NetApp(NTAP) - 2026 Q1 - Quarterly Results

News Summary 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 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] - 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] - First-party and marketplace Public Cloud storage services revenue grew 33% year-over-year[4] - 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] - Record first quarter cash provided by operations of $673 million and record first quarter free cash flow of $620 million[4] - Record first quarter GAAP operating profit of $309 million and record first quarter non-GAAP operating profit of $401 million[4] - Returned $404 million to stockholders through share repurchases and cash dividends[4] Q1 FY26 Financial Results NetApp's Q1 FY26 financial results show modest revenue growth, strong cash generation, and stable profitability, with non-GAAP metrics providing a clearer operational view GAAP Results NetApp's GAAP financial results for Q1 FY26 showed a slight increase in net revenues but a decrease in net income and EPS compared to Q1 FY25, despite strong cash generation from operations Q1 FY26 GAAP Financial Performance | Metric | Q1 FY26 ($M) | Q1 FY25 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net revenues | 1,559 | 1,541 | 1% | | Hybrid Cloud segment revenue | 1,398 | 1,382 | 1% | | Public Cloud segment revenue | 161 | 159 | 1% | | Gross profit | 1,098 | 1,098 | —% | | Net income | 233 | 248 | (6)% | | Earnings per share | 1.15 | 1.17 | (2)% | | Cash provided by operations | 673 | 341 | 97% | Non-GAAP Results Non-GAAP results for Q1 FY26 indicate growth in billings and stable net revenues, with a slight decline in net income and EPS, reflecting adjustments for certain non-recurring or non-cash items Q1 FY26 Non-GAAP Financial Performance | Metric | Q1 FY26 ($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) 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] - 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] - 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] Financial Outlook 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 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 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 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] Q1 FY26 Business Highlights 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 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] - Announced new cyber-resilience capabilities to strengthen data security at the storage layer against AI-driven attacks and quantum risks[12] - Launched NetApp ONTAP™ Connector for Amazon Q to securely synchronize enterprise data from ONTAP file systems with Amazon Q Business[12] - Introduced NetApp Model Context Protocol (MCP) Server for Knowledge Bases, enabling generative AI tools to securely access enterprise data as searchable context[12] Customer and Partner Momentum 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] - Introduced a new enterprise-grade RAG architecture in collaboration with NVIDIA and Microsoft, leveraging Azure NetApp Files and NVIDIA AI Blueprint[16] - 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] - Announced a partnership with Diskover Data's platform to integrate services with NetApp's data pipeline infrastructure for surfacing unstructured data[16] Personnel Updates 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] - 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] - Appointed Chiharu Saito as President and CEO of NetApp Japan to accelerate growth and deepen customer and partner engagement in the Japanese market[16] Awards and Recognition 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] - 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] - Keystone was named a Leader and Fast Mover in the 2025 GigaOm Sonar Report on Storage as a Service[16] - Named to the Database Trends & Applications 100 list of Companies That Matter Most in Data and the Forbes Global 2000 list[19] - Recognized as one of U.S. News & World Report's Best Public Companies to Work For[19] Corporate Information 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 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] - A live webcast and audio replay of the event are available on the NetApp Investor Relations website at investors.netapp.com[17] Safe Harbor Statement 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] - 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][20] About NetApp 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] - 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] - 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] Non-GAAP Financial Information 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 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] - 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][32] - 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] - 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] Exclusions from Non-GAAP Measures 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][33][34] - 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][36][37] - 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][39][40] - 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] Limitations of Non-GAAP Measures 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] - 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][43] Constant Currency Definition 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] - 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] Condensed Consolidated Financial Statements 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 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 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 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 | $1,659 | Supplemental Financial Data This section provides detailed supplemental financial data, including segment revenues, gross profit, geographic mix, non-GAAP performance metrics, and key balance sheet and cash flow items Revenues by Segment In Q1 FY26, NetApp's Hybrid Cloud segment revenues saw a slight increase, primarily driven by support and professional services, while Public Cloud segment revenues also grew modestly Revenues by Segment (Q1 FY26 vs Q1 FY25) | Segment | Q1 FY26 ($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 | $1,541 | Gross Profit and Margin by Segment While total gross profit remained flat, the Public Cloud segment significantly improved its gross margin in Q1 FY26, offsetting a decline in Product gross profit and margin within the Hybrid Cloud segment Gross Profit by Segment (Q1 FY26 vs Q1 FY25) | Segment | Q1 FY26 ($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 | $1,113 | Gross Margin by Segment (Q1 FY26 vs Q1 FY25) | Segment | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Product Gross Margin | 54.0% | 59.9% | | Support Gross Margin | 92.3% | 92.1% | | Professional and Other Services Gross Margin | 29.9% | 22.0% | | Hybrid Cloud Segment Gross Margin | 70.0% | 72.4% | | Public Cloud Segment Gross Margin | 80.1% | 71.1% | Geographic and Pathways Mix In Q1 FY26, the Americas region slightly increased its revenue contribution, with Americas Commercial growing, while EMEA and Asia Pacific remained stable. Indirect pathways continued to dominate revenue generation Geographic Mix (% of Revenue) | Region | % of Q1 FY26 Revenue | % of Q1 FY25 Revenue | | :--- | :--- | :--- | | Americas | 51% | 50% | | Americas Commercial | 43% | 39% | | U.S. Public Sector | 8% | 11% | | EMEA | 32% | 33% | | Asia Pacific | 17% | 17% | Pathways Mix (% of Revenue) | Pathway | % of Q1 FY26 Revenue | % of Q1 FY25 Revenue | | :--- | :--- | :--- | | Direct | 24% | 22% | | Indirect | 76% | 78% | Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate NetApp's non-GAAP income from operations remained stable in Q1 FY26, while non-GAAP income before income taxes saw a slight decrease, with the non-GAAP effective tax rate remaining consistent Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 ($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 | $416 | | Non-GAAP Effective Tax Rate | 20.7% | 20.7% | Non-GAAP Net Income and EPS Non-GAAP net income and diluted EPS experienced a slight decline in Q1 FY26 compared to the prior year, despite a reduction in weighted average common shares outstanding Non-GAAP Net Income and EPS (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Non-GAAP Net Income ($M) | $314 | $330 | | Non-GAAP Weighted Average Common Shares Outstanding, Diluted (M) | 203 | 212 | | Non-GAAP Net Income per Share, Diluted | $1.55 | $1.56 | Select Balance Sheet Items Key balance sheet metrics for Q1 FY26 show an increase in deferred revenue, a longer Days Sales Outstanding (DSO), a shorter Days Payables Outstanding (DPO), and a significant improvement in Inventory Turns compared to Q1 FY25 Select Balance Sheet Items (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | Deferred Revenue and Financed Unearned Services Revenue ($M) | $4,526 | $4,169 | | DSO (days) | 46 | 40 | | DPO (days) | 80 | 90 | | Inventory Turns | 14 | 8 | Select Cash Flow Statement Items NetApp achieved a substantial increase in net cash provided by operating activities and free cash flow in Q1 FY26, significantly improving its free cash flow as a percentage of net revenues Select Cash Flow Statement Items (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 ($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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 This section provides supplementary information, including footnotes for data clarification, trademark details, and essential contact information for press and investor relations 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][24][25] 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] - All other marks mentioned in the report are the property of their respective owners[22] 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] - For investor inquiries, contact Kris Newton at 1 408 822 3312 or kris.newton@netapp.com[88]