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What went well
- Strong growth in all-flash array business, with 21% year-over-year growth and an annualized revenue run rate of $3.4 billion, driven by both new customer acquisitions and upgrades from existing customers.
- NetApp's broadened and differentiated product portfolio, including capacity flash and performance flash products across all price points, is capturing market share and outperforming integrated system vendors.
- Positioned to capitalize on the growing enterprise AI demand, with unique capabilities in AI workloads, data preparation, and hybrid cloud pipelines, placing NetApp in the early innings of a large AI-driven storage opportunity.
What went wrong
- NetApp's AI storage revenue is still in early stages, with the CEO acknowledging that they are "in the early innings of the AI landscape from a storage perspective," suggesting that significant revenue impact may not materialize in the near term.
- Despite strong growth in all-flash array sales (up 21% this quarter), the penetration of flash into NetApp's installed base has remained steady quarter-over-quarter, indicating challenges in increasing adoption among existing customers.
- The competitive landscape in AI storage is intensifying, with competitors like Vast Data and WEKA being mentioned by analysts, which may affect NetApp's ability to capture market share despite their confidence in their capability set.
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Operating cash flow decreased 25% year-over-year in Q1 due to higher incentive compensation payouts and payments for strategic SSD purchases; how do you plan to manage cash flow going forward to ensure sufficient liquidity while maintaining these investments?
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Despite a strong revenue performance, free cash flow declined 28% year-over-year, yet you returned $507 million to shareholders through share repurchases and dividends; is this level of shareholder returns sustainable given the decrease in free cash flow?
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You aim to achieve public cloud gross margins of 75%-80%, but haven't disclosed current margin levels; what are your current public cloud gross margins, and what challenges do you anticipate in reaching your long-term targets?
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With the CFO announcing his retirement amid an uncertain macroeconomic environment, how are you ensuring that this leadership transition won't disrupt your strategic plans and operational execution?
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Given that flash storage constitutes only about 40% of your installed base while hard drives still dominate, what strategies are you employing to accelerate the migration to flash, and how do you address potential customer hesitation due to economic uncertainties?
Q2 2025 Earnings Call
- Issued Period: Q2 2025
- Guided Period: Q2 2025 and FY 2025
- Guidance:
- Revenue: $1.55 billion to $1.715 billion (5% growth year-over-year at midpoint) .
- Consolidated Gross Margin: 72% .
- Operating Margin: Approximately 28% .
- Net Interest Income: Approximately $15 million .
- Tax Rate: 20% to 21% .
- Earnings Per Share (EPS): $1.73 to $1.83 .
Q1 2025 Earnings Call
- Issued Period: Q1 2025
- Guided Period: Q2 2025 and FY 2025
- Guidance:
- Full Year Fiscal Year 2025 Guidance:
- Revenue: $6.48 billion to $6.68 billion (5% year-over-year growth at midpoint) .
- Consolidated Gross Margin: 71% to 72% .
- Operating Margin: 27% to 28% .
- Net Interest Income: $50 million .
- Tax Rate: 20% to 21% .
- EPS: $7 to $7.20 (10% year-over-year growth at midpoint) .
- Second Quarter Fiscal Year 2025 Guidance:
- Revenue: $1.55 billion to $1.715 billion (5% growth year-over-year at midpoint) .
- Consolidated Gross Margin: 72% .
- Operating Margin: Approximately 28% .
- Net Interest Income: Approximately $15 million .
- Tax Rate: 20% to 21% .
- EPS: $1.73 to $1.83 .
- Full Year Fiscal Year 2025 Guidance:
Q4 2024 Earnings Call
- Issued Period: Q4 2024
- Guided Period: Q1 2025 and FY 2025
- Guidance:
- Fiscal Year 2025 Guidance:
- Total Revenue: $6.45 billion to $6.65 billion (4.5% year-over-year growth at midpoint) .
- Consolidated Gross Margin: 71% to 72% .
- Operating Margin: 27% to 28% .
- EPS: $6.80 to $7.00 .
- Tax Rate: 21% to 22% .
- Operating Cash Flow: Expected to move in line with net income, with some quarterly variance .
- Shareholder Returns: Up to 100% of free cash flow through share buybacks and dividends. Quarterly dividend increased to $0.52 per share .
- Share Count Reduction: 1% to 2% .
- Q1 2025 Guidance:
- Revenue: $1.455 billion to $1.605 billion (7% year-over-year growth at midpoint) .
- Consolidated Gross Margin: 72% .
- Operating Margin: Approximately 25% .
- EPS: $1.40 to $1.50 .
- Fiscal Year 2025 Guidance:
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2024
- Guidance:
- Fiscal Year 2024 Guidance:
- Consolidated Gross Margin: 71% to 72% .
- Product Gross Margin: Approximately 60% .
- Operating Margin: Approximately 27% .
- EPS: $6.40 to $6.50 .
- Net Interest Income: Approximately $40 million .
- Share Count: 212 million shares .
- Tax Rate: 20% .
- Operating Cash Flow: At least $1.3 billion for the full year .
- Q4 2024 Guidance:
- Revenue: $1.585 billion to $1.735 billion (5% year-over-year increase at midpoint) .
- Consolidated Gross Margin: 71% .
- Product Gross Margin: Approximately 60% .
- Operating Margin: 27% to 28% .
- EPS: $1.73 to $1.83 .
- Tax Rate: 20% .
- Inventory Turns: 8x to 10x due to purchase commitments for NAND for fiscal '25 demand impacting cash flow and balance sheet in Q4 .
- Fiscal Year 2024 Guidance:
Recent developments and announcements about NTAP.
Financial Reporting
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Net Revenues: The company reported net revenues of $1.66 billion, marking a 6% increase compared to the same quarter in the previous year .
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All-Flash Array Revenue: NetApp achieved a record all-flash array annualized net revenue run rate of $3.8 billion, which is a 19% increase year-over-year .
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Cloud Storage Services: Revenue from first-party and marketplace cloud storage services grew by approximately 43% year-over-year .
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Operating Margins: The GAAP operating margin for the quarter was 21%, while the non-GAAP operating margin reached a record 29% .
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Earnings Per Share: GAAP net income per share was $1.42, and non-GAAP net income per share was $1.87, both showing significant growth from the previous year .
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Shareholder Returns: NetApp returned $406 million to stockholders through share repurchases and cash dividends during the quarter .
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Cash and Investments: The company reported cash, cash equivalents, and investments totaling $2.22 billion at the end of the quarter .
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Cash Flow: Cash provided by operations was $105 million, compared to $135 million in the same quarter of the previous year .
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Hybrid and Public Cloud Segments: The Hybrid Cloud segment revenue was $1.49 billion, and the Public Cloud segment revenue was $168 million, both showing growth compared to the previous year .
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Financial Guidance: For the third quarter of fiscal year 2025, NetApp expects net revenues to be between $1.610 billion and $1.760 billion, with GAAP earnings per share ranging from $1.41 to $1.51 and non-GAAP earnings per share from $1.85 to $1.95 .
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Full Fiscal Year 2025 Outlook: The company projects net revenues between $6.540 billion and $6.740 billion, with GAAP earnings per share between $5.48 and $5.68, and non-GAAP earnings per share between $7.20 and $7.40 .
Earnings Report
NetApp's Second Quarter Fiscal Year 2025 Earnings Results
NetApp has released its financial results for the second quarter of fiscal year 2025, which ended on October 25, 2024. Here are the key highlights:
Significant Trends and Outlook
These results reflect NetApp's strong performance in the data infrastructure market, driven by growth in all-flash storage and cloud services, as well as effective cost management strategies. The company continues to focus on delivering value to its customers and shareholders through innovative solutions and strategic investments .