NetApp NASDAQ: NTAP reported a record start to fiscal 2027, with first-quarter revenue rising 30% year over year to $2.03 billion and non-GAAP earnings per share increasing 66% to $2.58. The company said results exceeded the high end of its guidance ranges and reflected broad demand across its hybrid cloud, public cloud, all-flash and storage-as-a-service offerings.
CEO George Kurian said the quarter benefited from both stronger underlying demand for AI and data modernization projects and some accelerated customer purchases. He said the company also captured pricing benefits as component costs increased, though NetApp expects product-margin conditions to remain influenced by mix, costs and pricing through the year.
First-Quarter Results and Segment Performance
NetApp said Q1 included an additional week, which contributed approximately $65 million in revenue, primarily from support and public cloud. Excluding that benefit, revenue increased 26% year over year, according to CFO Wissam Jabre.
- Hybrid cloud revenue rose 30% year over year to $1.82 billion, or 27% excluding the extra week.
- Product revenue increased 51% to $987 million.
- Support revenue grew 11% to $720 million; excluding the extra week, support revenue increased 4%.
- Professional services revenue rose 15% to $112 million, driven mainly by Keystone, NetApp’s storage-as-a-service offering.
- Public cloud revenue increased 28% to $206 million, or 19% excluding the extra week.
- All-Flash Array revenue climbed 47% year over year to $1.31 billion.
Non-GAAP gross margin was 70.6%, down 50 basis points from a year earlier, as product revenue represented 49% of total revenue versus 42% in the prior-year quarter. Gross profit increased 29% to $1.43 billion. Product gross margin was 54.6%, down 150 basis points sequentially, primarily because of higher component costs, partly offset by pricing.
NetApp’s operating income increased 61% year over year to $645 million, while operating margin expanded 6.1 percentage points to 31.9%. The company generated $503 million in operating cash flow and $401 million in free cash flow during the quarter.
NetApp returned $302 million to shareholders, including $200 million in share repurchases and $102 million in dividends, or $0.52 per share. It ended the quarter with $3.6 billion in cash and short-term investments, $2.5 billion in gross debt and a net cash position of $1.1 billion.
AI, Modernization and Customer Demand
Kurian said AI-related demand is extending beyond dedicated GPU environments into broader modernization of databases, unstructured data platforms and other infrastructure needed to support AI applications and inference workloads. NetApp closed approximately 350 AI and data lake modernization deals in the quarter, with deal sizes increasing as customers move from proof-of-concept deployments into production.
The company cited agreements with Samsung Electronics for its electronic design automation environment and AI Center of Excellence, a public sector organization deploying NetApp AFF integrated with NVIDIA SuperPOD, and an Asian neocloud provider building customer-facing AI services.
Kurian said demand was broad-based across customer sizes, geographies, industry verticals, workloads and consumption models. While certain large customers accelerated purchases for select projects, he characterized those transactions as a small part of the overall business. In some cases, customers accelerated higher-priority projects while deferring lower-priority work.
NetApp also said customers are increasingly evaluating hybrid flash systems for lower-value use cases, while all-flash remains the largest contributor to the company’s growth. Kurian said the company saw stronger-than-expected demand for both technology refreshes and new workloads.
Cloud Strategy and Acquisitions
Public cloud revenue continued to grow in the high teens excluding the additional week, driven by adoption of NetApp’s first-party and marketplace storage services. The company highlighted Amazon FSx for NetApp ONTAP and Azure NetApp Files deployments supporting VMware migrations and data modernization projects.
Kurian said NetApp plans to introduce additional AI capabilities with hyperscale cloud providers and expand offerings that connect on-premises data with cloud environments. He also said Keystone grew roughly in line with the company’s all-flash business, with minimal benefit from the additional week.
During Q1, NetApp acquired DataPelago, whose Nucleus software engine is designed for in-place data processing for AI workloads. At the start of Q2, NetApp acquired JetStream, a provider of cloud-native disaster recovery technology for VMware environments. Kurian said the acquisitions strengthen the company’s cloud and AI offerings, including its ability to support VMware migrations even when production data resides on competitors’ infrastructure.
Raised Fiscal 2027 Outlook
For the second quarter, NetApp forecast revenue of $2.1 billion, plus or minus $75 million, representing 23% year-over-year growth at the midpoint. It expects non-GAAP gross margin of 67% to 68%, operating margin of 30.9% to 31.9%, and earnings per share of $2.54 to $2.64.
For fiscal 2027, NetApp raised its revenue outlook to $7.975 billion to $8.225 billion. The $8.1 billion midpoint would represent 17% growth and is $650 million above the company’s prior guidance midpoint. The company also raised its full-year non-GAAP EPS outlook to $9.73 to $10.03, with a midpoint of $9.88, representing 22% year-over-year growth.
Jabre said the company’s revised full-year gross-margin range of 68.1% to 69.1% reflects a greater expected product mix, although its outlook for product gross margin improved slightly from its forecast 90 days earlier. NetApp expects full-year operating margin of 30.3% to 31.3% as it continues investing in AI solutions while maintaining what Jabre described as disciplined expense management.
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.
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