Summary of NetApp's 2025 Conference Call Company Overview - **Company**: NetApp (NasdaqGS: NTAP) - **Event**: Fireside Chat at the Goldman Sachs Communicopia and Technology Conference - **Date**: September 09, 2025 - **Speaker**: Wissam Jabry, Executive Vice President and CFO Key Points Industry and Market Position - NetApp is focusing on growth opportunities in the all-flash storage market, public cloud business, and AI initiatives [3][4][5] - The company reported a strong performance in Q1 2026, with revenue and EPS slightly above guidance [4][5] - NetApp ranked number one in the all-flash market as published by IDC [5] Financial Performance - Q1 2026 saw a record free cash flow of approximately $620 million [5] - The public cloud business adjusted for a divestiture showed an 18% year-over-year growth [4] - The gross margin target for the public cloud segment was increased from 75%-80% to 80%-85% [21] Strategic Growth Areas 1. **All-Flash Storage**: - The all-flash market is growing faster than the overall storage market, presenting significant opportunities [9] - Transition from legacy hard disk drives to QLC SSDs is economically favorable for customers [9][10] 2. **Block Storage**: - The introduction of the ASA appliance allows NetApp to compete effectively in the block storage market, where it was previously underrepresented [12][14] - The standalone block appliance offers better performance and cost-effectiveness for specific market segments [15] 3. **Public Cloud**: - NetApp's legacy as a file vendor has strengthened its relationships with major cloud providers like Azure, GCP, and AWS [16][18] - The focus has shifted to first-party and marketplace offerings, enhancing profitability and growth [21] 4. **AI Initiatives**: - NetApp closed 125 AI infrastructure and data lake modernization deals, indicating strong demand for its AI solutions [25] - The company positions itself as a leader in managing unstructured data, which is critical for AI applications [26][27] Challenges and Risks - There is some softness in the U.S. public sector, which typically accounts for 10%-13% of NetApp's revenue [36] - Macro uncertainties may impact demand across various customer verticals [30] Future Outlook - The company expects 2% growth for the next quarter and 3% growth for the full year, with an acceleration in the second half of the year [29][30] - Continued investment in R&D and sales force is prioritized alongside returning capital to shareholders [47][48] - Focus on capitalizing on AI opportunities and maintaining leadership in the all-flash market [49][50] Additional Insights - Keystone, NetApp's storage-as-a-service platform, experienced 80% year-over-year growth, indicating a shift towards consumption-based models [43][45] - The company is managing memory pricing volatility through strategic supply chain management [39][40] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting NetApp's focus on growth, innovation, and market leadership in the evolving tech landscape.

Summary of NetApp's 2025 Conference Call Company Overview - **Company**: NetApp (NasdaqGS: NTAP) - **Event**: Fireside Chat at the Goldman Sachs Communicopia and Technology Conference - **Date**: September 09, 2025 - **Speaker**: Wissam Jabre, Executive Vice President and CFO Key Points Financial Performance - **Q1 FY26 Results**: Revenue and EPS slightly exceeded the midpoint of guidance, with strong performance in the U.S. enterprise sector offsetting softness in the U.S. public sector and EMEA [4][5] - **Public Cloud Growth**: Adjusted public cloud business growth was approximately 18%, with a high-margin business contributing to overall performance [4] - **Free Cash Flow**: Achieved a record free cash flow of around $620 million in Q1 [4] - **Market Position**: Ranked number one in the all-flash market as published by IDC [5] Strategic Growth Areas - **Focus Areas**: Emphasis on all-flash storage, public cloud business, and AI opportunities [3][4] - **Unified Data Management**: ONTAP serves as a competitive differentiator, providing unified data management across various data types and locations [6][7] - **Flash Market Transition**: Transition from legacy hard disk drives to QLC SSDs is ongoing, with all-flash storage growing faster than the overall storage market [9][10] Public Cloud Strategy - **Refocus on First-Party Solutions**: Narrowed public cloud segment to focus on first-party and marketplace offerings, increasing gross margin targets from 75%-80% to 80%-85% [21][22] - **Partnerships with Hyperscalers**: Long-standing relationships with cloud providers like Azure, GCP, and AWS enhance NetApp's offerings in the public cloud marketplace [16][18] AI Opportunities - **AI Infrastructure Deals**: Closed 125 AI infrastructure and data lake modernization deals, positioning NetApp as a key player in AI storage solutions [25][26] - **Unified Data Management for AI**: Emphasizes the need for high-performance, reliable storage solutions to support AI workloads [25][26] Market Outlook - **Growth Projections**: Guidance for 2% growth in the next quarter and 3% growth for the full year, with expectations for stronger performance in the second half of the year [29][30] - **Public Sector Exposure**: U.S. public sector contributes approximately 10%-13% of revenue, with a focus on identifying growth opportunities within this segment [36][37] Capital Allocation and M&A Strategy - **Return of Capital**: Aspiration to return up to 100% of free cash flow to shareholders while investing in R&D and sales force [48][49] - **M&A Considerations**: Organic growth is prioritized, but value-enhancing M&A opportunities will be considered [49] Key Priorities - **Growth Focus**: Continued emphasis on all-flash market, block segment, public cloud growth, and capitalizing on AI opportunities [51] Additional Insights - **Keystone Growth**: Keystone, the storage-as-a-service platform, reported an 80% revenue increase year-over-year, indicating strong adoption [45][46] - **Memory Pricing Management**: NetApp employs a capable supply chain team to monitor and manage memory pricing volatility, aiming for product gross margins in the mid to high 50% range [39][40] This summary encapsulates the critical insights and strategic directions discussed during the conference call, highlighting NetApp's performance, growth opportunities, and market strategies.

Core Viewpoint - NetApp Inc's shares have outperformed the Computer Storage Devices Industry, gaining 14.2% in the past month compared to the industry's 2% growth, indicating strong market performance and potential investment interest [1]. Group 1: Company Performance - NetApp's stock closed at $116.47, down 14% from its 52-week high of $135.45, raising questions about whether this pullback presents a buying opportunity [3]. - The All-Flash Array Business has an annualized net revenue run rate of $3.6 billion, reflecting a 6% year-over-year increase, with total billings rising 4% year-over-year to $1.5 billion [5]. - Keystone storage-as-a-service revenues surged 80% year-over-year in the fiscal first quarter, contributing to an 18% increase in Professional Services revenues to $97 million [6]. - Free cash flow reached $620 million, allowing for $404 million in dividends and share buybacks in the last quarter [8][10]. Group 2: Market Position and Growth Drivers - NetApp is experiencing increased demand for its all-flash arrays and cloud storage solutions, with 45% of systems in its installed base being all-flash [5]. - The company's partnerships with major hyperscalers like Amazon and Microsoft have driven a 33% growth in first-party and marketplace cloud storage services in the fiscal first quarter [7]. - The company won over 125 AI and data lake modernization deals in the fiscal first quarter, expanding its AI ecosystem [9]. Group 3: Financial Health and Shareholder Returns - NetApp's cash, cash equivalents, and investments totaled $3.32 billion, with a long-term debt of $2.485 billion as of July 25, 2025, indicating a strong balance sheet [10]. - The company returned $404 million to shareholders through dividends and share repurchases in the fiscal first quarter, with a total of $1.57 billion returned in fiscal 2025 [11]. Group 4: Challenges and Market Outlook - Management anticipates cautious spending due to an uncertain global macroeconomic outlook, with fiscal 2026 revenues projected between $6.625 billion and $6.875 billion [12]. - The company faces competition in the flash and cloud markets, which may limit near-term growth potential [14].

Core Insights - The storage market has experienced significant evolution since the beginning of the year, influenced by various demand indicators and macroeconomic factors [1] Demand Outlook - There have been multiple factors affecting demand, including tariffs and specific market dynamics such as DeepSeek [1] - The company is reflecting on how the demand outlook has changed over the past few months, indicating a more nuanced understanding of market conditions [1]

Summary of NetApp (NTAP) 2025 Conference Call Company Overview - **Company**: NetApp (NTAP) - **Event**: 2025 Conference held on September 3, 2025 Key Industry Insights - **Industry**: Storage and Data Infrastructure - **Market Trends**: - The storage market has shown resilience despite macroeconomic challenges such as geopolitical uncertainties and tariffs [6][8] - Demand for enterprise IT spending remains cautious, influenced by central bank policies and global conflicts [6][8] Core Company Performance and Outlook - **Enterprise Business**: - Non-public sector enterprise business performed well, driven by priorities like enterprise AI readiness, cloud transformation, and cyber resilience [7][10] - Cloud storage business grew by 33% year-on-year, indicating strong demand [10] - **Market Position**: - NetApp is the number one player in the flash storage market, having gained market share consistently over the past few years [10][25] - The company is well-positioned to benefit from the growth of enterprise AI, which is still in its early stages [9][15] Demand Drivers - **Enterprise AI**: - The adoption of enterprise AI is expected to accelerate, with significant opportunities in sectors like public services, manufacturing, financial services, and healthcare [15][16] - Companies are focusing on organizing and unifying data to leverage AI capabilities [13][15] - **Hybrid vs. Public Cloud**: - AI workloads typically start in the public cloud but transition to hybrid environments as data gravity increases [42][44] - The hybrid cloud segment is expected to grow as enterprises seek to optimize their data infrastructure for AI applications [42][44] Financial Performance and Margins - **Gross Margin Trends**: - Cloud gross margins have improved from mid-60s to a target range of 80%-85% due to a better mix of software revenue [31] - Product gross margins are expected to trend back up to mid to upper 50s in the second half of the year, driven by a shift towards flash storage [33] - **Cost Structure**: - NAND costs are projected to improve, which should positively impact product gross margins [34][36] Competitive Landscape - **Market Dynamics**: - The storage industry is competitive but rational, with NetApp maintaining a sticky software platform that is difficult for competitors to displace [52] - The company is positioned to capitalize on disruptions in the hyper-converged systems market, particularly with competitors like VMware [25][55] - **Customer Preferences**: - Customers are exploring alternatives to VMware due to pricing pressures, leading to increased interest in external storage solutions [58][60] Strategic Initiatives - **Software Capabilities**: - NetApp is focused on enhancing its software offerings to provide value-added services around data management, cybersecurity, and governance [45][62] - Upcoming customer conference is expected to showcase new software capabilities that can be monetized [62] Conclusion - **Investment Opportunity**: - NetApp is well-positioned to leverage its extensive installed base and software capabilities to drive growth in the AI era [62] - The company emphasizes its leadership in modern data infrastructure and the potential for significant revenue growth through enhanced software services [62]

Core Insights - NetApp's international operations are crucial for assessing its financial strength and growth potential [1][2][3] - The company's total revenue for the quarter ending July 2025 was $1.56 billion, reflecting a 1.2% increase [4] International Revenue Trends - Europe, Middle East, and Africa contributed 32.3% of total revenue, amounting to $503 million, which was a decline of 2.71% compared to expectations of $517.03 million [5] - Asia Pacific generated $265 million, representing 17% of total revenue, exceeding projections by 12.47% [6] Future Revenue Projections - Analysts forecast total revenue of $1.69 billion for the current fiscal quarter, a 1.7% increase year-over-year, with contributions from Europe, Middle East, and Africa expected to be $569.75 million and Asia Pacific $257.2 million [7] - For the full year, projected revenue is $6.75 billion, indicating a 2.8% rise from the previous year, with Europe, Middle East, and Africa expected to contribute $2.28 billion and Asia Pacific $1.03 billion [8] Overall Market Context - The reliance on international markets presents both opportunities and risks for NetApp, making it essential to monitor international revenue trends for future forecasts [9] - Analysts are closely tracking these trends amid increasing global interdependencies and geopolitical tensions [10]

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]