Summary of NetApp Insight 2025 Conference Call Company Overview - **Company**: NetApp (NasdaqGS: NTAP) - **Event**: Insight 2025 Conference - **Date**: October 14, 2025 Key Industry Insights AI and Technology Trends - The emergence of AI has transformed all businesses into technology-driven entities, with a significant focus on leveraging data for operational improvements [8][9][10] - Companies are increasingly interested in utilizing AI for enhancing sales pipelines and adapting to regulatory changes in the financial sector [11][12] - The advancements in hardware, particularly by companies like NVIDIA, have facilitated a rapid increase in AI capabilities [14][15] Virtualization and Cloud Strategies - There is a notable shift towards prioritizing on-premises workloads, influenced by data sovereignty concerns and the desire for control over data [20][21] - The acquisition of VMware by Broadcom has led to a strategic focus on on-prem solutions, contrasting the previous trend of cloud migration [16][17] - The virtualization landscape is evolving with the rise of containerization and new alternatives like Proxmox gaining traction [22][23][24] Storage Solutions - The resurgence of block storage is attributed to improvements in protocols and networking, particularly with NVMe technologies [41][42][43] - The demand for low-latency and high-reliability storage solutions is increasing, especially for tier one workloads [42][43] - NetApp's ONTAP system is being positioned as a comprehensive solution for various workloads, emphasizing the importance of performance and capacity [71][73] Product Developments - NetApp has consolidated its licensing into ONTAP One, streamlining access to various features like backup, data protection, and cyber resilience [32][34] - The introduction of proactive ransomware detection capabilities within ONTAP is highlighted as a unique offering in the industry [35][36] Market Dynamics - The consumer technology growth is driving enterprise data demands, with an explosion of data from various devices and services [47][48][49] - The integration of AI into consumer products is expected to influence enterprise solutions, leading to more customized experiences and data utilization [48][49] Future Outlook - The conference anticipates significant advancements in AI and machine learning, with expectations for more integrated and user-friendly systems in the coming years [58][59] - The potential for operating systems to incorporate AI functionalities is discussed, suggesting a future where AI becomes a standard feature across platforms [52][54] Additional Notes - The conference emphasizes the importance of understanding data and its implications for businesses, highlighting NetApp's long-standing commitment to innovation in data management [120][121] - The event serves as a platform for showcasing new technologies and strategies that align with current market needs and future trends [118][119]

Core Insights - Zacks Premium offers tools for investors to enhance their stock market strategies, including daily updates on Zacks Rank and Industry Rank, Equity Research reports, and Premium stock screens [1][2] Zacks Style Scores - Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum methodologies, helping investors identify stocks likely to outperform the market in the next 30 days [2][3] - Stocks are rated from A to F, with A indicating the highest potential for outperformance [3] Value Score - The Value Style Score focuses on identifying undervalued stocks using metrics like P/E, PEG, Price/Sales, and Price/Cash Flow [3] Growth Score - The Growth Style Score assesses a company's financial health and future outlook through projected and historical earnings, sales, and cash flow [4] Momentum Score - The Momentum Style Score evaluates stocks based on price trends and earnings estimate changes, aiding in timing purchases of high-momentum stocks [5] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for investors seeking attractive value, growth, and momentum [6] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to help investors build successful portfolios, with 1 (Strong Buy) stocks achieving an average annual return of +23.81% since 1988 [7][10] - There can be over 800 top-rated stocks available, making it essential to utilize Style Scores for better stock selection [8] Stock Analysis: NetApp (NTAP) - NetApp provides enterprise storage and data management solutions, focusing on cloud environments and technologies like AI and Kubernetes [11] - NTAP holds a 3 (Hold) Zacks Rank with a VGM Score of B and a Value Style Score of B, supported by a forward P/E ratio of 14.67 [12] - Recent earnings estimates for fiscal 2026 have been revised upward, with the Zacks Consensus Estimate increasing by $0.04 to $7.77 per share, and an average earnings surprise of +1.7% [12][13]

Core Insights - NetApp Inc's (NTAP) shares have increased by 45.5% over the past six months, lagging behind the Computer Storage Devices Industry's growth of 109.2% [1] - The Computer and Technology sector and the S&P 500 composite have risen by 45.8% and 27.5%, respectively, during the same period [1] - NTAP's stock closed at $120.31, below its 52-week high of $135.45, raising questions about potential buying opportunities [1] Price Performance - NTAP's share performance is significantly lower than the industry average, indicating potential underperformance [1] Demand and Growth Drivers - There is increasing demand for NetApp's cloud storage and AI solutions, with over 125 AI and data lake modernization deals won in the fiscal first quarter [5] - The company has expanded its AI ecosystem and launched the AIPod Mini with Intel, addressing cost and complexity challenges in AI implementation [5] - NetApp's all-flash array business has an annualized net revenue run rate of $3.6 billion, reflecting a 6% year-over-year increase [6] - Keystone storage-as-a-service revenues grew by 80% year over year, contributing to an 18% increase in Professional Services revenues to $97 million [7] - Public Cloud revenues from first-party and marketplace storage services grew by 33% in the fiscal first quarter [8] Financial Position - NetApp's cash, cash equivalents, and investments totaled $3.32 billion, with long-term debt at $2.485 billion as of July 25, 2025 [10] - The company generated net cash from operations of $673 million and free cash flow of $620 million, indicating a strong cash position [10] - NTAP returned $404 million to shareholders through dividends and share repurchases in the fiscal first quarter [11] Market Challenges - Management anticipates spending caution due to an uncertain global macroeconomic outlook, with fiscal first-quarter revenues increasing only 1% year over year [12] - The forecast for fiscal 2026 revenues is between $6.625 billion and $6.875 billion, with potential deferrals in storage cycles and infrastructure refreshes if macro conditions worsen [12] - Intense competition in the flash and cloud markets poses additional challenges [12] Valuation - NetApp's forward 12-month price-to-earnings ratio is 14.72X, which is below the industry average of 23.16X [13] Analyst Sentiment - Analysts have slightly revised earnings estimates upward for the current year, indicating a positive outlook [14] Conclusion - NetApp's strong flash portfolio, growing Keystone adoption, and partnerships with major hyperscalers are key long-term growth drivers [16] - The company's solid balance sheet and consistent shareholder returns further strengthen its investment case [16]

Core Insights - Zacks Premium offers tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores provide a rating system for stocks based on value, growth, and momentum, aiding investors in selecting securities likely to outperform the market in the short term [2][3] - Stocks are rated from A to F, with A indicating the highest potential for outperformance [3] Value Score - The Value Score identifies attractive stocks using financial ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow, focusing on undervalued stocks [3] Growth Score - The Growth Score assesses a company's financial health and future outlook, analyzing projected and historical earnings, sales, and cash flow to find sustainable growth opportunities [4] Momentum Score - The Momentum Score capitalizes on price trends, using factors like one-week price changes and monthly earnings estimate changes to identify favorable investment times [5] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for investors who utilize multiple investing strategies [6] Zacks Rank - The Zacks Rank is a proprietary model based on earnings estimate revisions, with 1 (Strong Buy) stocks historically yielding an average annual return of +23.81% since 1988, outperforming the S&P 500 [7][9] - Investors are encouraged to focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B for optimal returns [9][10] Company Spotlight: NetApp (NTAP) - NetApp specializes in enterprise storage and data management solutions, assisting companies in managing cloud environments and adopting advanced technologies [11] - NTAP holds a Zacks Rank of 3 (Hold) with a VGM Score of B and a Growth Style Score of A, indicating a projected year-over-year earnings growth of 7.2% for the current fiscal year [12] - Recent upward revisions in earnings estimates and a positive earnings surprise average of +1.7% position NTAP as a potential growth investment [12][13]

Core Insights - NetApp Inc. (NASDAQ:NTAP) is underperforming in the data center sector in 2025, with a stock increase of only 3.3% compared to broader industry enthusiasm [1] - The company faces competition from pure-play cloud providers, but its hybrid model remains attractive to enterprises for flexibility and cost savings [1] Financial Performance - Analysts are cautious about NetApp, with nearly two-thirds rating it as Neutral, although TD Cowen analyst John Blackledge maintains a Buy rating with a price target of $130 [2] - At the Goldman Sachs Communicopia + Technology Conference, NetApp reported steady growth in all-flash storage, cloud services, and AI, despite weak demand in the U.S. public sector and parts of EMEA [3] Growth Projections - Management has kept its growth forecast at 2% for the next quarter and 3% for the year, with product margins expected in the mid-to-high 50% range [4] - The company is focusing on adding senior hires in North America to boost sales and is investing in R&D to enhance its data and cloud offerings [4] Business Model - NetApp provides hybrid cloud and data storage solutions for enterprise clients, offering a range of products from on-premises hardware to cloud software and data management tools [4]

Group 1: Stock Performance - NetApp (NTAP) closed at $118.52, reflecting a -1.13% change from the previous day, underperforming the S&P 500's daily gain of 0.26% [1] - Over the past month, NetApp shares appreciated by 6.29%, underperforming the Computer and Technology sector's gain of 7.4% but outperforming the S&P 500's gain of 2.87% [1] Group 2: Upcoming Earnings - NetApp is projected to report earnings of $1.89 per share, indicating year-over-year growth of 1.07% [2] - The Zacks Consensus Estimate for revenue is $1.69 billion, up 1.68% from the previous year [2] Group 3: Full-Year Estimates - Full-year Zacks Consensus Estimates for NetApp are earnings of $7.77 per share and revenue of $6.76 billion, representing year-over-year changes of +7.17% and +2.85%, respectively [3] - Recent changes to analyst estimates for NetApp may reflect evolving short-term business trends, with positive revisions indicating optimism about the business outlook [3] Group 4: Valuation Metrics - NetApp has a Forward P/E ratio of 15.43, which is lower than the industry average Forward P/E of 16.36, suggesting it is trading at a discount [6] - The current PEG ratio for NetApp is 2.1, which is in line with the average PEG ratio of 2.1 for Computer-Storage Devices stocks [7] Group 5: Industry Ranking - The Computer-Storage Devices industry is part of the Computer and Technology sector, holding a Zacks Industry Rank of 207, placing it in the bottom 17% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Core Insights - The data center industry is experiencing significant growth driven by the demand for artificial intelligence, with estimates suggesting a potential increase in global data center needs by 100 gigawatts by 2030 [2][3] - Despite the overall growth in the sector, not all companies are benefiting equally, with some facing challenges such as poor execution and heavy debt, leading to sharp declines in their stock prices [3][4] Group 1: Industry Overview - Goldman Sachs and McKinsey & Company emphasize the critical role of high-density data centers in the AI race and as foundational infrastructure for digital services [1][2] - The demand for AI capacity is rising rapidly, creating a significant opportunity for data center operators [2] - The power requirements for data centers are projected to nearly triple from 68 to 196 gigawatts in the coming years, highlighting the need for investment in power solutions [10] Group 2: Company Performance - DigitalBridge Group Inc. is one of the worst-performing data center stocks in 2025, with a year-to-date return of only 4.6%, despite being a major player in the digital infrastructure space with over $96 billion in assets [8][9] - NetApp Inc. has a year-to-date return of 3.3%, struggling to keep pace with the broader market due to competition from pure-play cloud providers, although its hybrid model remains appealing to enterprises [12][15] - Analysts have a cautious outlook on NetApp, with two-thirds holding a Neutral rating, while the company maintains a growth forecast of 2% for the next quarter and 3% for the year [13][15]

Summary of the Conference Call on IT Hardware and Communications Equipment Industry Overview - The focus is on the **IT Hardware and Communications Equipment** industry, specifically the **storage market** and **NAND pricing** trends [1][2]. Key Points and Arguments 1. **Storage Market Growth Projections**: - Total storage estimates for **CY25** have been adjusted upwards, with a forecast of **5% growth** for **CY26** and **2% growth** for **CY27** [2]. - The storage market is expected to grow at a **CAGR of 7%** from **2021 to 2026**, with hardware growing at **6%** and software/SaaS at **15%** [17][18]. 2. **NAND Pricing Impact**: - Recent upward movements in **NAND pricing** are expected to affect storage players' revenues and margins, as NAND can account for up to **50% of COGS** in storage hardware [3][8]. - The correlation between NAND pricing changes and product GM is delayed, typically taking about a quarter to reflect in revenue and margins [8][11]. 3. **Market Dynamics**: - The storage market has shown resilience year-to-date, although there are pockets of weakness, particularly in the public sector and EMEA [2]. - The anticipated recovery in enterprise spending and AI-related demand is expected to begin impacting the market around **CY26** [2][17]. 4. **Vendor Performance**: - **NetApp (NTAP)** and **Pure Storage (PSTG)** are expected to see improvements in product GMs in the second half of the year, aided by strategic pre-buys [16]. - **DELL** and **HPE** are noted for their market share dynamics, with DELL being a consistent share donor and HPE maintaining stable market share [31][37][41]. 5. **Software/SaaS Market Share**: - Software/SaaS revenues are projected to remain a small portion of the overall market, expected to grow from **4%** in **2026** to nearly **5%** by **CY27** [25][28]. 6. **AFA vs. Disc/Hybrid Growth**: - AFA (All-Flash Array) is expected to grow at a **CAGR of 9%**, while Disc/Hybrid is projected to grow at **6%** from **2021 to 2026** [17][18]. Additional Important Insights - The storage market's growth is not correlating with trends in server and DC switching revenues, indicating that external storage is not fully participating in AI-related growth [18][19]. - Historical data shows a decline in the correlation between server revenues and external storage revenues, particularly as AI servers with higher ASPs ramp up [19][21]. - The overall storage market has experienced fluctuations, with an average growth of **6%** over the past five years, and is now expected to average **8% growth** in **2025-2026** [21][24]. Conclusion - The IT Hardware and Communications Equipment industry, particularly the storage segment, is poised for moderate growth driven by enterprise recovery and AI-related demand, despite challenges posed by NAND pricing volatility and market dynamics.

Core Viewpoint - NetApp's recent earnings report shows a slight decline in earnings year over year, but revenues have increased, indicating a mixed performance. The company remains optimistic about its future outlook and growth potential in the Hybrid and Public Cloud segments [2][3][4]. Financial Performance - Non-GAAP earnings for Q1 fiscal 2026 were $1.55 per share, beating estimates by 0.7% but declining 0.6% year over year [2]. - Revenues reached $1.56 billion, a 1% increase year over year, and exceeded the consensus estimate by 1.2% [3]. - The company expects fiscal 2026 revenues to be between $6.625 billion and $6.875 billion, reflecting a 3% year-over-year growth at the midpoint [4]. Segment Performance - Hybrid Cloud segment revenues increased 1% year over year to $1.4 billion, while Public Cloud revenues also improved 1% to $161 million. Excluding the divested Spot business, Public Cloud revenues grew 18% year over year [6]. - Within the Hybrid Cloud segment, product revenues decreased 2% to $654 million, while support contract revenues increased 3% to $647 million [7]. Key Metrics - All-Flash Array revenues rose 6% year over year to $893 million, with a total annualized run rate of $3.6 billion [9]. - Total billings increased by 4% year over year to $1.51 billion, and deferred revenues totaled $4.5 billion, up 8.6% [9]. Operating Details - Non-GAAP gross margin was 71.1%, down 110 basis points from the previous year. The Hybrid segment's gross margin was 70%, while the Public Cloud segment saw an increase to 80.1% [10]. - Non-GAAP operating income decreased 0.5% year over year to $401 million, with an operating margin of 25.7% [10]. Balance Sheet & Cash Flow - The company ended the quarter with $3.32 billion in cash and equivalents, down from $3.85 billion in the previous quarter [11]. - Free cash flow was $620 million, with a margin of 39.8%, compared to $640 million in the prior year [12]. Guidance - For Q2, NetApp anticipates revenues between $6.625 billion and $6.875 billion, with a projected non-GAAP EPS between $1.84 and $1.94 [13]. Market Sentiment - Estimates for NetApp have trended downward over the past month, with a Zacks Rank of 3 (Hold), indicating an expectation of in-line returns in the coming months [14][17].

Core Insights - The Zacks Computer-Storage Devices industry faces challenges from escalating trade tensions, macroeconomic turbulence, and intense competition, but benefits from trends like digital transformation, edge computing, and AI workload proliferation [1][2][6] Industry Overview - The industry includes companies that design, develop, manufacture, and market HDDs and SSDs for various devices, with some offering software-defined all-flash solutions and high-performance memory subsystems [3] Trends Influencing Growth - AI is driving demand for high-speed, high-capacity storage solutions, necessitating a shift towards NVMe-based SSDs and object storage for unstructured data [4] - Cloud storage technologies are evolving, with a focus on virtualization and edge computing to manage increasing data complexity and scale [5] Macro Conditions - Trade tensions and inflation are significant concerns, potentially affecting global IT spending, which is projected to reach $5.43 trillion in 2025, a 7.9% increase from 2024 [6] - PC shipments increased by 4.4% year-over-year in Q2 2025, but are expected to plateau in the latter half of the year due to vendor inventory adjustments [7][8] Industry Performance - The Zacks Computer-Storage Devices industry has outperformed the S&P 500 with a 22.7% increase over the past year, compared to the S&P 500's 17.8% gain, but lags behind the broader sector's 28.3% growth [11] Valuation Metrics - The industry is currently trading at a forward 12-month P/E ratio of 21.15X, below the S&P 500's 23.32X and the sector's 28.93X [14] Company Highlights - **Netlist (NLST)**: Experienced a 44% sequential revenue increase to $41.7 million, driven by DDR5 demand, and is pursuing legal actions against Samsung and Micron for patent infringements [20][21] - **Pure Storage (PSTG)**: Expanded its Flash portfolio and reported strong demand for its products, with a Zacks Rank of 3 and a 71.6% stock gain over the past year [25][27] - **NetApp (NTAP)**: Benefiting from demand for all-flash arrays and cloud storage solutions, with Keystone storage-as-a-service revenues growing 80% year-over-year [32][33]