NetApp, Inc. NTAP reported third-quarter fiscal 2025 non-GAAP earnings of $1.91 per share, which was in line with the Zacks Consensus Estimate but declined 1.6% year over year. The bottom line was within the company’s guided range of $1.85-$1.95.
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Revenues of $1.64 billion increased 2% year over year. The figure was within the guided range of $1.61-$1.76 billion. The top line missed the consensus mark by 3.1%.
NTAP witnessed growth in the all-flash array business and a 40% jump in first-party and marketplace cloud storage services revenues in the fiscal third quarter. However, the top-line performance was affected by inconsistent sales execution, leading to some deals slipping out of the quarter. Forex headwinds also impacted top-line expansion.
Management has lowered its outlook for fiscal 2025 driven by divestment of Spot by NetApp, forex headwinds, global Public sector weakness and fiscal third-quarter revenue performance. It now expects full-year revenues in the range of $6.49-$6.64 billion, up 5% year over year at the mid-point. Earlier, it anticipated sales in the band of $6.54-$6.74 billion.
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Non-GAAP earnings per share for fiscal 2025 are now forecasted to be between $7.17 and $7.27, up 12% year over year at the mid-point. Earlier, it expected non-GAAP earnings between $7.20 and $7.40 per share. For fiscal 2025, NetApp now expects non-GAAP gross margin to be 71% compared with the earlier range of 71-72%. Non-GAAP operating margin is anticipated to be in the band of 28-28.5%, unchanged from the prior view.
Following the announcement, NTAP’s shares are down 15.3% in the pre-market trading session today. In the past year, shares have gained 15% against the Computer Storage Devices-industry’s decline of 22%.
NTAP’s Top-Line Details
NTAP reports revenues under two segments, Hybrid Cloud and Public Cloud.
The Hybrid Cloud segment includes revenues from the enterprise data center business, including product, support and professional services.
The Public Cloud segment comprises revenues from products delivered as a service and related supports. The portfolio contains cloud automation and optimization services, storage and cloud infrastructure monitoring services.
Revenues from the Hybrid Cloud segment increased 1% year over year to $1.47 billion. The Public Cloud segment’s revenues improved 15% to $174 million.
We expected fiscal third-quarter revenues from the Hybrid Cloud and Public Cloud segments to be $1.514 billion and $171.3 million, respectively.
NetApp, Inc. Stock Price, Consensus and EPS Surprise
NetApp, Inc. Price, Consensus and EPS Surprise
NetApp, Inc. price-consensus-eps-surprise-chart | NetApp, Inc. Quote
Within the Hybrid Cloud segment, Product revenues (51.7% of segmental revenues) increased 1% year over year to $758 million.
Revenues from Support Contracts (42.3%) totaled $621 million, down 2% year over year. Professional and Other Services revenues (6%) amounted to $88 million, up 14%.
Region-wise, the Americas, Europe, Middle East and Africa, and Asia Pacific contributed 51%, 34% and 15% to total revenues, respectively.
Direct and indirect revenues added 21% and 79%, respectively, to total revenues.
Key Metrics of NTAP
In the fiscal third quarter, the company’s All-Flash Array Business’ annualized net revenue run rate was $3.8 billion, up 10% year over year. Total billings rose 2% year over year to $1.7 billion. Deferred revenues totaled $4.1 billion. Remaining performance obligations (“RPO”) were $4.5 billion, while the Unbilled RPO was $350 million. Revenues from Keystone storage-as-a-service solution were up 60% year over year.
NTAP’s Operating Details
Non-GAAP gross margin of 70.7% was down 200 basis points (bps) from the prior-year quarter’s levels.
The Hybrid segment’s gross margin was 70.1% compared with 73.4% in the prior year. The Public Cloud segment witnessed a gross margin of 76.4%, up from 65.6%.
Non-GAAP operating expenses were $669 million compared with $682 million in the previous quarter.
Non-GAAP operating income rose 1.4% year over year to $492 million. Non-GAAP operating margin was 30%, down from the prior year's figure of 30.2%.
NTAP’s Balance Sheet & Cash Flow
NetApp exited the quarter ended Jan. 24, 2025, with $2.26 billion in cash, cash equivalents and investments compared with $2.22 billion as of Oct. 25, 2024.
Long-term debt was $1.244 billion, unchanged as of Oct. 25.
Net cash from operations was $385 million compared with $484 million in the previous year's quarter.
Free cash flow was $338 million (free cash flow margin of 20.6%) compared with $448 million in the prior quarter (27.9%). Lower free cash flow was mainly due to lower collections and higher cash outflows for strategic SSD purchases secured earlier.
The company returned $306 million to its shareholders as dividend payouts and share repurchases in the fiscal third quarter. NetApp has $600 million worth of shares remaining under its existing authorization. NTAP also announced a dividend of 52 cents per share payable on April 23, 2025, to its shareholders of record as of the close of business on April 4.
NTAP’s Q4 Guidance
Management expects non-GAAP earnings per share to be between $1.84 and $1.94. The Zacks Consensus Estimate is pegged at $2 per share.
Net revenues are anticipated to be in the range of $1.65-$1.8 billion. The Zacks Consensus Estimate is pegged at $1.76 billion.
NTAP’s Zacks Rank
NetApp currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performance of NTAP Competitors
Pure Storage PSTG reported fourth-quarter fiscal 2025 non-GAAP EPS of 45 cents, which beat the Zacks Consensus Estimate by 7.1%. The company reported non-GAAP EPS of 50 cents in the prior-year quarter. Quarterly revenues expanded 11% from the year-ago quarter to $879.8 million, beating the Zacks Consensus Estimate by 1.08%. The top line outpaced management’s guidance owing to record sales across FlashBlade, FlashArray//XL, Portworx, the //E portfolio and renewals of its Evergreen subscriptions. In the fiscal fourth quarter, TCV sales of Evergreen//One hit a record high of $140 million, up 20% year over year.
Quantum Corporation QMCO reported a third-quarter fiscal 2025 non-GAAP loss of 81 cents per share, wider than the Zacks Consensus Estimate of a loss of 70 cents. The company incurred a loss of $1.79 per share in the year-ago quarter. QMCO generated revenues of $72.6 million, up 0.9% year over year. The top line beat the consensus mark by 0.8%. The revenue increase was primarily driven by better-than-expected bookings, as the company successfully converted recent customer wins into realized sales. Backlog also stabilized at around $9.3 million, within its target range of $8-$10 million, despite continued supply-chain delays in some areas.
Teradata TDC reported fourth-quarter 2024 non-GAAP earnings of 53 cents per share, which beat the Zacks Consensus Estimate by 26.19%. The bottom line decreased 5.4% year over year. Revenues of $409 million missed the Zacks Consensus Estimate by 0.43%. The figure declined 11% year over year on a reported basis and 9% on a constant-currency (cc) basis. Total annual recurring revenues at the fourth-quarter end declined 6% year over year to $1.474 billion. The figure fell 4% at cc.
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