Adjustments for Non-Cash Items [USD, Millions]

Stock-Based Compensation [USD, Millions]

Changes in Working Capital [USD, Millions]

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from / Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Millions]

Net Change in Cash [USD, Millions]

cc06e95fd649e8fb980b8a8a4bfcbe0a9adc6721b4fbe95083393f2ab1eb42ac

| Metric [USD Million] | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 |
|----------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| Americas             | **821**  **[0000950170-23-005545_ntap-20230127.htm:24]**  | N/A     | **754**  **[0000950170-23-045061_ntap-20230728.htm:20]**  | **789**  **[0000950170-23-067033_ntap-20231027.htm:23]**  | **802**  **[0000950170-24-023115_ntap-20240126.htm:24]**  | N/A     | N/A     | **862**  **[0000950170-24-130551_ntap-20241025.htm:21]**  |
| EMEA                 | **491**  **[0000950170-23-005545_ntap-20230127.htm:24]**  | N/A     | **446**  **[0000950170-23-045061_ntap-20230728.htm:20]**  | **525**  **[0000950170-23-067033_ntap-20231027.htm:23]**  | **567**  **[0000950170-24-023115_ntap-20240126.htm:24]**  | N/A     | N/A     | **543**  **[0000950170-24-130551_ntap-20241025.htm:21]**  |
| APAC                 | **214**  **[0000950170-23-005545_ntap-20230127.htm:24]**  | N/A     | **232**  **[0000950170-23-045061_ntap-20230728.htm:20]**  | **248**  **[0000950170-23-067033_ntap-20231027.htm:23]**  | **237**  **[0000950170-24-023115_ntap-20240126.htm:24]**  | N/A     | N/A     | **253**  **[0000950170-24-130551_ntap-20241025.htm:21]**  |
| Total Revenue        | **1,526**  **[0000950170-23-005545_ntap-20230127.htm:24]**  | N/A     | **1,432**  **[0000950170-23-045061_ntap-20230728.htm:20]**  | **1,562**  **[0000950170-23-067033_ntap-20231027.htm:23]**  | **1,606**  **[0000950170-24-023115_ntap-20240126.htm:24]**  | N/A     | N/A     | **1,658**  **[0000950170-24-130551_ntap-20241025.htm:21]**  |

7fb031a6ff1f3cd7b10a928349ca63bb4cea5be31d66fe5f0b74aed8c3256c97

| Metric (USD Millions) | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 |
|-----------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| Hybrid Cloud Segment  | **1,376**  **[0000950170-23-003745_ntap-ex99_1.htm:10]**  | **1,430**  **[0000950170-23-025324_ntap-ex99_1.htm:1]**  | **1,278**  **[0000950170-23-044130_ntap-ex99_1.htm:10]**  | **1,410**  **[0000950170-23-066400_ntap-ex99_1.htm:11]**  | **1,455**  **[0000950170-24-023060_ntap-ex99_1.htm:11]**  | **1,520**  **[0000950170-24-066567_ntap-ex99_1.htm:14]**  | **1,380**  **[0000950170-24-101383_ntap-ex99_1.htm:0]**  | **1,490**  **[0000950170-24-129714_ntap-ex99_1.htm:0]**  |
| Public Cloud Segment  | **150**  **[0000950170-23-003745_ntap-ex99_1.htm:10]**    | **151**  **[0000950170-23-025324_ntap-ex99_1.htm:1]**    | **154**  **[0000950170-23-044130_ntap-ex99_1.htm:10]**    | **154**  **[0000950170-23-066400_ntap-ex99_1.htm:11]**    | **151**  **[0000950170-24-023060_ntap-ex99_1.htm:11]**    | **152**  **[0000950170-24-066567_ntap-ex99_1.htm:14]**    | **159**  **[0000950170-24-101383_ntap-ex99_1.htm:0]**    | **168**  **[0000950170-24-129714_ntap-ex99_1.htm:0]**    |
| Product Revenue       | **682**  **[0000950170-23-003745_ntap-ex99_1.htm:10]**    | **744**  **[0000950170-23-025324_ntap-ex99_1.htm:10]**    | **590**  **[0000950170-23-044130_ntap-ex99_1.htm:10]**    | N/A             | N/A             | N/A             | **669**  **[NTAP_3400052_4]**    | N/A             |
| Support Revenue       | **616**  **[0000950170-23-003745_ntap-ex99_1.htm:10]**    | **598**  **[0000950170-23-025324_ntap-ex99_1.htm:10]**    | **611**  **[0000950170-23-044130_ntap-ex99_1.htm:10]**    | N/A             | N/A             | N/A             | **631**  **[0000950170-24-101383_ntap-ex99_1.htm:0]** **[NTAP_3400052_4]** **[0000950170-24-101383_ntap-ex99_1.htm:12]** **[0000950170-24-101408_ntap-20240726.htm:22]** **[0000950170-24-101408_ntap-20240726.htm:23]**    | N/A             |
| Professional and Other Services Revenue | **78**  **[0000950170-23-003745_ntap-ex99_1.htm:10]**  | **88**  **[0000950170-23-025324_ntap-ex99_1.htm:10]**  | **77**  **[0000950170-23-044130_ntap-ex99_1.htm:10]**  | N/A | N/A | N/A | **82**  **[0000950170-24-101383_ntap-ex99_1.htm:0]** **[NTAP_3400052_4]** **[0000950170-24-101383_ntap-ex99_1.htm:12]** **[0000950170-24-101408_ntap-20240726.htm:22]** **[0000950170-24-101408_ntap-20240726.htm:23]**  | N/A |
| Total Net Revenues    | **1,526**  **[0000950170-23-003745_ntap-ex99_1.htm:10]**  | **1,580**  **[0000950170-23-025324_ntap-ex99_1.htm:1]**  | **1,432**  **[0000950170-23-044130_ntap-ex99_1.htm:10]**  | **1,560**  **[0000950170-23-066400_ntap-ex99_1.htm:0]**  | **1,606**  **[0000950170-24-023060_ntap-ex99_1.htm:11]**  | **1,670**  **[0000950170-24-066567_ntap-ex99_1.htm:0]**  | **1,539**  **[0000950170-24-101383_ntap-ex99_1.htm:0]**  | **1,660**  **[0000950170-24-129714_ntap-ex99_1.htm:13]**  |

8f766a5fe234dd7be3998a1665fba9169b72e9a2c3b2a9813c58eb146d7b5538

43ac0dd208fdfb9099c346d664a0a8718dd9738eff824e0107b8ab7840fa3b95

1. 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?

2. 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?

3. 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?

4. 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?

5. 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?

0d85ef835e1fff3dbc9acde662803674fc6977cc9861f15b6ca9f2b88da73fa5

Hybrid Cloud

- Product Revenues

- Support Revenues

- Professional Services

Public Cloud

Product Revenues

- Hardware Component

- Software Component

Services Revenues

- Software Maintenance

- Hardware Maintenance

Total Revenue

e7e58dd9bfb621d60c84b6a1a1f009d8742adf8337e2823bebaecd1501d9dc17

909ea32f1b2fda79be0f5eae325d9f7b5bdf555fec85fe6aa2873e7de3c5e9a6

e0b29c0cba47b415784ca14ff279d0799ff3a77149959e2c27b31979dceea283

Americas

- Sales to customers inside the U.S.

EMEA

APAC

64af340856f98310534ea25ee7781fda7b6bf379a1377c7478c8877b6f898562

### 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)  **[NTAP_3400052_5]** .
  - **Consolidated Gross Margin**: 72%  **[NTAP_3400052_5]** .
  - **Operating Margin**: Approximately 28%  **[NTAP_3400052_5]** .
  - **Net Interest Income**: Approximately $15 million  **[NTAP_3400052_5]** .
  - **Tax Rate**: 20% to 21%  **[NTAP_3400052_5]** .
  - **Earnings Per Share (EPS)**: $1.73 to $1.83  **[NTAP_3400052_5]** .

### 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)  **[NTAP_3400052_5]** .
    - **Consolidated Gross Margin**: 71% to 72%  **[NTAP_3400052_5]** .
    - **Operating Margin**: 27% to 28%  **[NTAP_3400052_5]** .
    - **Net Interest Income**: $50 million  **[NTAP_3400052_5]** .
    - **Tax Rate**: 20% to 21%  **[NTAP_3400052_5]** .
    - **EPS**: $7 to $7.20 (10% year-over-year growth at midpoint)  **[NTAP_3400052_5]** .
  - **Second Quarter Fiscal Year 2025 Guidance**:
    - **Revenue**: $1.55 billion to $1.715 billion (5% growth year-over-year at midpoint)  **[NTAP_3400052_5]** .
    - **Consolidated Gross Margin**: 72%  **[NTAP_3400052_5]** .
    - **Operating Margin**: Approximately 28%  **[NTAP_3400052_5]** .
    - **Net Interest Income**: Approximately $15 million  **[NTAP_3400052_5]** .
    - **Tax Rate**: 20% to 21%  **[NTAP_3400052_5]** .
    - **EPS**: $1.73 to $1.83  **[NTAP_3400052_5]** .

### 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)  **[NTAP_3391225_7]** .
    - **Consolidated Gross Margin**: 71% to 72%  **[NTAP_3391225_7]** .
    - **Operating Margin**: 27% to 28%  **[NTAP_3391225_7]** .
    - **EPS**: $6.80 to $7.00  **[NTAP_3391225_7]** .
    - **Tax Rate**: 21% to 22%  **[NTAP_3391225_7]** .
    - **Operating Cash Flow**: Expected to move in line with net income, with some quarterly variance  **[NTAP_3391225_7]** .
    - **Shareholder Returns**: Up to 100% of free cash flow through share buybacks and dividends. Quarterly dividend increased to $0.52 per share  **[NTAP_3391225_7]** .
    - **Share Count Reduction**: 1% to 2%  **[NTAP_3391225_7]** .
  - **Q1 2025 Guidance**:
    - **Revenue**: $1.455 billion to $1.605 billion (7% year-over-year growth at midpoint)  **[NTAP_3391225_7]** .
    - **Consolidated Gross Margin**: 72%  **[NTAP_3391225_7]** .
    - **Operating Margin**: Approximately 25%  **[NTAP_3391225_7]** .
    - **EPS**: $1.40 to $1.50  **[NTAP_3391225_7]** .

### 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%  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Product Gross Margin**: Approximately 60%  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Operating Margin**: Approximately 27%  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **EPS**: $6.40 to $6.50  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Net Interest Income**: Approximately $40 million  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Share Count**: 212 million shares  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Tax Rate**: 20%  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Operating Cash Flow**: At least $1.3 billion for the full year  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
  - **Q4 2024 Guidance**:
    - **Revenue**: $1.585 billion to $1.735 billion (5% year-over-year increase at midpoint)  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Consolidated Gross Margin**: 71%  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Product Gross Margin**: Approximately 60%  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Operating Margin**: 27% to 28%  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **EPS**: $1.73 to $1.83  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Tax Rate**: 20%  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .
    - **Inventory Turns**: 8x to 10x due to purchase commitments for NAND for fiscal '25 demand impacting cash flow and balance sheet in Q4  **[NTAP_3375989_6]** **[NTAP_3375989_5]** .

c3caab6678f66c2bedc5e74268d1c561c59f61c9c96350af52f56d388f201514

| Program Details          | Program 1       |
|--------------------------|-----------------|
| Approval Date            | **May 13, 2003**  **[0000950170-24-130551_ntap-20241025.htm:14]**  |
| End Date/Duration        | N/A             |
| Total Additional Amount  | **$1.0 billion**  **[0000950170-24-130551_ntap-20241025.htm:14]**  |
| Remaining Authorization  | **$0.8 billion**  **[0000950170-24-130551_ntap-20241025.htm:37]**  |
| Details                  | The program may be suspended or discontinued at any time.  **[0000950170-24-130551_ntap-20241025.htm:14]**  |

684b286ea423e8526a51a0a9c672a4561ee70cc923ac0443dcc23a4af3199b8a

**Quarterly guidance for Q2 2025:**
- **Revenue**: $1.55 billion to $1.715 billion  **[NTAP_3400052_5]**  (no change from $1.55 billion to $1.715 billion   )
- **Consolidated Gross Margin**: 72%  **[NTAP_3400052_5]**  (no change from 72%   )
- **Operating Margin**: Approximately 28%  **[NTAP_3400052_5]**  (no change from approximately 28%   )
- **Net Interest Income**: Approximately $15 million  **[NTAP_3400052_5]**  (no change from approximately $15 million   )
- **Tax Rate**: 20% to 21%  **[NTAP_3400052_5]**  (no change from 20% to 21%   )
- **EPS**: $1.73 to $1.83  **[NTAP_3400052_5]**  (no change from $1.73 to $1.83   )

d04e4739130aa06f790bbdf902a70489e34472cb20293558df55f90b9bca177f

| Name                  | Start Date | End Date | Reason for Change |
|-----------------------|------------|----------|-------------------|
| Deloitte & Touche LLP | 1995  **[0000950170-24-071327_ntap-20240426.htm:129]**  | Present  | Current auditor   |

5401a63dd1b4831eaac6c479e538eac377ac580da1db79c484d2ffacd7f0a83d

8862456020858749cb8a59e1fe1d2e3401be47e65b3e32f2587d19dd8b51eebf

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

- Total Revenue: $1,658 million (+6% YoY)  **[0000950170-24-130551_ntap-20241025.htm:18]** **[0000950170-23-067033_ntap-20231027.htm:21]**   
- Hybrid Cloud: $1,490 million (+6% YoY)  **[0000950170-24-130551_ntap-20241025.htm:18]** **[0000950170-23-067033_ntap-20231027.htm:21]**   
- Public Cloud: $168 million (+9% YoY)  **[0000950170-24-130551_ntap-20241025.htm:18]** **[0000950170-23-067033_ntap-20231027.htm:21]**   
- Americas: $862 million (+9% YoY)  **[0000950170-24-130551_ntap-20241025.htm:21]** **[0000950170-23-067033_ntap-20231027.htm:23]**   
- Net Income: $299 million (**+28% YoY**)  **[0000950170-24-130551_ntap-20241025.htm:2]** **[0000950170-23-067033_ntap-20231027.htm:2]**   
- EPS (Diluted): $1.42 (**+29% YoY**)  **[0000950170-24-130551_ntap-20241025.htm:2]** **[0000950170-23-067033_ntap-20231027.htm:2]**   

f7e6c228e9b07917e2d917d74dad23797b824b77403ef6bee0f5e96f0a28f39a

7e5ddd7c47307593668c812a6d6de701d7a8282a7f69ed99ec750b65cbf9c31b

| Year  | Amount Due (in millions) | Debt Type              | Interest Rate (%) | % of Total Debt                              |
|-------|--------------------------|------------------------|-------------------|---------------------------------------------|
| 2025  | 750                      | 1.875% Senior Notes    | 1.875            | 37.5% = (750 / 2000) * 100 **[0000950170-24-130551_ntap-20241025.htm:11]** **[0000950170-24-130551_ntap-20241025.htm:11]**  |
| 2027  | 550                      | 2.375% Senior Notes    | 2.375            | 27.5% = (550 / 2000) * 100 **[0000950170-24-130551_ntap-20241025.htm:11]** **[0000950170-24-130551_ntap-20241025.htm:11]**  |
| 2030  | 700                      | 2.70% Senior Notes     | 2.70             | 35.0% = (700 / 2000) * 100 **[0000950170-24-130551_ntap-20241025.htm:11]** **[0000950170-24-130551_ntap-20241025.htm:11]**  |

22d65d1e807d76d5126e8459babc679d9d138decbbf8ce00d922675bc64c4faa

1. **AI Opportunities**  
   **Q:** When will AI significantly impact your business?  
   **A:** We are seeing the early stages of preparing data infrastructure for AI, with over **100 wins** across multiple verticals serving as leading indicators of future large-scale deployments.  **[NTAP_3409789_8]** **[NTAP_3409789_22]**  These are primarily on-premises wins in AI centers of excellence and have not yet reached large scale.  **[NTAP_3409789_8]** **[NTAP_3409789_22]**  We expect AI inferencing to become a bigger factor in the **second half of next year**, so the growth opportunity is still ahead of us.  **[NTAP_3409789_8]** **[NTAP_3409789_22]** 

2. **All-Flash Array Growth**  
   **Q:** How sustainable is your all-flash array growth?  
   **A:** We've had **four consecutive quarters** of high teens or over **20% revenue growth** in all-flash arrays, clearly outpacing the market and competitors.  **[NTAP_3409789_9]**  This success is due to our alignment with customer spending areas and a unique value proposition, including a single operating system and advanced hybrid multi-cloud capabilities.  **[NTAP_3409789_9]**  We're focused on executing in the go-to-market while competitors are distracted, giving us confidence in the durability of our leadership position and the growth opportunity ahead.  **[NTAP_3409789_9]** 

3. **Cloud Revenue Growth**  
   **Q:** How is your public cloud revenue performing?  
   **A:** Our first-party and marketplace cloud storage services grew by **43% year-over-year**, significantly boosting public cloud revenue.  **[NTAP_3409789_20]**  We expect to return to double-digit growth in the second half of this fiscal year  **[NTAP_3409789_18]** **[NTAP_3409789_20]** , driven by strong partnerships with hyperscalers and shifting customers from subscription to consumption models, which is improving margins.  **[NTAP_3409789_20]** 

4. **Prebuying Memory Inventory**  
   **Q:** What's the impact of prebuying memory on inventory?  
   **A:** The increase in inventories is largely due to prebuys of memory negotiated at the end of '24 and '25, covering the majority of our expected demand in fiscal '25.  **[NTAP_3409789_10]**  We're not planning further prebuys and are starting to see some softening in the NAND market.  **[NTAP_3409789_10]**  We'll monitor the market but don't expect additional prebuys this fiscal year.  **[NTAP_3409789_10]** 

5. **Public Sector Outlook**  
   **Q:** What's the outlook for your public sector business?  
   **A:** Our U.S. public sector business performed well despite the continuing resolution, supported by long-term projects with program spending approved across annual budget cycles.  **[NTAP_3409789_11]**  We also saw strong performance globally in the public sector segment.  **[NTAP_3409789_11]**  With the new administration, we anticipate that alignment across legislature and executive may lead to policies being implemented quickly.  **[NTAP_3409789_11]** 

6. **Impact of VMware Acquisition**  
   **Q:** Any impact from Broadcom's VMware acquisition?  
   **A:** We haven't seen any material impact yet.  **[NTAP_3409789_12]**  Customers are exploring three paths: optimizing existing VMware estates, moving to new architectures with alternative hypervisors where we benefit due to our integrations, and moving to public cloud where our strong solutions with VMware and hyperscalers are advantageous.  **[NTAP_3409789_12]** 

7. **RPO Decline Explanation**  
   **Q:** Why did RPO decline sequentially this quarter?  
   **A:** RPO decreased quarter-over-quarter as expected because deferred revenue always declines from Q1 to Q2.  **[NTAP_3409789_11]**  However, total deferred revenue, including short term, grew year-over-year, which is a great sign following strong billings growth.  **[NTAP_3409789_11]**  We expect unbilled RPO to continue growing, largely driven by Keystone.  **[NTAP_3409789_11]** 

8. **Keystone Business Growth**  
   **Q:** How is Keystone contributing to growth?  
   **A:** Keystone is reported in professional services revenue, which grew sequentially due to Keystone.  **[NTAP_3409789_13]** **[NTAP_3409789_14]**  Customer feedback has been stellar with zero churn, and we expect Keystone to grow faster than our product business, aiding us in winning new customers and workloads.  **[NTAP_3409789_19]** 

9. **Macro Impact on Growth**  
   **Q:** How does macro affect your growth outlook?  
   **A:** The macro environment remains unchanged, and we are well aligned to priority spending areas like data center modernization and cloud.  **[NTAP_3409789_7]**  Our growth outlook for the year is **regardless of the macro**; we assume it stays where it is.  **[NTAP_3409789_7]** 

bccc5b50ddaf690a33226839d92009888ee9a63a2816a71d3cefce061ac49470

1. **Fiscal Year '25 Outlook**  
   **Q:** Early thoughts on fiscal year '25 guidance?  
   **A:** Mike Berry stated that they feel really good about the momentum in Q3 and the guidance built into Q4. They expect continued growth driven by the C Series, industry tailwinds, and priorities aligned with customer needs. Product gross margins are expected to land between the upper 50s to **60%**. They plan to be prudent with investments to drive growth while maintaining disciplined spending. Cloud storage growth is now closer to **65%** from a revenue perspective, and they see this as a key growth area. They also intend to return capital to shareholders while leaving flexibility for investments.  **[NTAP_3375989_15]** 

2. **Product Gross Margins and Mix Shift**  
   **Q:** Can we expect flexibility in pricing due to QLC use affecting gross margins?  
   **A:** George Kurian explained that the mix shift from hard drives to flash continues, raising the structural baseline product gross margin from the mid-50s to the upper 50s and up to **60%**. The mix shift is the most important lever, along with the value of their ONTAP software and commodity supply chain management. NetApp is uniquely positioned to benefit from using QLC in a broad range of applications, with only one other vendor offering QLC-based all-flash arrays. They feel good about their solution and emphasize that enterprise applications are about value, not just price.  **[NTAP_3375989_13]** 

3. **Momentum of C Series and Flash Products**  
   **Q:** Is momentum for C Series and new flash products continuing?  
   **A:** George Kurian stated they are seeing strong advantages with the C Series in modernizing traditional hybrid flash systems and deploying new private cloud environments. The 10K drive transition is a multiyear process, and they are in the early stages. They also see renewed interest due to changes in software licensing. The ASA product family is in the early innings, focusing on the block storage market. Additionally, AI is set for rapid expansion and growth. They have strong momentum and plan to stay focused and disciplined in execution.  **[NTAP_3375989_10]** 

4. **AI Market Opportunity and Timing**  
   **Q:** What's the timing for investments in AI and the competitive environment?  
   **A:** George Kurian mentioned they are in the early phases of the generative AI opportunity. Customers are collecting and unifying data, augmenting foundational models with their own data. This phase is expected to continue for several months or a year. Deployment of production models and movement from training to inferencing will become more relevant heading into next year. NetApp had a strong quarter in the flash business with several 8-figure deals in Q3, involving major companies in oil and gas, genomics, media, and open-source models. They feel good about their strength in the AI market and are expanding their opportunities.  **[NTAP_3375989_7]** 

5. **Increase in Consumption-Based Models**  
   **Q:** Is there increased appetite for consumption-based storage models?  
   **A:** George Kurian noted that the maturity of offerings and customer comfort with cloud-like procurement models are factors. The increase in interest rates has caused some customers to consider CapEx versus OpEx. Customers transitioning environments find as-a-service models a good option. NetApp's Keystone service had another strong quarter, up more than **triple digits** year-to-date, including the past quarter. They see strong momentum but do not see a mandate, viewing it as a new way to address customer preferences.  **[NTAP_3375989_11]** 

6. **Impact of NAND Prices on Behavior**  
   **Q:** How do rising NAND prices affect customer purchases of all-flash arrays?  
   **A:** Michael Berry stated that customers budget based on dollars, and short-term changes in NAND prices don't significantly change the market. Declining NAND prices have made SSD flash technology more affordable, offering benefits in environmentals, economics, and energy efficiency, improving economic decisions for customers. SSDs are less than **50%** of their bill of materials or that of their competitors.  **[NTAP_3375989_9]** 

7. **Competitive Landscape in Fiber Storage and AI**  
   **Q:** Understanding the competitive landscape in fiber storage market, especially related to AI?  
   **A:** George Kurian acknowledged the market has always been competitive with vendors coming and going. NetApp has a strong position due to the installed base of unstructured data, which is vital for building data pipelines for AI and ML applications. They offer solutions that allow customers to build hybrid cloud pipelines, providing scalability, high performance, security protection, and data management needed as AI models scale. They feel confident about expanding their market presence.  **[NTAP_3375989_12]** 

8. **AI Model Placement Preferences**  
   **Q:** Notable trends in AI model placements due to security and data sovereignty?  
   **A:** George Kurian observed that data is foundational to AI, and enterprises are augmenting foundational models with their own data. Concerns like malicious data injection impact AI significantly. Maintaining data security, privacy, and lineage are crucial discussions, which will intensify with regulatory enforcement, such as in the European Union. This increases the need for data management across AI's lifecycle. NetApp is well-positioned with capabilities to build secure private environments both in the public cloud and customers' data centers.  **[NTAP_3375989_14]** 

9. **Differentiators of NetApp's FSX**  
   **Q:** How does NetApp's FSX differentiate, and what customers and use cases are attracted?  
   **A:** George Kurian highlighted that unstructured data is vital in generative AI, operating on documents, images, and videos. NetApp stores a significant portion of enterprises' unstructured data. They help customers move data securely to the public cloud for AI training. Their high-performance scale-out solutions, like SSX on Amazon, are used for model training by one of the world's largest open-source model providers. They also have certifications with NVIDIA, allowing enterprises to build supercomputers, train models, and deploy them into production. They are confident about the expanding opportunity and have had several good wins.  **[NTAP_3375989_8]** 

f1054f3574fac71a1ab4633be7a2f6d94ca09d8bfbac33493628563d0b767066

- **NetApp is in a strong position to capitalize on the growing AI and machine learning markets**, offering unique solutions that allow customers to build hybrid cloud pipelines that are super scalable and high performance, with the security protection and data management needed as AI models scale.  **[NTAP_3375989_12]**  They have **confidence about expanding opportunities in AI**, having had several good wins and investing to expand in this space.  **[NTAP_3375989_8]**
- **Successful product innovation**, including the C Series and ASA family of all-flash products, is driving strong momentum and allows NetApp to **displace competitors' products**.  **[NTAP_3375989_20]**  They are in the **early stages of multi-year transitions**, such as the 10K drive transition, and see **significant growth opportunities ahead**.  **[NTAP_3375989_10]**
- **Record high operating margins of 30% were achieved this quarter**  **[NTAP_3375989_18]** , and the company is raising the structural baseline product gross margin from the mid-50s to up to 60%, driven by the mix shift from hard drives to flash.  **[NTAP_3375989_13]**  **NetApp expects to drive continued growth and profitability**, maintaining operating discipline and capitalizing on share gain opportunities despite the uncertain macro environment.  **[NTAP_3375989_21]**

c74e8616ade32766ad0b497588a1e967e6fa10674db3c06bcd28795a00ba4650

- **Decline in Deferred Revenue:** NetApp's **deferred revenue declined year-over-year** in the last two quarters, including a decline in cloud-related deferred revenue, which could impact future revenue streams.  **[NTAP_3375989_15]**
- **Customers Renewing Support for Shorter Periods:** Instead of tech refreshes, customers are opting to **renew their support for up to a year**, potentially affecting **long-term support revenue growth**.  **[NTAP_3375989_15]**
- **Uncertain Macroeconomic Environment:** The company acknowledged that the **macro environment remains uncertain**, which could impact future performance.  **[NTAP_3375989_17]**

f5bf3eca805a9b21281648ea21e607707f71305c1f374e4db3476991312d8bb6

- NetApp projects fiscal year 2025 revenue growth of **4.5%**, indicating cautious optimism but acknowledging macroeconomic uncertainties and cautious customer spending, which could limit growth prospects.  **[NTAP_3391225_9]** **[NTAP_3391225_8]**
- The company expects **gross margins** to decline in the second half of fiscal '25 due to higher component costs, particularly rising **SSD** prices, which may pressure profitability.  **[NTAP_3391225_13]** **[NTAP_3391225_16]**
- NetApp's cloud subscription offerings have faced headwinds, leading to decreased revenue in the second half of FY '24, with challenges expected to continue into the first half of FY '25, potentially impacting cloud revenue growth.  **[NTAP_3391225_18]** **[NTAP_3391225_15]**

6c7b5fb36749081af5185b2a229e59d3b2fed2829ee9f09efbb45fc404d6a2d0

- 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**.  **[NTAP_3368196_6]**
- 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.  **[NTAP_3368196_10]**
- 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.  **[NTAP_3368196_16]** **[NTAP_3368196_13]**

ac00c2f6029b56dd526f3be1b0bd6ef4c7aa193a14dd3f771d3abc04b67f1430

- **Strong Position in AI**: NetApp is leveraging its strength as the **installed incumbent for the world's largest unstructured data sets** to tap into AI opportunities. They've built supercomputing environments with major customers like a **leading genomics company**, accelerating drug discovery, and an **oil and gas company**, supporting a **1 trillion parameter large language model** and their AI center of excellence.  **[NTAP_3391225_9]** **[NTAP_3391225_8]**
- **Growing Cloud Storage Services**: NetApp's **first-party and marketplace cloud storage services** are seeing strong momentum, becoming a **much bigger part of their overall cloud business** entering FY '25 than in FY '24. They expect **consistent revenue growth in cloud** in fiscal '25, **stronger in the second half**.  **[NTAP_3391225_18]** **[NTAP_3391225_15]**
- **Success of Keystone Offering**: NetApp's **Storage as a Service** offering, **Keystone**, had a **really strong year**, with **strong wins** displacing competitors. Customers appreciate the **flexibility**, **operational consistency**, and **simplicity**, leading to **multiyear agreements** and success across multiple verticals.  **[NTAP_3391225_8]**

a6300016249fdab1d2a78982dd64359c7f298c8f0e3aa24e89e31381e3c11bf9

- **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**.  **[NTAP_3368196_19]**
- **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.  **[NTAP_3368196_8]** ,  **[NTAP_3368196_18]**
- **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.  **[NTAP_3368196_9]**

59be221bf2ea6dc49648c29c3e5be068a4e553df33cc7fd7fce2ca010fddbf4a

- 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.  **[NTAP_3400052_18]**
- 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.  **[NTAP_3400052_14]**
- 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.  **[NTAP_3400052_19]**

70cc13600d19dcf060bb6bc6a9ce754c8883c1a264f0b77b70507cc95316e31f

- **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.**  **[NTAP_3400052_14]** **[NTAP_3400052_16]**
- **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.**  **[NTAP_3400052_21]** **[NTAP_3400052_16]**
- **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.**  **[NTAP_3400052_19]** **[NTAP_3400052_18]**

1fcd964cedf442ce56de3b8052760c8b832c0b58e365ce0ff8214d8f46d3851d

1. **Revenue Guidance and Macro Outlook**  
   **Q:** Are you seeing macro concerns affecting growth outlook?  
   **A:** George Kurian said that while there is continued scrutiny of spending, NetApp is confident entering the year, having finished strong. The flash portfolio has strengthened with the refresh of A-Series products. The company feels good about tapping into AI opportunities and maintaining leadership in traditional enterprise applications.  **[NTAP_3391225_9]** 

2. **AI Impact and Opportunities**  
   **Q:** How will AI deployments translate into revenue growth?  
   **A:** NetApp had over **50 AI wins in Q4** across data foundations and model training. The ramp on AI servers leads storage, as clients build computing stacks using existing data. AI growth is factored into next year's guidance, and the company sees strong long-term opportunities.  **[NTAP_3391225_11]** 

3. **Gross Margins and NAND Costs**  
   **Q:** What is the outlook for product gross margins amid higher NAND costs?  
   **A:** Mike Berry stated they are comfortable with a **58% to 60%** product gross margin range for fiscal '25, starting higher in the first half and decreasing as prebuy inventories are used. They have locked in a large portion of SSD demand at higher prices and focus on driving profitable revenue growth while being disciplined in pricing.  **[NTAP_3391225_14]** **[NTAP_3391225_16]** 

4. **Cloud Business Performance**  
   **Q:** What's changing in the cloud business to drive growth?  
   **A:** George Kurian explained they sharpened focus on first-party and marketplace cloud storage services, now about **two-thirds** of the cloud business. Subscription headwinds are diminishing, and overall cloud revenue is expected to grow consistently in fiscal '25, stronger in the second half.  **[NTAP_3391225_15]** **[NTAP_3391225_19]** 

5. **Operating Margins and OpEx Leverage**  
   **Q:** Will operating margins reach 30% given reduced OpEx?  
   **A:** Mike Berry noted that while they achieved **30% operating margin** previously due to high gross margins, they guide a **27% to 28%** operating margin for fiscal '25. OpEx is expected to grow about **2%**, less than the revenue growth, as they target investments in sales and engineering.  **[NTAP_3391225_12]** **[NTAP_3391225_13]** 

6. **Cash Flow and Shareholder Returns**  
   **Q:** How should we think about free cash flow and shareholder returns?  
   **A:** Operating cash flow is expected to track with net income, which is projected to increase. CapEx will be consistent with the prior year's **$155 million**. Dividends increased from **$0.50 to $0.52** per share, using about **$425 million** in cash. Remaining free cash flow will go toward share repurchases.  **[NTAP_3391225_22]** 

7. **Competitive Landscape for C-Series**  
   **Q:** How will increased competition affect the C-Series business?  
   **A:** George Kurian expressed confidence, highlighting that existing customers benefit from seamless upgrades due to the same operating system and management tools. They have seen upgrades from hybrid systems and net new customers, displacing competitors and optimizing VMware environments with C-Series.  **[NTAP_3391225_20]** 

8. **Product Launch Impact**  
   **Q:** How does the A-Series launch affect seasonality and growth?  
   **A:** Mike Berry mentioned that while they are excited about the A-Series, it is just starting and won't significantly impact Q1. They expect it to drive growth as they progress through fiscal '25.  **[NTAP_3391225_10]** 

9. **Storage Density and SSD Adoption**  
   **Q:** Are you increasing storage density with higher-capacity SSDs?  
   **A:** George Kurian confirmed they have **30-terabyte SSDs** shipping, which are growing quickly as a percentage of total capacity. Their systems can pack more density into a single system than many competitors.  **[NTAP_3391225_22]** 

dd2715937bd3eb8bea95da5d63fd56775ff62e5103b9184aeb5210a6bb103445

NetApp Inc (NTAP)

Financials