NetApp Q4 Earnings Call Highlights

Key Points

• NetApp delivered record Q4 and fiscal 2026 results, with revenue of $1.95 billion in the quarter and non-GAAP EPS of $2.43, both above guidance. Full-year revenue rose to $6.93 billion, while operating cash flow and free cash flow also hit record levels.
• AI, all-flash storage, and cloud services were the main growth drivers. NetApp said it logged more than 1,100 AI and data-prep wins in fiscal 2026, and all-flash revenue reached $4.2 billion for the year, up 11%.
• The company issued upbeat fiscal 2027 guidance and boosted shareholder returns. NetApp also raised its buyback authorization by $1 billion, while guiding for revenue growth of about 8% at the midpoint and signaling continued demand despite higher component costs.

NetApp NASDAQ: NTAP reported record fourth-quarter and fiscal 2026 results, with executives citing strong demand for artificial intelligence infrastructure, public cloud services, all-flash storage and its Keystone storage-as-a-service offering.

Chief Executive Officer George Kurian called fiscal 2026 “a landmark year” for the company, saying NetApp achieved record results across revenue, gross profit, operating income, cash flow from operations and free cash flow. He said the company’s performance was supported by fourth-quarter customer demand and demonstrated its ability to benefit from “the accelerating adoption of enterprise AI and cloud.”

“NetApp stands at the forefront of a transformative era driven by rapid AI adoption and explosive cloud growth,” Kurian said, emphasizing the company’s positioning in hybrid cloud and intelligent data infrastructure.

Quarterly Revenue and Earnings Top Guidance

Chief Financial Officer Wissam Jabre said NetApp delivered fiscal fourth-quarter revenue of $1.95 billion, up 12% year-over-year and 14% sequentially. Excluding the divested Spot by NetApp business, which generated $9 million in the year-ago quarter, revenue grew 13% year-over-year. Jabre said revenue was up 10% year-over-year excluding foreign exchange effects.

Non-GAAP earnings per share were $2.43, up 26% from the prior year and above the high end of the company’s guidance range. Jabre said the quarter marked NetApp’s 10th consecutive quarter of year-over-year revenue growth.

Hybrid cloud revenue was $1.77 billion, up 13% year-over-year. Product revenue increased 14% to $966 million, which Jabre attributed in part to the execution of a multi-year agreement with Google Cloud to deliver secure, AI-ready data infrastructure to Google Distributed Cloud environments. Support revenue rose 10% to $688 million, partly driven by a one-time item, while professional services revenue grew 14% to $112 million, mainly due to growth in Keystone.

Public cloud revenue was $182 million in the quarter, up 11% year-over-year. Excluding Spot, public cloud revenue increased 18%, driven by demand for first-party and marketplace storage services.

AI and All-Flash Demand Drive Momentum

Kurian said AI was a “clear growth engine” for NetApp in fiscal 2026. The company recorded approximately 500 AI and data preparation wins in the fourth quarter, bringing the full-year total to more than 1,100. During the question-and-answer session, Kurian said all 500 fourth-quarter AI wins were on-premises and included a mix of enterprise and neo-cloud customers.

He said roughly half of the AI use cases were tied to data preparation and large-scale analytics, while the remainder was split between training or fine-tuning large language models and inferencing.

NetApp’s all-flash revenue reached $4.2 billion for fiscal 2026, up 11% from the prior year. Fourth-quarter all-flash revenue was $1.2 billion, up 18% year-over-year. Kurian said customers are using NetApp’s flash offerings for high-performance AI environments where storage must support expensive GPU infrastructure, while hybrid flash also grew for less demanding AI workloads.

Kurian highlighted several customer examples, including a global financial company that signed a $20 million deal with NetApp to support AI-driven fraud detection and customer personalization, and a European government agency using NetApp’s disaggregated AFX solution in an NVIDIA SuperPOD environment.

In response to an analyst question, Kurian said AFX had early wins in neo-cloud, financial services, hedge funds and life sciences, while the company’s AI Data Engine was receiving positive feedback from customers seeking to organize large stores of unstructured data for AI projects.

Cloud, Keystone and Google Partnership Expand Opportunity

Kurian said public cloud revenue reached $688 million for fiscal 2026, up 18% year-over-year on a basis normalized for the Spot divestiture. First-party and marketplace cloud services grew 30% during the year.

He said customers are increasingly choosing NetApp to simplify and scale hybrid and multi-cloud environments, including AI-related use cases. Kurian cited an insurance company using Azure NetApp Files with Azure Databricks for financial risk modeling and data science, and an Asian engineering company using FSx for NetApp ONTAP to support a generative AI chatbot deployment on AWS.

Revenue from Keystone grew approximately 65% from fiscal 2025. Kurian said the growth reflects a broader shift toward consumption-based IT models and the desire for a cloud-like experience for on-premises data. During the Q&A, he said Keystone’s growth is not merely a response to higher NAND pricing, although some customers may view the offering as a way to balance cost and use during a period of inflationary component costs.

The company also emphasized its expanded partnership with Google Cloud for Google Distributed Cloud. Kurian said the collaboration supports government agencies and regulated enterprises in secure and sovereign environments. In response to an analyst question, he said Google Distributed Cloud brings Google’s technology stack to disconnected or lightly connected data centers, including regulated industries, public sector and national security environments, and that NetApp was selected to provide a large portion of the data infrastructure.

Margins, Cash Flow and Capital Returns

Fourth-quarter non-GAAP gross margin was 70.5%, up 100 basis points year-over-year, driven by public cloud gross margin expansion. Operating income was $624 million, up 26% from the prior year, while operating margin reached 32%, up 340 basis points year-over-year. Jabre said both operating income and operating margin were all-time records.

For the full fiscal year, revenue was $6.93 billion, up 5% year-over-year and above the high end of guidance. Excluding Spot, revenue grew 7%. Full-year operating margin was 30.2%, up 190 basis points, while non-GAAP EPS was $8.13, up 12%.

Operating cash flow for the year was $2.07 billion, and free cash flow was $1.87 billion, up close to 40% year-over-year. NetApp ended the year with $3.58 billion in cash and short-term investments and $2.49 billion in gross debt, resulting in a net cash position of $1.1 billion.

The company returned $303 million to shareholders in the fourth quarter through $200 million of share repurchases and $103 million in dividends. For the full year, NetApp returned $1.36 billion through share repurchases and dividends. Jabre said approximately $500 million remained under the current buyback authorization and announced a $1 billion increase to that authorization.

Fiscal 2027 Outlook Reflects AI Demand and Component Cost Pressure

For fiscal 2027, NetApp guided for revenue of $7.325 billion to $7.575 billion. At the midpoint of $7.45 billion, that implies 8% year-over-year growth. The company expects gross margin of 68.5% to 69.5%, operating margin of 29.1% to 30.1%, and EPS of $8.70 to $9.00.

For the fiscal first quarter, NetApp expects revenue of $1.75 billion to $1.9 billion, with the midpoint implying 17% year-over-year growth. Jabre noted that the quarter includes an extra week, expected to contribute approximately $65 million of revenue and $21 million of operating expenses. First-quarter EPS is expected to range from $2.05 to $2.15.

Executives addressed investor questions about potential demand pull-forward and pricing changes tied to higher memory and component costs. Kurian said NetApp saw some accelerated decision-making, but added that “on the face of the Q4 P&L, the impact of pull forward or accelerated decision-making was minimal.” He said fourth-quarter results were tied to large deals the company had previously indicated could materialize in the second half of fiscal 2026.

Jabre said product gross margin is expected to trough in the July quarter and gradually improve as price adjustments take effect. Kurian said NetApp believes it can source adequate supply to meet its outlook for the year.

“As we look to FY 2027, we are confident in our strategy and our ability to deliver ongoing growth and leadership in AI and cloud,” Kurian said in closing remarks.

About NetApp NASDAQ: NTAP

NetApp, Inc NASDAQ: NTAP is a data management and storage company that delivers hybrid cloud data services for applications and data. Founded in 1992 as Network Appliance and rebranded as NetApp in 2008, the company is headquartered in Sunnyvale, California. NetApp's offering focuses on enabling organizations to store, manage, protect and move data across on-premises environments and major public clouds.

The company's product portfolio centers on the ONTAP data management software and a range of storage systems and services built around it.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.