Q2 2024 Summary
Published Jan 4, 2025, 1:15 AM UTCInitial Price$79.47July 26, 2023
Final Price$71.43October 26, 2023
Price Change$-8.04
% Change-10.12%
- NetApp's strong momentum in their all-flash C-Series portfolio is driving growth and helping them capture market share, even in a soft IT spending environment. The expansion of their total addressable market with all-SAN array configurations and high-performance flash products has led to an increase in guidance for the full year.
- NetApp is well-positioned to capitalize on the shift from hard disk drives to flash storage, especially in general-purpose applications, which is a significant portion (about 30% to 40%) of the hard drive market. They are in the early stages of this migration and feel confident about their flash portfolio's ability to attack this market.
- NetApp has a competitive advantage with their ability to offer a single solution with common automation, administration, and lifecycle management for both file and block storage, which no other vendor can provide. This unique offering has enabled them to win large deals, such as a $16 million deal with their C-Series, by providing performance and simplification at scale and reaching new customers with competitive price points.
- Demand remains soft and mixed, with large enterprises still soft, and tech and service provider spending has not come back. There's weakness in Europe, and the public sector continues to be a work in progress due to budget negotiations resulting in softer budgets for certain agencies.
- Generative AI adoption will take time to become a significant demand driver, as customers are cautious due to regulations and concerns about ethics, privacy, and cybersecurity. The momentum in AI is expected to build over multiple years, delaying potential revenue growth from this area. ,
- Management anticipates lower product gross margins in the second half, guiding a range of 50% to 60%, down from 61% in Q2. They may need to be flexible with pricing in a soft demand environment to maintain competitiveness, which could impact margins.