NTAP Q4 2025: 150 AI Wins vs Q1 Revenue Down 1%
- Accelerating AI Adoption: Executives highlighted that the company secured 150 AI infrastructure wins in the quarter, reflecting strong customer momentum and a competitive position in the expanding enterprise AI market.
- Improving Margin Profile: Management expects gradual improvement in product and cloud gross margins—driven by margin-enhancing product mix and disciplined cost management—which supports robust operating leverage going forward.
- Market Leadership in All-Flash and Hybrid Cloud: The company continues to gain market share in its all-flash arrays and hybrid cloud segments, demonstrating strong competitive differentiation and positioning for further revenue expansion.
- Macro uncertainties in key regions: Executives noted concerns over spending in the U.S. public sector and parts of Europe/EMEA, with customers showing caution due to geopolitical and economic uncertainties, which could delay deal closures and impact overall revenue growth.
- Tariff and input cost headwinds: The discussion highlighted that tariffs are estimated to impose a 40–60 basis point drag on gross margins, indicating that rising input costs and tariff uncertainties may pressure profitability.
- Near-term guidance weakness and cautious outlook: Q1 guidance reflects a slight revenue decline (approximately –1% year-over-year), suggesting that despite longer-term growth prospects such as AI, near-term product and capital spending might be subdued due to execution and macro challenges.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | 3.8% increase ( ) | Total revenue increased from $1,668 million to $1,732 million due to overall growth across business segments, building on prior period performance driven by stronger product and service demand compared to Q4 2024. |
Hybrid Cloud Revenue | Increase from $1,516 million to $1,568 million ( ) | Hybrid Cloud revenue grew by approximately $52 million as robust demand continued in hybrid deployments, reflecting improved product offerings and sales momentum that were evident in the previous quarter. |
Public Cloud Revenue | 8% increase ( ) | Public Cloud revenue rose from $152 million to $164 million driven by increased customer demand and expanded first-party and marketplace services, following the upward trend observed in earlier periods. |
Americas Revenue | Increase from $848 million to $889 million ( ) | Americas revenue increased by about $41 million as domestic sales of products and services improved, continuing the trend of growth seen in previous periods with stronger market performance in the region. |
EMEA Revenue | Increase from $566 million to $589 million ( ) | EMEA revenue grew modestly by approximately $23 million indicating steady regional expansion and market stability from the previous period. |
APAC Revenue | Remained steady at $254 million ( ) | APAC revenue remained unchanged suggesting market stability in the region and no significant shifts from the last period’s performance. |
Cash and Cash Equivalents | 44% increase ( ) | Cash and cash equivalents surged from $1,903 million to $2,742 million, reflecting significantly improved operational cash flows and effective financing or liquidity management compared to the previous period. |
Stockholders’ Equity | 9% decrease ( ) | Stockholders’ equity declined from $1,146 million to $1,040 million likely due to cash outflows such as dividends and share repurchases, which outweighed net income contributions and led to adjustments from previous period levels. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenue ($USD Billions) | FY 2026 | no prior guidance | $6.625 - $6.875 (Midpoint: $6.75, 3% YoY growth; 4% YoY growth excluding Spot business) | no prior guidance |
Consolidated Gross Margin (%) | FY 2026 | no prior guidance | 71% - 72% | no prior guidance |
Operating Margin (%) | FY 2026 | no prior guidance | 28.8% - 29.8% | no prior guidance |
Other Income and Expenses ($USD Millions) | FY 2026 | no prior guidance | -$10 | no prior guidance |
Tax Rate (%) | FY 2026 | no prior guidance | 20% - 21% | no prior guidance |
EPS ($USD) | FY 2026 | no prior guidance | $7.60 - $7.90 (Midpoint: $7.75) | no prior guidance |
Operating Cash Flow | FY 2026 | no prior guidance | Expected to move in line with net income | no prior guidance |
Shareholder Returns | FY 2026 | no prior guidance | Up to 100% of free cash flow in dividends and buybacks; share count reduction by low single-digit percentage points YoY | no prior guidance |
Revenue ($USD Billions) | Q1 2026 | no prior guidance | $1.455 - $1.605 (Midpoint: $1.53; -1% YoY decline; 1% YoY growth excluding Spot business) | no prior guidance |
Consolidated Gross Margin (%) | Q1 2026 | no prior guidance | 71% - 72% | no prior guidance |
Operating Margin (%) | Q1 2026 | no prior guidance | 25% - 26% | no prior guidance |
EPS ($USD) | Q1 2026 | no prior guidance | $1.48 - $1.58 (Midpoint: $1.53) | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q4 2025 | $1.65B - $1.8B | $1.732B | Met |
Revenue | FY 2025 | $6.49B - $6.64B | $6.572B (1,541+ 1,658+ 1,641+ 1,732) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Enterprise AI Adoption | Q1 called it “early innings” with focus on data preparation and demand from large enterprises ( ); Q3 described initial stages with centers of excellence and early wins ( ) | Q4 emphasized a robust transition from PoCs to production deployments, record deal wins, and fivefold year‐over‐year growth ( ) | Consistently positive momentum with evolving sentiment from early-stage exploration to more mature, production‐focused and winning outcomes. |
Competitive AI Storage Dynamics | Q1 mentioned positioning in Gen AI storage and market share gains, while Q3 highlighted differentiation through software and hybrid cloud integration ( ; ) | Q4 detailed clear technical advantages, hybrid cloud integration, and notable market share gains and customer wins ( ) | Steady messaging with an increasingly robust technical narrative and stronger market validation in Q4. |
All-Flash Array Growth | Q1 reported strong 21% year-over‐year growth driven by new customers and installed base refreshes ( ); Q3 noted 10% growth with impact from delayed deals ( ) | Q4 reported 14% year‐over‐year growth with record revenue run rates and significant market share gains ( ) | Fluctuating growth rates reflecting execution challenges in Q3, but a recovery and improved performance in Q4. |
Differentiated Product Portfolio | Q1 highlighted a broad portfolio with new product launches and innovation ( ); Q3 focused on a recent portfolio refresh and strong customer wins ( ) | Q4 emphasized a unified data architecture and AI‐ready integrated solutions with extended partnerships ( ) | Steady innovation across periods, with an expanding and increasingly integrated product story in Q4. |
Hybrid Cloud Expansion | Q1 stressed hybrid cloud revenue growth and new product introductions ( ); Q3 discussed increased public cloud services and integration efforts ( ) | Q4 leveraged strong all‐flash array and block storage performance alongside AI integration to drive hybrid growth ( ) | Consistent focus on hybrid strategies, with Q4 showing enhanced market share and integration of AI as a differentiator. |
Storage as a Service (Keystone) | Q1 described robust growth (over 60% YoY) and strategic relevance ( ); Q3 noted nearly 60% YoY expansion and strong as‐a‐service momentum ( ) | Q4 reported 54% YoY growth in Keystone’s TCV with significant contributions to professional services ( ) | No decline observed—steady, strong growth and continued strategic importance across all periods. |
Macro-Economic and Geopolitical Uncertainty | Q1 acknowledged geopolitical risks, potential interest rate changes, and mixed regional performance ( ); Q3 revealed caution in European and U.S. public sector markets affecting deal timing ( ) | Q4 underscored global macro uncertainties including slowing growth, inflation concerns, and specific regional challenges in EMEA and U.S. public sector ( ) | Recurring caution with persistent macro and geopolitical headwinds; sentiment remains cautious with some regional differences. |
Margin Improvement vs Tariff and Input Cost Pressures | Q1 focused on strategic NAND purchases and margin leverage despite slight inventory impacts ( ); Q3 highlighted strong operating and public cloud margin improvements with effective expense control ( ) | Q4 expects gradual product margin improvement with a moderate 40–60 basis point impact from tariffs, managed via a diverse supply chain ( ) | Consistent efforts to improve margins and manage cost pressures; Q4’s guidance continues this disciplined approach. |
Sales Execution Challenges and Deal Slippage | Q1 did not explicitly mention execution issues; Q3 detailed sporadic deal slippage due to procurement delays and market caution in Europe ( ) | Q4 acknowledged prior quarter deal slippage with strong sequential recovery and improved closing discipline ( ) | Earlier execution challenges were highlighted in Q3 but appear to have been effectively addressed and recovered by Q4. |
Working Capital Constraints and Free Cash Flow Pressures | Q1 reported declines in cash flow due to higher incentive compensations and strategic SSD investments, while Q3 noted lower operating cash flow due to inventory pressures ( ; ) | Q4 indicated lower operating cash flow and free cash flow due to working capital changes, including higher variable compensation and tax outflows ( ) | Consistent headwinds on free cash flow and working capital across periods, reflecting ongoing investment and operational challenges. |
Near-Term Revenue Guidance and Cautious Outlook | Q1 raised revenue guidance with 5% YoY growth yet flagged geopolitical and budget uncertainties ( ); Q3 provided guidance tempered by FX impacts and divestiture effects, noting a cautious tone ( ) | Q4 projected Q1 FY26 revenue in a tight range with a slight decline or modest growth (1% growth excluding divested business) amid heightened macroeconomic and geopolitical caution ( ) | A consistently cautious near-term outlook influenced by global uncertainties and market-specific pressures, although long-term growth remains positive. |
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Guidance & Margins
Q: How will margins progress this FY?
A: Management expects FY '26 operating margins of 28.8–29.8% with gradual product margin improvement after a flat Q1, accounting for higher input costs and the Spot divestiture impact. -
AI Advantage
Q: What gives you an edge in AI?
A: They highlighted robust technical strengths—integrated high‐performance all‐flash systems and reference architectures—that helped secure 150 AI wins this quarter, reinforcing their competitive position. -
Cloud Revenue
Q: How did Public Cloud perform ex-Spot?
A: Public Cloud revenue, excluding Spot, grew 22% YoY in Q4 and 16% YoY for the full year, showing strong cloud momentum amid transition challenges. -
Tariff Impact
Q: What is the tariff impact on margins?
A: Tariffs exert roughly 40–60 basis points of margin drag, though a diversified supply chain and semiconductor exemptions effectively mitigate the negative effects. -
Keystone Growth
Q: How is Keystone progressing?
A: Keystone’s TCV reached $224 million, up 54% YoY, reflecting strong customer adoption as shifts in CAPEX versus OpEX continue. -
FX Impact
Q: What was the FX impact this quarter?
A: FX effects were minimal, remaining below 1% and not materially affecting quarterly performance. -
Flash vs HDD Trend
Q: How are all-flash and HDD trends evolving?
A: All-flash arrays are steadily capturing greater market share while legacy HDD segments decline as customers modernize their storage mix. -
GenAI and Data Growth
Q: How will GenAI drive storage demand?
A: Accelerated GenAI adoption is expected to spur significant data growth from richer multimodal datasets and increased inferencing needs, though impacts are in early stages. -
Broadcom Impact
Q: How are VMware licensing changes affecting NetApp?
A: Management sees minimal disruption from the Broadcom acquisition, continuing to expand alternative hypervisor support and customer choice. -
Market Uncertainty
Q: How is macro uncertainty affecting deals?
A: Geopolitical and economic uncertainties, notably in U.S. public sector and EMEA, are causing cautious deal pacing and longer procurement cycles. -
Section 232 & Semiconductors
Q: Impact from Section 232 reviews on semiconductors?
A: Operating under a semiconductor exemption, management does not expect material disruptions from Section 232 reviews. -
AI Win Rate
Q: Has the AI win rate improved?
A: The number of AI wins increased from around 100 to 150, demonstrating strong market confidence and effective sales execution. -
Long-term AI Storage
Q: Will AI drive long-term storage growth?
A: Management believes enterprise AI adoption, especially for inferencing applications, will boost storage investments significantly over the next 12–18 months.