunk) | Stock-Based Compensation Expense (in millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | | Cost of product revenues | $1 | $1 | | Cost of hardware support and other services revenues | $6 | $6 | | Sales and marketing | $34 | $35 | | Research and development | $25 | $31 | | General and administrative | $17 | $12 | | **Total stock-based compensation expense** | **$83** | **$85** | - The Board of Directors authorized an additional **$1.1 billion** for common stock repurchases in Q1 FY26, bringing the remaining authorization to **$1.2 billion** as of July 25, 2025[73](index=73&type=chunk)[173](index=173&type=chunk) | Stock Repurchase Program Activity (in millions, except per share) | Three Months Ended July 25, 2025 | | :---------------------------------------------------------------- | :------------------------------- | | Number of shares repurchased | 3.0 | | Average price per share | $99.76 | | Stock repurchases allocated to additional paid-in capital | $67 | | Stock repurchases allocated to retained earnings | $233 | | Remaining authorization at end of period | $1,152 | - A cash dividend of **$0.52** per share was declared for both periods, with **$104 million** paid in Q1 FY26[75](index=75&type=chunk) [9. Derivatives and Hedging Activities](index=20&type=section&id=9.%20Derivatives%20and%20Hedging%20Activities) This note describes the company's use of derivative instruments for managing foreign currency risk and hedging activities - The company uses derivative instruments, primarily foreign currency exchange forward contracts, to manage foreign currency risk and reduce earnings volatility, not for trading or speculative purposes[76](index=76&type=chunk) | Notional Amount of Foreign Currency Exchange Forward Contracts (in millions) | July 25, 2025 | April 25, 2025 | | :------------------------------------------------------------------------- | :------------ | :------------- | | Cash Flow Hedges (Forward contracts purchased) | $119 | $81 | | Balance Sheet Contracts (Forward contracts sold) | $1,533 | $790 | - The gain recognized from derivative instruments not designated as hedging instruments in other (expense) income, net, was **$18 million** for the three months ended July 25, 2025, compared to **$13 million** in the prior year[78](index=78&type=chunk) [10. Restructuring Charges](index=20&type=section&id=10.%20Restructuring%20Charges) This note details the company's restructuring charges, including net charges and cash payments related to restructuring activities - Restructuring charges decreased significantly to **$2 million** in Q1 FY26 from **$17 million** in Q1 FY25, as activities under the plan approved in Q4 FY25 were substantially completed[79](index=79&type=chunk)[80](index=80&type=chunk) | Restructuring Activities (in millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Balance at beginning of period | $51 | $10 | | Net charges | $2 | $17 | | Cash payments | $(37) | $(9) | | **Balance at end of period** | **$16** | **$18** | [11. Income Taxes](index=20&type=section&id=11.%20Income%20Taxes) This note provides information on the company's income taxes, including effective tax rates and unrecognized tax benefits | Effective Tax Rates | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :------------------ | :------------------------------- | :------------------------------- | | Effective tax rates | 23.4% | 17.1% | - The effective tax rate increased to **23.4%** from **17.1%** year-over-year, primarily due to a decrease in discrete tax benefits related to stock-based compensation[81](index=81&type=chunk)[82](index=82&type=chunk) - The One Big Beautiful Bill Act (OBBB) signed into law on July 4, 2025, did not have a material impact on the income tax provision for the three months ended July 25, 2025, but the company is still evaluating its full impact[83](index=83&type=chunk) - As of July 25, 2025, the company had **$69 million** of gross unrecognized tax benefits, with **$48 million** net affecting the income tax provision if recognized[87](index=87&type=chunk) [12. Net Income per Share](index=21&type=section&id=12.%20Net%20Income%20per%20Share) This note details the calculation of basic and diluted net income per share, including employee equity award impact | Net Income per Share Calculation (in millions, except per share amounts) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :-------------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Net income | $233 | $248 | | Shares used in basic computation | 201 | 206 | | Dilutive impact of employee equity award plans | 2 | 6 | | Shares used in diluted computation | 203 | 212 | | **Basic Net Income per Share** | **$1.16** | **$1.20** | | **Diluted Net Income per Share** | **$1.15** | **$1.17** | - Diluted net income per share decreased to **$1.15** from **$1.17** year-over-year, reflecting a decrease in net income and a reduction in dilutive shares from employee equity award plans[88](index=88&type=chunk) [13. Segment, Geographic, and Significant Customer Information](index=22&type=section&id=13.%20Segment%2C%20Geographic%2C%20and%20Significant%20Customer%20Information) This note provides segment, geographic, and significant customer information, detailing revenues and gross profit by segment - The company operates in two segments: Hybrid Cloud (unified data storage, software, hardware, support) and Public Cloud (as-a-service offerings including cloud storage, data services, and operational services on leading public clouds)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) | Segment Revenues and Gross Profit (in millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | | **Net Revenues:** | | | | Hybrid Cloud | $1,398 | $1,382 | | Public Cloud | $161 | $159 | | **Total Net Revenues** | **$1,559** | **$1,541** | | **Segment Gross Profit:** | | | | Hybrid Cloud | $979 | $1,000 | | Public Cloud | $129 | $113 | | **Total Segment Gross Profit** | **$1,108** | **$1,113** | | **Segment Gross Margin:** | | | | Hybrid Cloud | 70.0% | 72.4% | | Public Cloud | 80.1% | 71.1% | - Public Cloud revenues increased marginally to **$161 million**, with gross margin improving significantly to **80.1%** from **71.1%** due to cost optimization and changes in offering mix after the Spot by NetApp business sale[92](index=92&type=chunk)[94](index=94&type=chunk)[129](index=129&type=chunk)[137](index=137&type=chunk) | Geographical Revenues (in millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | | Americas | $791 | $763 | | EMEA | $503 | $513 | | APAC | $265 | $265 | | **Net revenues** | **$1,559** | **$1,541** | - **Arrow Electronics, Inc.** and **TD Synnex Corporation** remained significant distributors, accounting for **23%** and **21%** of net revenues, respectively, for the three months ended July 25, 2025[97](index=97&type=chunk) [14. Commitments and Contingencies](index=24&type=section&id=14.%20Commitments%20and%20Contingencies) This note outlines the company's commitments and contingencies, including purchase obligations, financing, and legal proceedings - As of July 25, 2025, the company had **$0.7 billion** in non-cancelable purchase commitments for inventory and **$0.6 billion** in other purchase obligations[98](index=98&type=chunk)[99](index=99&type=chunk) - The company provides long-term financing to creditworthy customers and enters into recourse leasing arrangements, but has not experienced significant losses to date[100](index=100&type=chunk)[102](index=102&type=chunk) - The company is subject to various legal proceedings, including patent infringement claims, but management believes the ultimate outcome will not materially harm its financial position, and no material accrual has been recorded[106](index=106&type=chunk)[107](index=107&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of NetApp's business, strategic focus, and key capital allocation activities for the quarter [Overview](index=28&type=section&id=Overview) This section provides an overview of NetApp's business, strategic focus, and key capital allocation activities for the quarter - NetApp provides enterprise-class software, systems, and services, focusing on intelligent data infrastructure, unified data storage, active data management, and adaptive operations across hybrid and multi-cloud environments, with a strategic emphasis on AI workloads[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - The company repurchased **3.0 million** shares for **$300 million** and paid **$104 million** in cash dividends during the first three months of fiscal 2026[117](index=117&type=chunk) - The **1.875% Senior Notes** due June 2025 were repaid for **$757 million** upon maturity[118](index=118&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) This section analyzes NetApp's financial performance, detailing revenue drivers, cost changes, and operating expense trends | (in millions, except percentages) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | % Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :------- | | Net revenues | $1,559 | $1,541 | 1% | | Product revenues | $654 | $669 | (2)% | | Services revenues | $905 | $872 | 4% | | Support | $647 | $631 | 3% | | Professional and other services | $97 | $82 | 18% | | Public cloud | $161 | $159 | 1% | - Product revenues decreased by **2%** year-over-year, primarily due to lower sales of hybrid systems, partially offset by higher sales of all-flash array systems and favorable foreign exchange rates[124](index=124&type=chunk) - Professional and other services revenues increased by **18%**, mainly driven by growth in the Keystone storage-as-a-service offering[127](index=127&type=chunk) - Cost of product revenues increased by **12%** year-over-year, leading to a **6 percentage point** decrease in Hybrid Cloud product gross margins due to higher component costs[131](index=131&type=chunk)[133](index=133&type=chunk) - Cost of Public Cloud revenues decreased by **30%**, and gross margins increased by **nine percentage points**, attributed to cost optimization, decreased fixed asset depreciation, and the impact of the Spot by NetApp business sale[134](index=134&type=chunk)[137](index=137&type=chunk) - Total operating expenses (Sales and Marketing, R&D, G&A) decreased by **2 percentage points** as a percentage of net revenues, totaling **$787 million**, primarily due to lower compensation costs and outside services in sales and marketing and R&D[139](index=139&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk) - Interest expense increased by **81%** to **$29 million** due to a higher average outstanding principal amount of Senior Notes with a higher average coupon rate[150](index=150&type=chunk) [Liquidity, Capital Resources and Cash Requirements](index=35&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Cash%20Requirements) This section assesses NetApp's liquidity, capital resources, and cash requirements, including debt management and future capital needs | (in millions) | July 25, 2025 | April 25, 2025 | | :-------------------------------------- | :------------ | :------------- | | Cash, cash equivalents and short-term investments | $3,324 | $3,846 | | Principal amount of debt | $2,500 | $3,250 | - Cash, cash equivalents, and short-term investments decreased by **$522 million** to **$3.3 billion**, primarily due to debt repayment (**$750 million**), stock repurchases (**$300 million**), and dividends (**$104 million**), partially offset by **$673 million** from operating activities[155](index=155&type=chunk) - Working capital decreased by **$71 million** to **$1.1 billion** as of July 25, 2025[155](index=155&type=chunk) - The company expects to satisfy its liquidity requirements for at least the next 12 months and the foreseeable future through existing cash, cash generated from operations, and access to capital markets and credit lines[161](index=161&type=chunk) - As of July 25, 2025, **$2.8 billion** of cash, cash equivalents, and short-term investments were held by foreign subsidiaries, with **$514 million** available in the U.S[162](index=162&type=chunk) - Capital expenditures for the remainder of fiscal 2026 are anticipated to be between **$125 million** and **$175 million**[170](index=170&type=chunk) - A final transition tax payment of **$179 million** related to the 2017 Tax Cuts and Jobs Act was outstanding as of July 25, 2025, and was paid in the second quarter of fiscal 2026[171](index=171&type=chunk) - Total off-balance sheet purchase commitments, including non-cancelable inventory commitments and other purchase obligations, amounted to **$1.3 billion** as of July 25, 2025[174](index=174&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section reports no material changes to the company's market risk exposures since the Annual Report on Form 10-K for April 25, 2025 - No material changes in market risk exposures were reported for the three months ended July 25, 2025[178](index=178&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and reports no material changes in internal control over financial reporting - As of July 25, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[180](index=180&type=chunk) - No changes in internal control over financial reporting were identified that materially affected or are reasonably likely to materially affect internal control over financial reporting during the first quarter of fiscal 2026[181](index=181&type=chunk) PART II — OTHER INFORMATION This section contains other information, including legal proceedings, risk factors, equity sales, and controls and procedures [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 14 for legal proceedings, indicating no new material information beyond what is already detailed - Legal proceedings are discussed in Note 14 – Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements[184](index=184&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section reports no material changes to the company's risk factors since the Annual Report on Form 10-K for April 25, 2025 - No material changes to the company's risk factors have occurred since the Annual Report on Form 10-K for the year ended April 25, 2025[185](index=185&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchase activity, including shares repurchased, average price, and remaining authorization | Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | Approximate Dollar Value of Shares That May Yet Be Purchased Under The Repurchase Program (in millions) | | :----------------------------- | :-------------------------------------------- | :--------------------------- | :---------------------------------------------------------------------------------------------------- | | April 26, 2025 - May 23, 2025 | 1,360 | $95.25 | $1,323 | | May 24, 2025 - June 20, 2025 | 1,020 | $102.07 | $1,219 | | June 21, 2025 - July 25, 2025 | 627 | $105.77 | $1,152 | | **Total** | **3,007** | **$99.76** | | - The company repurchased a total of **3.0 million** shares of common stock at an average price of **$99.76** per share during the three months ended July 25, 2025[186](index=186&type=chunk) - As of July 25, 2025, the remaining authorized amount for stock repurchases under the program was **$1.2 billion**[173](index=173&type=chunk)[186](index=186&type=chunk) [Item 3. Defaults upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[187](index=187&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[188](index=188&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This section discloses an insider's adoption of a Rule 10b5-1 trading arrangement for company securities sales - On June 26, 2025, Daniel De Lorenzo, VP and Chief Accounting Officer, entered into a 10b5-1 trading arrangement to sell up to **3,308 shares**, expiring on September 25, 2026[189](index=189&type=chunk) - No other directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter[190](index=190&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all documents filed as exhibits to the report, including agreements, certifications, and XBRL files - The report includes exhibits such as Restricted Stock Unit Agreements, an Offer Letter for Syam Nair, the Amended and Restated Executive Compensation Plan, and certifications from the CEO and CFO[192](index=192&type=chunk) [SIGNATURE](index=44&type=section&id=SIGNATURE) This section contains the signature of the Executive Vice President and CFO, confirming the report's due authorization and filing - The report is signed by Wissam Jabre, Executive Vice President and Chief Financial Officer, on August 27, 2025[195](index=195&type=chunk)

[News Summary](index=1&type=section&id=News%20Summary) NetApp achieved strong Q1 FY26 results, securing market leadership in all-flash storage, significant public cloud growth, and record profitability and cash flow [Q1 FY26 Highlights](index=1&type=section&id=Q1%20FY26%20Highlights) NetApp delivered a solid start to fiscal year 2026, achieving the 1 market share in all-flash storage, significant growth in public cloud services, and record cash flow and operating profit, while returning substantial capital to stockholders - NetApp achieved the **1 market share position in all-flash storage** for calendar Q1 2025, as reported by IDC[4](index=4&type=chunk) - All-flash array revenue grew **6% year-over-year to $893 million** in Q1, for an annualized net revenue run rate of **$3.6 billion**[4](index=4&type=chunk) - First-party and marketplace Public Cloud storage services revenue grew **33% year-over-year**[4](index=4&type=chunk) - Billings of **$1.51 billion** in the first quarter grew **4% year-over-year**, marking the seventh consecutive quarter of year-over-year growth[4](index=4&type=chunk) - Record first quarter cash provided by operations of **$673 million** and record first quarter free cash flow of **$620 million**[4](index=4&type=chunk) - Record first quarter GAAP operating profit of **$309 million** and record first quarter non-GAAP operating profit of **$401 million**[4](index=4&type=chunk) - Returned **$404 million** to stockholders through share repurchases and cash dividends[4](index=4&type=chunk) [Q1 FY26 Financial Results](index=2&type=section&id=First%20Quarter%20of%20Fiscal%20Year%202026%20Financial%20Results) NetApp's Q1 FY26 financial results show modest revenue growth, strong cash generation, and stable profitability, with non-GAAP metrics providing a clearer operational view [GAAP Results](index=2&type=section&id=GAAP%20Results) NetApp's GAAP financial results for Q1 FY26 showed a slight increase in net revenues but a decrease in net income and EPS compared to Q1 FY25, despite strong cash generation from operations Q1 FY26 GAAP Financial Performance | Metric | Q1 FY26 ($M) | Q1 FY25 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net revenues | 1,559 | 1,541 | 1% | | Hybrid Cloud segment revenue | 1,398 | 1,382 | 1% | | Public Cloud segment revenue | 161 | 159 | 1% | | Gross profit | 1,098 | 1,098 | —% | | Net income | 233 | 248 | (6)% | | Earnings per share | 1.15 | 1.17 | (2)% | | Cash provided by operations | 673 | 341 | 97% | [Non-GAAP Results](index=2&type=section&id=Non-GAAP%20Results) Non-GAAP results for Q1 FY26 indicate growth in billings and stable net revenues, with a slight decline in net income and EPS, reflecting adjustments for certain non-recurring or non-cash items Q1 FY26 Non-GAAP Financial Performance | Metric | Q1 FY26 ($M) | Q1 FY25 ($M) | % Change | | :--- | :--- | :--- | :--- | | Billings | 1,511 | 1,449 | 4% | | Net revenues | 1,559 | 1,541 | 1% | | Hybrid Cloud segment revenue | 1,398 | 1,382 | 1% | | Public Cloud segment revenue | 161 | 159 | 1% | | Gross profit | 1,108 | 1,113 | —% | | Net income | 314 | 330 | (5)% | | Earnings per share | 1.55 | 1.56 | (1)% | [Constant Currency Impact (Q1 FY26)](index=2&type=section&id=Constant%20Currency%20-%20Q1%20FY%202026%20versus%20Q1%20FY%202025) When adjusted for constant currency, NetApp's Q1 FY26 net revenues remained flat year-over-year, while billings showed a modest increase, with foreign currency changes favorably impacting net income and EPS - In constant currency, year-over-year, net revenues were **flat** and billings increased by **3%**[9](index=9&type=chunk) - The year-over-year fluctuations of GAAP and Non-GAAP net income each included a favorable impact of approximately **$10 million** from foreign currency exchange rate changes[9](index=9&type=chunk) - The year-over-year fluctuations of GAAP and Non-GAAP earnings per share each included a favorable impact of approximately **$0.05** from foreign currency exchange rate changes[9](index=9&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook) NetApp projects continued revenue growth and healthy profitability for Q2 and the full fiscal year 2026, alongside a consistent cash dividend [Q2 FY26 Financial Outlook](index=2&type=section&id=Second%20Quarter%20of%20Fiscal%20Year%202026%20Financial%20Outlook) NetApp projects continued revenue growth and strong profitability for the second quarter of fiscal year 2026, with non-GAAP metrics showing higher margins and EPS compared to GAAP estimates Q2 FY26 Financial Guidance | Metric | GAAP Range | Non-GAAP Range | | :--- | :--- | :--- | | Net revenues | $1.615 billion - $1.765 billion | | | Consolidated gross margins | 69.5% - 70.5% | 70.5% - 71.5% | | Operating margins | 22% - 23% | 28% - 29% | | Earnings per share | $1.35 - $1.45 | $1.84 - $1.94 | [Full FY26 Financial Outlook](index=3&type=section&id=Full%20Fiscal%20Year%202026%20Financial%20Outlook) For the full fiscal year 2026, NetApp anticipates robust net revenues and healthy margins, with non-GAAP guidance reflecting a more optimistic profitability outlook Full FY26 Financial Guidance | Metric | GAAP Range | Non-GAAP Range | | :--- | :--- | :--- | | Net revenues | $6.625 billion - $6.875 billion | | | Consolidated gross margins | 70% - 71% | 71% - 72% | | Operating margins | 22.8% - 23.8% | 28.8% - 29.8% | | Earnings per share | $5.72 - $6.02 | $7.60 - $7.90 | [Dividend Announcement](index=3&type=section&id=Dividend) NetApp declared a cash dividend of $0.52 per share for Q1 FY26, payable in October 2025 - The next cash dividend of **$0.52 per share** is to be paid on October 22, 2025, to stockholders of record as of the close of business on October 3, 2025[11](index=11&type=chunk) [Q1 FY26 Business Highlights](index=3&type=section&id=First%20Quarter%20of%20Fiscal%20Year%202026%20Business%20Highlights) NetApp's Q1 FY26 business highlights include significant product innovations in AI and cyber resilience, expanded strategic partnerships, key leadership appointments, and notable industry recognition [Leading Product Innovation](index=3&type=section&id=Leading%20Product%20Innovation) NetApp introduced several new products and capabilities in Q1 FY26, focusing on AI-ready data infrastructure, enhanced cyber resilience, streamlined cloud management, and improved data access for generative AI - NetApp introduced NetApp™ AIPod™ Mini with Intel, a cost-effective, scalable AI solution for enterprise-grade AI[12](index=12&type=chunk) - Announced new cyber-resilience capabilities to strengthen data security at the storage layer against AI-driven attacks and quantum risks[12](index=12&type=chunk) - Launched NetApp ONTAP™ Connector for Amazon Q to securely synchronize enterprise data from ONTAP file systems with Amazon Q Business[12](index=12&type=chunk) - Introduced NetApp Model Context Protocol (MCP) Server for Knowledge Bases, enabling generative AI tools to securely access enterprise data as searchable context[12](index=12&type=chunk) [Customer and Partner Momentum](index=4&type=section&id=Customer%20and%20Partner%20Momentum) NetApp expanded its strategic collaborations with key industry players like NVIDIA, Microsoft, and AWS, focusing on accelerating AI adoption, enhancing cloud services, and strengthening its partner ecosystem - Announced a collaboration with NVIDIA to integrate the NVIDIA AI Data Platform reference design into NetApp AIPod, accelerating enterprise adoption of agentic AI[16](index=16&type=chunk) - Introduced a new enterprise-grade RAG architecture in collaboration with NVIDIA and Microsoft, leveraging Azure NetApp Files and NVIDIA AI Blueprint[16](index=16&type=chunk) - AWS announced public preview of Amazon Elastic VMware Service with support for Amazon FSx for NetApp ONTAP, enabling scalable VMware workload migration to AWS[16](index=16&type=chunk) - Announced a partnership with Diskover Data's platform to integrate services with NetApp's data pipeline infrastructure for surfacing unstructured data[16](index=16&type=chunk) [Personnel Updates](index=4&type=section&id=Personnel) NetApp made key leadership appointments in Q1 FY26, including a new Chief Product Officer and strengthened sales leadership in North America and Japan, to drive innovation and market growth - NetApp named Syam Nair as Chief Product Officer, bringing over **25 years of cloud and platform leadership** to accelerate innovation in hybrid cloud and AI[16](index=16&type=chunk) - Strengthened North American sales leadership with the appointment of Jim Gannon as VP of Strategic Sales and Darrin Hands as VP of Corporate, Midmarket and SMB Sales[16](index=16&type=chunk) - Appointed Chiharu Saito as President and CEO of NetApp Japan to accelerate growth and deepen customer and partner engagement in the Japanese market[16](index=16&type=chunk) [Awards and Recognition](index=4&type=section&id=Awards%20and%20Recognition) NetApp received numerous industry accolades in Q1 FY26, including achieving the 1 market share in all-flash storage, awards for cyber resilience and Storage as a Service, and recognition for its leadership and workplace culture - NetApp achieved the **1 market share position in all-flash storage** as reported by IDC[16](index=16&type=chunk) - Received the 2025 SE Labs Award for Enterprise Data Protection for its AI-powered ransomware protection (NetApp ONTAP ARP/AI) with **99% detection and zero false positives**[16](index=16&type=chunk) - Keystone was named a **Leader and Fast Mover** in the 2025 GigaOm Sonar Report on Storage as a Service[16](index=16&type=chunk) - Named to the Database Trends & Applications 100 list of Companies That Matter Most in Data and the Forbes Global 2000 list[19](index=19&type=chunk) - Recognized as one of U.S. News & World Report's Best Public Companies to Work For[19](index=19&type=chunk) [Corporate Information](index=5&type=section&id=Corporate%20Information) This section provides essential corporate details, including investor communication channels, forward-looking statement disclaimers, and an overview of NetApp's strategic market positioning [Webcast and Conference Call Information](index=5&type=section&id=Webcast%20and%20Conference%20Call%20Information) NetApp hosted a conference call on August 27, 2025, to discuss Q1 FY26 results, with webcast and audio replay available on its Investor Relations website - NetApp hosted a conference call to discuss these results on August 27, 2025, at 2:30 p.m. Pacific Time[17](index=17&type=chunk) - A live webcast and audio replay of the event are available on the NetApp Investor Relations website at investors.netapp.com[17](index=17&type=chunk) [Safe Harbor Statement](index=5&type=section&id=Safe%20Harbor%20Statement%20Under%20U.S.%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) This section outlines the forward-looking nature of statements in the press release, particularly regarding financial outlook and business prospects, and highlights various risk factors that could cause actual results to differ materially - This press release contains forward-looking statements, including financial guidance and statements about business, economic, and market outlook[18](index=18&type=chunk) - Actual results may differ materially due to factors such as rapid industry, technological and market trends, ability to execute cloud strategy, global political and macroeconomic conditions, cybersecurity breaches, and supply chain disruptions[18](index=18&type=chunk)[20](index=20&type=chunk) [About NetApp](index=10&type=section&id=About%20NetApp) NetApp positions itself as an intelligent data infrastructure company, offering unified data storage, integrated data services, and CloudOps solutions to help customers manage and leverage their data across hybrid and multicloud environments, with a focus on AI and cyber resilience - NetApp is the intelligent data infrastructure company, combining unified data storage, integrated data services, and CloudOps solutions[45](index=45&type=chunk) - It creates silo-free infrastructure, harnessing observability and AI to enable the industry's best data management, with enterprise-grade storage natively embedded in major clouds[45](index=45&type=chunk) - Data services create a data advantage through superior cyber resilience, governance, and application agility, while CloudOps solutions provide continuous optimization of performance and efficiency through observability and AI[45](index=45&type=chunk) [Non-GAAP Financial Information](index=6&type=section&id=NetApp%20Usage%20of%20Non-GAAP%20Financial%20Information) This section details NetApp's use of non-GAAP financial measures, outlining their purpose, specific exclusions, inherent limitations, and the definition of constant currency reporting [NetApp Usage of Non-GAAP Financial Information](index=6&type=section&id=NetApp%20Usage%20of%20Non-GAAP%20Financial%20Information) NetApp provides non-GAAP measures to supplement GAAP financial statements, believing they offer useful insights into financial and business trends, ongoing operational performance, and assist management in decision-making and comparisons, while also defining key non-GAAP metrics like free cash flow and billings - Non-GAAP measures provide useful information to investors and management regarding financial and business trends and ongoing operational performance[28](index=28&type=chunk) - Management uses non-GAAP measures to measure company performance against historical results, facilitate comparisons to competitors, and allow greater transparency in financial and operational decision making[28](index=28&type=chunk)[32](index=32&type=chunk) - Free cash flow is defined as net cash provided by operating activities less cash used to acquire property and equipment, reflecting cash available for investments, acquisitions, repurchases, and dividends[30](index=30&type=chunk) - Billings are approximated by adding net revenues to the change in total deferred revenue and financed unearned services revenue, providing insight into amounts billed from purchase orders[31](index=31&type=chunk) [Exclusions from Non-GAAP Measures](index=8&type=section&id=Exclusions%20from%20Non-GAAP%20Measures) NetApp excludes specific items from its non-GAAP measures, such as amortization of intangibles, stock-based compensation, litigation settlements, acquisition-related expenses, restructuring charges, asset impairments, gains/losses on asset sales, and certain income tax adjustments, to provide a clearer view of core operational performance - Exclusions include amortization of intangible assets, stock-based compensation expenses, and litigation settlements, as they are not considered reflective of ongoing business or operational performance[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - Acquisition-related expenses, restructuring charges, and asset impairments are also excluded due to their non-recurring or unpredictable nature, making them less useful for future planning[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - Gains/losses on the sale or derecognition of assets, sale of equity investments, and debt extinguishment costs are excluded as they do not reflect the results of the underlying, ongoing business[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - Income tax adjustments are made to reflect a projected annual non-GAAP effective tax rate and exclude certain non-recurring tax charges or benefits to provide a more meaningful measure of operational performance[41](index=41&type=chunk) [Limitations of Non-GAAP Measures](index=9&type=section&id=Limitations%20of%20Non-GAAP%20Measures) NetApp acknowledges that non-GAAP measures have limitations as they do not reflect all amounts determined by GAAP and should be used in conjunction with, not as a substitute for, GAAP financial measures - Non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with GAAP, and may differ from non-GAAP measures used by other companies[42](index=42&type=chunk) - These measures do not reflect all amounts associated with the Company's results of operations as determined in accordance with GAAP and should only be used to evaluate results in conjunction with corresponding GAAP measures[42](index=42&type=chunk)[43](index=43&type=chunk) [Constant Currency Definition](index=10&type=section&id=Constant%20Currency) NetApp provides constant currency growth rates for certain financial measures by assuming the same foreign currency exchange rates as the comparable prior-year period, to quantify the impact of currency fluctuations - Constant currency information assumes the same foreign currency exchange rates that were in effect for the comparable prior-year period were used in translation of the current period results[44](index=44&type=chunk) - This is used to quantify the impact of foreign currency exchange rate changes on year-over-year fluctuations for measures including net revenues, billings, and earnings[44](index=44&type=chunk) [Condensed Consolidated Financial Statements](index=11&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The condensed consolidated financial statements present NetApp's balance sheet, income statement, and cash flow performance for Q1 FY26, highlighting key financial positions and operational results [Condensed Consolidated Balance Sheets](index=11&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheet shows a decrease in total assets and liabilities from April 2025 to July 2025, primarily driven by changes in current assets and liabilities, including a significant reduction in cash and accounts receivable Condensed Consolidated Balance Sheets (Selected Items) | Metric (In millions) | July 25, 2025 | April 25, 2025 | | :--- | :--- | :--- | | Cash, cash equivalents and investments | $3,324 | $3,846 | | Accounts receivable | $787 | $1,246 | | Total current assets | $4,687 | $5,851 | | Total assets | $9,679 | $10,823 | | Current portion of long-term debt | $— | $750 | | Total current liabilities | $3,569 | $4,662 | | Total liabilities | $8,704 | $9,783 | | Stockholders' equity | $975 | $1,040 | [Condensed Consolidated Statements of Operations](index=12&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For Q1 FY26, NetApp reported a slight increase in net revenues, driven by services growth, but a decrease in net income and diluted EPS compared to the prior year, primarily due to higher cost of product and income tax provision Condensed Consolidated Statements of Operations (Selected Items) | Metric (In millions, except per share amounts) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :--- | :--- | :--- | | Product revenues | $654 | $669 | | Services revenues | $905 | $872 | | Net revenues | $1,559 | $1,541 | | Gross profit | $1,098 | $1,098 | | Income from operations | $309 | $282 | | Net income | $233 | $248 | | Diluted EPS | $1.15 | $1.17 | [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) NetApp generated significantly more cash from operations in Q1 FY26 compared to Q1 FY25, but this was offset by increased cash used in investing activities and a substantial increase in cash used in financing activities, mainly due to debt repayments Condensed Consolidated Statements of Cash Flows (Selected Items) | Metric (In millions) | Three Months Ended July 25, 2025 | Three Months Ended July 26, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $673 | $341 | | Net cash used in investing activities | $(181) | $(51) | | Net cash used in financing activities | $(1,157) | $(548) | | Net change in cash, cash equivalents and restricted cash | $(658) | $(250) | | Cash, cash equivalents and restricted cash (End of period) | $2,091 | $1,659 | [Supplemental Financial Data](index=14&type=section&id=SUPPLEMENTAL%20DATA) This section provides detailed supplemental financial data, including segment revenues, gross profit, geographic mix, non-GAAP performance metrics, and key balance sheet and cash flow items [Revenues by Segment](index=14&type=section&id=Revenues%20by%20Segment) In Q1 FY26, NetApp's Hybrid Cloud segment revenues saw a slight increase, primarily driven by support and professional services, while Public Cloud segment revenues also grew modestly Revenues by Segment (Q1 FY26 vs Q1 FY25) | Segment | Q1 FY26 ($M) | Q1 FY25 ($M) | | :--- | :--- | :--- | | Product | $654 | $669 | | Support | $647 | $631 | | Professional and Other Services | $97 | $82 | | Hybrid Cloud Segment Net Revenues | $1,398 | $1,382 | | Public Cloud Segment Net Revenues | $161 | $159 | | Net Revenues | $1,559 | $1,541 | [Gross Profit and Margin by Segment](index=14&type=section&id=Gross%20Profit%20by%20Segment) While total gross profit remained flat, the Public Cloud segment significantly improved its gross margin in Q1 FY26, offsetting a decline in Product gross profit and margin within the Hybrid Cloud segment Gross Profit by Segment (Q1 FY26 vs Q1 FY25) | Segment | Q1 FY26 ($M) | Q1 FY25 ($M) | | :--- | :--- | :--- | | Product Gross Profit | $353 | $401 | | Support Gross Profit | $597 | $581 | | Professional and Other Services Gross Profit | $29 | $18 | | Hybrid Cloud Segment Gross Profit | $979 | $1,000 | | Public Cloud Segment Gross Profit | $129 | $113 | | Total Segments Gross Profit | $1,108 | $1,113 | Gross Margin by Segment (Q1 FY26 vs Q1 FY25) | Segment | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Product Gross Margin | 54.0% | 59.9% | | Support Gross Margin | 92.3% | 92.1% | | Professional and Other Services Gross Margin | 29.9% | 22.0% | | Hybrid Cloud Segment Gross Margin | 70.0% | 72.4% | | Public Cloud Segment Gross Margin | 80.1% | 71.1% | [Geographic and Pathways Mix](index=14&type=section&id=Geographic%20Mix) In Q1 FY26, the Americas region slightly increased its revenue contribution, with Americas Commercial growing, while EMEA and Asia Pacific remained stable. Indirect pathways continued to dominate revenue generation Geographic Mix (% of Revenue) | Region | % of Q1 FY26 Revenue | % of Q1 FY25 Revenue | | :--- | :--- | :--- | | Americas | 51% | 50% | | Americas Commercial | 43% | 39% | | U.S. Public Sector | 8% | 11% | | EMEA | 32% | 33% | | Asia Pacific | 17% | 17% | Pathways Mix (% of Revenue) | Pathway | % of Q1 FY26 Revenue | % of Q1 FY25 Revenue | | :--- | :--- | :--- | | Direct | 24% | 22% | | Indirect | 76% | 78% | [Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate](index=15&type=section&id=Non-GAAP%20Income%20from%20Operations%2C%20Income%20before%20Income%20Taxes%20%26%20Effective%20Tax%20Rate) NetApp's non-GAAP income from operations remained stable in Q1 FY26, while non-GAAP income before income taxes saw a slight decrease, with the non-GAAP effective tax rate remaining consistent Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 ($M) | Q1 FY25 ($M) | | :--- | :--- | :--- | | Non-GAAP Income from Operations | $401 | $399 | | % of Net Revenues | 25.7% | 25.9% | | Non-GAAP Income before Income Taxes | $396 | $416 | | Non-GAAP Effective Tax Rate | 20.7% | 20.7% | [Non-GAAP Net Income and EPS](index=15&type=section&id=Non-GAAP%20Net%20Income) Non-GAAP net income and diluted EPS experienced a slight decline in Q1 FY26 compared to the prior year, despite a reduction in weighted average common shares outstanding Non-GAAP Net Income and EPS (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Non-GAAP Net Income ($M) | $314 | $330 | | Non-GAAP Weighted Average Common Shares Outstanding, Diluted (M) | 203 | 212 | | Non-GAAP Net Income per Share, Diluted | $1.55 | $1.56 | [Select Balance Sheet Items](index=15&type=section&id=Select%20Balance%20Sheet%20Items) Key balance sheet metrics for Q1 FY26 show an increase in deferred revenue, a longer Days Sales Outstanding (DSO), a shorter Days Payables Outstanding (DPO), and a significant improvement in Inventory Turns compared to Q1 FY25 Select Balance Sheet Items (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Deferred Revenue and Financed Unearned Services Revenue ($M) | $4,526 | $4,169 | | DSO (days) | 46 | 40 | | DPO (days) | 80 | 90 | | Inventory Turns | 14 | 8 | [Select Cash Flow Statement Items](index=15&type=section&id=Select%20Cash%20Flow%20Statement%20Items) NetApp achieved a substantial increase in net cash provided by operating activities and free cash flow in Q1 FY26, significantly improving its free cash flow as a percentage of net revenues Select Cash Flow Statement Items (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 ($M) | Q1 FY25 ($M) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $673 | $341 | | Purchases of Property and Equipment | $53 | $41 | | Free Cash Flow | $620 | $300 | | Free Cash Flow as % of Net Revenues | 39.8% | 19.5% | [GAAP to Non-GAAP Reconciliations](index=16&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliations) This section provides detailed reconciliations from GAAP to Non-GAAP financial measures for various income statement, balance sheet, and guidance metrics, clarifying adjustments made [Net Income Reconciliation](index=16&type=section&id=NET%20INCOME%20RECONCILIATION) This section reconciles GAAP net income to Non-GAAP net income by adjusting for specific items such as amortization of intangible assets, stock-based compensation, restructuring charges, acquisition-related expenses, gains/losses on asset sales, and income tax effects Net Income Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | NET INCOME (GAAP) | $233 | $248 | | Adjustments: | | | | Amortization of intangible assets | $6 | $14 | | Stock-based compensation | $83 | $85 | | Restructuring charges | $2 | $17 | | Acquisition-related expense | $— | $1 | | Gains/losses on the sale or derecognition of assets | $1 | $— | | Income tax effects | $(11) | $(35) | | NON-GAAP NET INCOME | $314 | $330 | [Cost of Revenues Reconciliation](index=16&type=section&id=COST%20OF%20REVENUES%20RECONCILIATION) This table reconciles GAAP cost of revenues to Non-GAAP cost of revenues by excluding amortization of intangible assets and stock-based compensation Cost of Revenues Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | COST OF REVENUES (GAAP) | $461 | $443 | | Adjustments: | | | | Amortization of intangible assets | $(3) | $(8) | | Stock-based compensation | $(7) | $(7) | | NON-GAAP COST OF REVENUES | $451 | $428 | [Gross Profit Reconciliation](index=16&type=section&id=GROSS%20PROFIT%20RECONCILIATION) This section reconciles GAAP gross profit to Non-GAAP gross profit by adding back amortization of intangible assets and stock-based compensation Gross Profit Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | GROSS PROFIT (GAAP) | $1,098 | $1,098 | | Adjustments: | | | | Amortization of intangible assets | $3 | $8 | | Stock-based compensation | $7 | $7 | | NON-GAAP GROSS PROFIT | $1,108 | $1,113 | [Sales and Marketing Expenses Reconciliation](index=17&type=section&id=SALES%20AND%20MARKETING%20EXPENSES%20RECONCILIATION) This table reconciles GAAP sales and marketing expenses to Non-GAAP sales and marketing expenses by excluding amortization of intangible assets and stock-based compensation Sales and Marketing Expenses Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | SALES AND MARKETING EXPENSES (GAAP) | $461 | $471 | | Adjustments: | | | | Amortization of intangible assets | $(3) | $(6) | | Stock-based compensation | $(34) | $(35) | | NON-GAAP SALES AND MARKETING EXPENSES | $424 | $430 | [Research and Development Expenses Reconciliation](index=17&type=section&id=RESEARCH%20AND%20DEVELOPMENT%20EXPENSES%20RECONCILIATION) This table reconciles GAAP research and development expenses to Non-GAAP research and development expenses by excluding stock-based compensation Research and Development Expenses Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | RESEARCH AND DEVELOPMENT EXPENSES (GAAP) | $242 | $252 | | Adjustments: | | | | Stock-based compensation | $(25) | $(31) | | NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES | $217 | $221 | [General and Administrative Expenses Reconciliation](index=17&type=section&id=GENERAL%20AND%20ADMINISTRATIVE%20EXPENSES%20RECONCILIATION) This table reconciles GAAP general and administrative expenses to Non-GAAP general and administrative expenses by excluding stock-based compensation and gains/losses on asset sales General and Administrative Expenses Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | GENERAL AND ADMINISTRATIVE EXPENSES (GAAP) | $84 | $75 | | Adjustments: | | | | Stock-based compensation | $(17) | $(12) | | Gains/losses on the sale or derecognition of assets | $(1) | $— | | NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES | $66 | $63 | [Restructuring Charges Reconciliation](index=17&type=section&id=RESTRUCTURING%20CHARGES%20RECONCILIATION) This table reconciles GAAP restructuring charges to Non-GAAP restructuring charges by excluding the restructuring charges themselves Restructuring Charges Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | RESTRUCTURING CHARGES (GAAP) | $2 | $17 | | Adjustments: | | | | Restructuring charges | $(2) | $(17) | | NON-GAAP RESTRUCTURING CHARGES | $— | $— | [Acquisition-Related Expense Reconciliation](index=17&type=section&id=ACQUISITION-RELATED%20EXPENSE%20RECONCILIATION) This table reconciles GAAP acquisition-related expense to Non-GAAP acquisition-related expense by excluding the acquisition-related expense Acquisition-Related Expense Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | ACQUISITION-RELATED EXPENSE (GAAP) | $— | $1 | | Adjustments: | | | | Acquisition-related expense | $— | $(1) | | NON-GAAP ACQUISITION-RELATED EXPENSE | $— | $— | [Operating Expenses Reconciliation](index=17&type=section&id=OPERATING%20EXPENSES%20RECONCILIATION) This table reconciles GAAP operating expenses to Non-GAAP operating expenses by excluding amortization of intangible assets, stock-based compensation, restructuring charges, acquisition-related expenses, and gains/losses on asset sales Operating Expenses Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | OPERATING EXPENSES (GAAP) | $789 | $816 | | Adjustments: | | | | Amortization of intangible assets | $(3) | $(6) | | Stock-based compensation | $(76) | $(78) | | Restructuring charges | $(2) | $(17) | | Acquisition-related expense | $— | $(1) | | Gains/losses on the sale or derecognition of assets | $(1) | $— | | NON-GAAP OPERATING EXPENSES | $707 | $714 | [Income from Operations Reconciliation](index=18&type=section&id=INCOME%20FROM%20OPERATIONS%20RECONCILIATION) This table reconciles GAAP income from operations to Non-GAAP income from operations by adding back amortization of intangible assets, stock-based compensation, restructuring charges, acquisition-related expenses, and gains/losses on asset sales Income from Operations Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | INCOME FROM OPERATIONS (GAAP) | $309 | $282 | | Adjustments: | | | | Amortization of intangible assets | $6 | $14 | | Stock-based compensation | $83 | $85 | | Restructuring charges | $2 | $17 | | Acquisition-related expense | $— | $1 | | Gains/losses on the sale or derecognition of assets | $1 | $— | | NON-GAAP INCOME FROM OPERATIONS | $401 | $399 | [Income Before Income Taxes Reconciliation](index=18&type=section&id=INCOME%20BEFORE%20INCOME%20TAXES%20RECONCILIATION) This table reconciles GAAP income before income taxes to Non-GAAP income before income taxes by adjusting for amortization of intangible assets, stock-based compensation, restructuring charges, acquisition-related expenses, and gains/losses on asset sales Income Before Income Taxes Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | INCOME BEFORE INCOME TAXES (GAAP) | $304 | $299 | | Adjustments: | | | | Amortization of intangible assets | $6 | $14 | | Stock-based compensation | $83 | $85 | | Restructuring charges | $2 | $17 | | Acquisition-related expense | $— | $1 | | Gains/losses on the sale or derecognition of assets | $1 | $— | | NON-GAAP INCOME BEFORE INCOME TAXES | $396 | $416 | [Provision for Income Taxes Reconciliation](index=18&type=section&id=PROVISION%20FOR%20INCOME%20TAXES%20RECONCILIATION) This table reconciles GAAP provision for income taxes to Non-GAAP provision for income taxes by adjusting for income tax effects Provision for Income Taxes Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | PROVISION FOR INCOME TAXES (GAAP) | $71 | $51 | | Adjustments: | | | | Income tax effects | $11 | $35 | | NON-GAAP PROVISION FOR INCOME TAXES | $82 | $86 | [Net Income Per Share Reconciliation](index=18&type=section&id=NET%20INCOME%20PER%20SHARE%20RECONCILIATION) This table reconciles GAAP net income per share to Non-GAAP net income per share by adjusting for amortization of intangible assets, stock-based compensation, restructuring charges, and income tax effects Net Income Per Share Reconciliation (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | NET INCOME PER SHARE (GAAP) | $1.15 | $1.17 | | Adjustments: | | | | Amortization of intangible assets | $0.03 | $0.07 | | Stock-based compensation | $0.41 | $0.40 | | Restructuring charges | $0.01 | $0.08 | | Income tax effects | $(0.05) | $(0.17) | | NON-GAAP NET INCOME PER SHARE | $1.55 | $1.56 | [Gross Margin Reconciliation](index=18&type=section&id=GROSS%20MARGIN%20RECONCILIATION) This table reconciles GAAP gross margin to Non-GAAP gross margin by adjusting for cost of revenues adjustments, including amortization of intangible assets and stock-based compensation Gross Margin Reconciliation (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Gross margin-GAAP | 70.4% | 71.3% | | Cost of revenues adjustments | 0.7% | 0.9% | | Gross margin-Non-GAAP | 71.1% | 72.2% | [Product Gross Margin Reconciliation](index=19&type=section&id=PRODUCT%20GROSS%20MARGIN%20RECONCILIATION) This table reconciles GAAP product gross margin to Non-GAAP product gross margin by adjusting for cost of product revenues adjustments, specifically stock-based compensation Product Gross Margin Reconciliation (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Product gross margin-GAAP | 53.8% | 59.8% | | Cost of product revenues adjustments | 0.2% | 0.1% | | Product gross margin-Non-GAAP | 54.0% | 59.9% | [Services Gross Margin Reconciliation](index=19&type=section&id=SERVICES%20GROSS%20MARGIN%20RECONCILIATION) This table reconciles GAAP services gross margin to Non-GAAP services gross margin by adjusting for cost of services revenues adjustments, including amortization of intangible assets and stock-based compensation Services Gross Margin Reconciliation (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Services gross margin-GAAP | 82.4% | 80.0% | | Cost of services revenues adjustments | 1.0% | 1.7% | | Services gross margin-Non-GAAP | 83.4% | 81.7% | [Operating Margin Reconciliation](index=19&type=section&id=OPERATING%20MARGIN%20RECONCILIATION) This table reconciles GAAP operating margin to Non-GAAP operating margin by adjusting for various income from operations adjustments, including amortization of intangible assets, stock-based compensation, restructuring charges, acquisition-related expenses, and gains/losses on asset sales Operating Margin Reconciliation (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Operating margin-GAAP | 19.8% | 18.3% | | Adjustments | 5.9% | 7.6% | | Operating margin-Non-GAAP | 25.7% | 25.9% | [Effective Tax Rate Reconciliation](index=20&type=section&id=EFFECTIVE%20TAX%20RATE%20RECONCILIATION) This table reconciles GAAP effective tax rate to Non-GAAP effective tax rate by adjusting for income tax effects Effective Tax Rate Reconciliation (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | GAAP effective tax rate | 23.4% | 17.1% | | Adjustments: Income tax effects | (2.7)% | 3.6% | | Non-GAAP effective tax rate | 20.7% | 20.7% | [Free Cash Flow Reconciliation](index=20&type=section&id=RECONCILIATION%20OF%20NET%20CASH%20PROVIDED%20BY%20OPERATING%20ACTIVITIES%20TO%20FREE%20CASH%20FLOW%20%28NON-GAAP%29) This table reconciles net cash provided by operating activities to free cash flow (Non-GAAP) by subtracting purchases of property and equipment Free Cash Flow Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Net cash provided by operating activities | $673 | $341 | | Purchases of property and equipment | $(53) | $(41) | | Free cash flow | $620 | $300 | [Billings Reconciliation](index=20&type=section&id=RECONCILIATION%20OF%20NET%20REVENUES%20TO%20BILLINGS%20%28NON-GAAP%29) This table reconciles net revenues to billings (Non-GAAP) by adjusting for the change in deferred revenue and financed unearned services revenue Billings Reconciliation (Q1 FY26 vs Q1 FY25) | Metric (In millions) | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Net revenues | $1,559 | $1,541 | | Change in deferred revenue and financed unearned services revenue* | $(48) | $(92) | | Billings | $1,511 | $1,449 | [Q2 FY26 Guidance Reconciliation](index=21&type=section&id=RECONCILIATION%20OF%20GAAP%20GUIDANCE%20TO%20NON-GAAP%20SECOND%20QUARTER%20FISCAL%202026) This section provides the reconciliation of GAAP guidance to Non-GAAP guidance for Q2 FY26, covering gross margin, operating margin, and earnings per share, by adjusting for specific items Q2 FY26 Gross Margin and Operating Margin Guidance Reconciliation | Metric | GAAP Guidance | Adjustments | Non-GAAP Guidance | | :--- | :--- | :--- | :--- | | Gross Margin | 69.5% - 70.5% | 1% | 70.5% - 71.5% | | Operating Margin | 22% - 23% | 6% | 28% - 29% | Q2 FY26 Net Income Per Share Guidance Reconciliation | Metric | GAAP Guidance | Adjustments | Non-GAAP Guidance | | :--- | :--- | :--- | :--- | | Net Income Per Share | $1.35 - $1.45 | $0.49 | $1.84 - $1.94 | [Full FY26 Guidance Reconciliation](index=22&type=section&id=RECONCILIATION%20OF%20GAAP%20GUIDANCE%20TO%20NON-GAAP%20FISCAL%202026) This section provides the reconciliation of GAAP guidance to Non-GAAP guidance for the full fiscal year 2026, covering gross margin, operating margin, and earnings per share, by adjusting for specific items Full FY26 Gross Margin and Operating Margin Guidance Reconciliation | Metric | GAAP Guidance | Adjustments | Non-GAAP Guidance | | :--- | :--- | :--- | :--- | | Gross Margin | 70% - 71% | 1% | 71% - 72% | | Operating Margin | 22.8% - 23.8% | 6% | 28.8% - 29.8% | Full FY26 Net Income Per Share Guidance Reconciliation | Metric | GAAP Guidance | Adjustments | Non-GAAP Guidance | | :--- | :--- | :--- | :--- | | Net Income Per Share | $5.72 - $6.02 | $1.88 | $7.60 - $7.90 | [Additional Information](index=6&type=section&id=Additional%20Information) This section provides supplementary information, including footnotes for data clarification, trademark details, and essential contact information for press and investor relations [Footnotes](index=6&type=section&id=Footnotes) This section provides definitions and references for certain terms and metrics used in the report, including IDC market share data, all-flash array annualized net revenue run rate, and explanations for non-GAAP financial information and constant currency - Footnotes clarify definitions for IDC Worldwide Quarterly Enterprise Storage Systems Tracker, all-flash array annualized net revenue run rate, and refer to sections explaining NetApp's usage of non-GAAP financial information and constant currency growth rates[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) [Trademarks](index=6&type=section&id=Trademarks) This section lists NetApp's trademarks and states that all other marks belong to their respective owners - NetApp, the NetApp logo, and the marks listed at http://www.netapp.com/TM are trademarks of NetApp, Inc[22](index=22&type=chunk) - All other marks mentioned in the report are the property of their respective owners[22](index=22&type=chunk) [Contacts](index=22&type=section&id=Contacts) This section provides contact information for press and investor inquiries - For press inquiries, contact Kenya Hayes at **1 703 589 7595** or kenya.hayes@netapp.com[88](index=88&type=chunk) - For investor inquiries, contact Kris Newton at **1 408 822 3312** or kris.newton@netapp.com[88](index=88&type=chunk)

Group 1 - NetApp is expected to announce its fiscal first-quarter 2026 earnings on August 27, 2025, with anticipated earnings of $1.54 per share and revenue of $1.54 billion, reflecting a slight year-over-year decline in earnings and flat sales compared to the previous year [2] - For fiscal 2026, NetApp projects revenue between $6.63 billion and $6.88 billion, indicating a growth of 3% to 4%, with gross margins of 71% to 72% and non-GAAP EPS of $7.60 to $7.90 [3] - The company aims to return up to 100% of free cash flow through dividends and buybacks, highlighting its focus on profitability and shareholder returns [3] Group 2 - Over the past twelve months, NetApp generated $6.6 billion in revenue, with an operating profit of $1.4 billion and a net income of $1.2 billion, showcasing its operational strength despite subdued top-line growth [3] - Historical data indicates that NetApp shares have increased following earnings reports 60% of the time, with a median one-day gain of 4.4% and a maximum observed increase of 18% [2][4] - The correlation between one-day post-earnings returns and subsequent five-day returns can provide insights for traders, with a strategy to position long if the one-day return is positive [5]

Core Insights - NetApp, Inc. is set to release its first-quarter fiscal 2026 earnings on August 27, with expected non-GAAP earnings per share between $1.48 and $1.58, slightly down from the previous year [1][10] - Anticipated net sales are projected to range from $1.455 billion to $1.605 billion, reflecting a minor decline of 0.1% from the prior year [2][10] Financial Performance - The Zacks Consensus Estimate for earnings is currently at $1.54 per share, indicating a 1.3% decrease year-over-year [1][2] - The company has a history of beating estimates, achieving an average earnings surprise of 3.2% over the last four quarters [2] Growth Drivers - Increasing momentum in the all-flash portfolio and growth in cloud storage services are expected to support NetApp's performance [3] - The company has gained nearly 3 percentage points in all-flash market share and 1 percentage point in block storage in 2024 [4] - All-flash systems and public cloud services now account for over two-thirds of revenue, up from less than half five years ago [4] Segment Performance - The all-flash array annualized revenue run rate increased by 14% year-over-year to a record $4.1 billion [5] - The Public Cloud segment revenue is projected to reach $173 million, an 8.9% increase year-over-year, with first-party and marketplace storage services growing by 44% [7][10] Market Trends - The enterprise AI market is driving customers to modernize their data infrastructure, which is expected to enhance long-term growth prospects for NetApp [6] - Strong partnerships with hyperscalers like Amazon and Microsoft position NetApp favorably in the cloud infrastructure market [7] Outlook - Despite positive growth trends, the global macroeconomic environment remains uncertain, with anticipated customer spending caution and challenges in the U.S. Public Sector and EMEA [8]

Core Viewpoint - Analysts forecast that NetApp (NTAP) will report quarterly earnings of $1.54 per share, reflecting a year-over-year decline of 1.3%, with anticipated revenues of $1.54 billion, a decrease of 0.1% compared to the previous year [1]. Earnings Projections - The consensus EPS estimate for the quarter has not changed over the past 30 days, indicating stability in analysts' projections [2]. - Revisions to earnings projections are crucial for predicting investor behavior, as empirical studies show a strong correlation between earnings estimate trends and short-term stock performance [3]. Revenue Estimates - Analysts predict 'Net revenues- Services' at $884.44 million, a year-over-year increase of 1.4% [5]. - 'Net revenues- Product' is expected to be $654.94 million, indicating a decline of 2.1% year over year [5]. - 'Net revenues- Public Cloud' is projected to reach $170.45 million, reflecting a growth of 7.2% year over year [5]. - 'Net revenues- Hybrid Cloud' is forecasted at $1.37 billion, a decrease of 0.5% from the previous year [6]. Geographic Revenue Insights - The consensus for 'Geographic Revenue- United States, Canada and Latin America' is $782.49 million, suggesting a year-over-year increase of 2.6% [6]. - 'Geographic Revenue- Asia Pacific' is expected to be $235.61 million, indicating a significant decline of 11.1% year over year [6]. - 'Geographic Revenue- Europe, Middle East and Africa' is projected at $517.03 million, reflecting a modest increase of 0.8% year over year [7]. Margin and Change Estimates - Analysts estimate 'Gross margin - Product - Non-GAAP' to be 56.0%, down from 59.9% year over year [7]. - 'Gross margin - Services - Non-GAAP' is expected to reach 82.8%, slightly up from 81.7% year over year [7]. - The estimated 'Product - % Change' is -1.8%, contrasting with the previous year's figure of 13.0% [8]. - 'Total Revenue - % Change' is projected at 0.3%, compared to 8.0% year over year [8]. Stock Performance - NetApp shares have increased by 3% in the past month, outperforming the Zacks S&P 500 composite, which moved up by 1.1% [8].

Industry Overview - The computer storage devices industry is expected to benefit from the growth in cloud computing, IoT, connected devices, virtual reality, and AI, leading to increased demand for robust data storage solutions [1][2] - Companies are leveraging AI for IT operations and machine learning to optimize storage solutions, while virtualization technologies are being used to streamline data storage [2] Company Highlights Western Digital Corp. (WDC) - WDC is experiencing strong demand in the cloud market, which constitutes 90% of its total revenue, with a 36% increase in the last reported quarter driven by high-capacity nearline HDDs [4] - The company has doubled shipments of 26TB CMR and 32TB UltraSMR drives and plans to ramp up HAMR drives by the first half of 2027 [4] - WDC anticipates that the rise of generative AI will lead to a refresh cycle in client and consumer devices, boosting storage needs across various sectors [5] - The fiscal first-quarter 2026 revenue forecast is $2.7 billion (+/- $100 million), reflecting a 22% increase [6] NetApp Inc. (NTAP) - NTAP is benefiting from a strong all-flash portfolio and has seen a five-fold growth in its AI business year over year [10][11] - The company has secured over 150 AI and data lake modernization deals in the last quarter and is expanding its AI ecosystem with major tech partners [11] - The fiscal 2026 revenue estimate is $6.75 billion, indicating a 2.7% year-over-year improvement [12] Dell Technologies Inc. (DELL) - DELL has secured $12.1 billion in AI server orders, driven by strong demand for AI-optimized servers amid digital transformation [14] - The company is expanding its cloud services and infrastructure solutions, with a focus on multi-cloud solutions through its APEX platform [16] - The fiscal 2026 revenue estimate is $111.29 billion, suggesting a 6.7% year-over-year improvement [19]