NetApp Inc ($NTAP) Q4 2026 Earnings Call

Good afternoon everyone. Thank you for joining us. FY26 was a landmark year for NetApp with record results across revenue, gross profit, operating income, cash flow from operations, and free cash flow supported by strong customer demand in the fourth quarter. Our performance demonstrates our ability to capitalize on the accelerating adoption of enterprise AI and cloud with our differentiated hybrid cloud intelligent data infrastructure platform trusted by the world's leading enterprises and cloud providers. NetApp is increasingly at the center of our customers' data-driven AI transformations. Achieving our full-year target of a 30% operating margin underscores our commitment to profitable growth and ongoing innovation. NetApp stands at the forefront of a transformative era driven by rapid AI adoption and explosive cloud growth. Enterprises are reimagining how they operate and compete. And only NetApp delivers truly hybrid intelligent data infrastructure on premises and in the cloud, all-flash and hybrid flash to seamlessly protect, secure, govern, and activate the entire data estate for AI. Our 30 years of innovation and leadership in hybrid multicloud environments are more relevant than ever as our vision of a hybrid world is realized. As enterprise AI adoption scales, the primary challenge is not compute but activating large volumes of unstructured data. A significant share of the world's enterprise unstructured data resides on NetApp solutions and our ability to activate it securely and efficiently across hybrid and multicloud environments gives us a powerful competitive advantage. As the only true hybrid cloud platform, unifying data governance across on-premises and cloud environments, we enable zero-copy data activation, eliminating the cost and risk of moving data and transforming fragmented infrastructure into a secure launchpad for real-time AI and automation. Our value proposition is resonating strongly with customers and the industry. Our storage services on AWS, Azure, and Google Cloud empower customers to protect, mobilize, and govern their data with unmatched flexibility and consistency regardless of location. This capability is increasingly critical as customers launch and scale their AI initiatives. By integrating our data infrastructure platform with the AI and analytics offerings of leading cloud providers, customers can activate their data for AI workloads in place where it is created without costly or time-consuming migration or duplication, making NetApp the secure zero-copy foundation enterprises need to move from fragmented infrastructure to real-time AI at scale. We fueled nearly 50 partner AI factories and labs as they build out their real-world test beds to accelerate AI deployment. A recent example of this is at Worldwide Technologies' live AI proving ground where NetApp AFX all-flash storage is featured, allowing customers to test architectures, validate performance, and quickly move from experimentation to deployment. This collaboration highlights the large opportunity ahead as enterprises look for trusted partners to operationalize AI confidently. We see growing opportunity and success with Neo and sovereign cloud providers who recognize the strength of our differentiated solutions and our joint go-to-market initiatives with leading hyperscalers. These partnerships reinforce our position as a trusted collaborator in the evolving cloud ecosystem. A leading Neocloud turned to NetApp for intelligent all-flash storage infrastructure, eliminating complexity and powering orchestration at cloud scale. The new deployments will help accelerate AI onboarding and time to value. With this win, we can begin to expand into other workloads to become the foundational data layer. Another significant achievement is our expanded partnership with Google Cloud for Google Distributed Cloud, which underscores both the growing opportunity in AI and sovereign cloud environments and the strength of our technology. This collaboration enables government agencies and regulated enterprises to leverage advanced AI capabilities from Google and NetApp's secure-by-design data infrastructure platform to modernize operations and accelerate AI-driven insights even in the most sensitive environments. We achieved record revenue in Q4 and FY26 driven by public cloud, all-flash, and Keystone, which all reached all-time highs, reflecting strong demand from customers modernizing infrastructure and scaling AI workloads. Public cloud revenue grew to $688 million in FY26, up 18% year-over-year, normalized for the divestiture of the Spot by NetApp business in March 2025. This growth was driven by first-party and marketplace cloud services which increased 30% in FY26. We are seeing growing demand from both new and existing customers to extend NetApp's capabilities deeper into their cloud environments. Customers are increasingly choosing NetApp to simplify and scale their hybrid and multicloud environments, leveraging our unified data management capabilities for operational consistency and agility. Our expanding cloud portfolio is unlocking new use cases and verticals including AI, fueling growth and expanding our addressable market. For example, a leading insurance company accelerated financial risk modeling and data science by connecting Azure Databricks directly to their data in Azure NetApp Files, ensuring security, governance, and performance. Similarly, an Asian engineering company streamlined its GenAI chatbot deployment on AWS by leveraging FSx for NetApp ONTAP, allowing secure, permission-aware access to data in place and reducing operational overhead. Across these wins, the common thread is NetApp's ability to deliver secure, governed, high-performance data access for AI workloads, enabling customers to innovate faster and operate more efficiently, all while maintaining control and compliance. FY26 all-flash revenue was $4.2 billion, an increase of 11% from last year, propelled by robust Q4 performance with revenue of $1.2 billion, up 18% year-over-year. Customers are choosing NetApp to power their most mission-critical workloads and our momentum in this segment is a testament to the strength of our innovation and go-to-market execution. A prime example of this is a European aerospace company that chose NetApp, displacing competitors in a greenfield win. The data management capabilities of NetApp all-flash arrays stood out for their high performance, cyber resilience, and ransomware protection as well as seamless integration with a broad ecosystem of partners. Our comprehensive solution delivered the security, simplicity, and strategic value needed to support critical initiatives. Revenue from our Keystone storage-as-a-service offering grew approximately 65% from FY25 as more customers embrace the flexibility and simplicity of a cloud-like experience for their on-premises data. This momentum reflects the broader shift towards consumption-based IT models and our ability to meet customers wherever they are on their transformation journeys. A leading manufacturer chose NetApp Keystone with all-flash and StorageGRID to support its AI strategy, requiring a secure, flexible platform for massive data sets. Keystone delivers secure, governed self-service at scale, enabling rapid collaboration and predictable on-demand performance. Our unified platform streamlines data management with multi-protocol support, native S3 tiering, and cloud integration for maximum efficiency. AI was a clear growth engine for us. In FY26, we had approximately 500 AI and data preparation wins in Q4 alone, bringing the FY26 total to over 1,100. Our ability to help customers operationalize AI at scale, accelerate time to insight, and drive real business outcomes is putting us increasingly at the center of our customers' AI journeys. In FY26, we furthered our AI innovation, launching next-generation solutions, including AFX and AI Data Engine, which are seeing strong early momentum and positive feedback from customers and partners. Additionally, we announced enhancements to the performance and capabilities of our all-flash arrays and expanded our converged AI solutions. These offerings help organizations simplify their AI infrastructure, eliminate silos, and accelerate their data pipelines, reinforcing NetApp's role as the data infrastructure platform for AI. Let me walk through a couple of additional customer wins that spotlight NetApp's competitive advantages. A European government agency required real-time situational awareness with ultra-fast, latency-free data processing. NetApp's disaggregated AFX solution for their NVIDIA SuperPod environment enabled independent scaling of compute and storage, delivering flexible, future-proof infrastructure. Our rapid execution and expertise empowered a robust, mission-critical AI platform to meet evolving operational demands. A global financial leader signed a $20 million deal with NetApp to accelerate its AI-driven fraud detection and customer personalization. NetApp's GPU-ready, low-latency data lake platform delivers high-performance access to multi-ebibyte data sets, enabling global real-time fraud scoring, continuous model retraining, and robust enterprise governance and resiliency. It's high-impact wins like these that helped us achieve record-setting results while navigating a dynamic macro environment. We're managing rising memory and component costs by working closely with our supply chain partners and adjusting pricing to balance growth and margins. Data generation continues unabated and customers need solutions that best optimize performance and cost. Our ability to offer a broad range of solutions with flexible purchasing options including cloud, Keystone, and hybrid flash strengthens our competitive position, resilience, and flexibility. FY26 also set a new bar for cash generation. Our strong free cash flow enables us to invest in innovation while returning value to shareholders through dividends and share repurchases. We remain committed to disciplined capital allocation and long-term value creation. I want to thank the entire NetApp team for their customer-centric focus and hard work in FY26. It was a year of strong execution, innovation, and accelerating growth. Clear proof that our strategy is working, and our portfolio is resonating in the market. The investments we made this year have expanded our opportunities and set a solid foundation for future growth. Looking ahead, we are encouraged by the robust demand signals we're seeing and are confident in our ability to maintain this momentum as reflected in our fiscal year 27 outlook. Our hybrid multicloud leadership, differentiated AI offerings, and flexible storage and consumption offerings position NetApp for continued success as customers accelerate their data-driven AI transformations. With that, I'll turn the call over to Wam.

Thank you for your question. Momentum in the business was very, very strong. IT spending is forecasted to be up strongly driven by enterprises readying for AI and we are seeing that across all segments of our business: cloud, flash, AI, and Keystone. And it shows the differentiation in our offerings as well as solid execution by our customer-facing teams. We have seen some accelerated decision making but we also know that most customers do not have the flexibility to do so. On the face of the Q4 P&L, the impact of pull forward or accelerated decision making was minimal. Our Q4 results were tied to the big deals we told you to expect when we guided the fiscal year. And we see a really strong outlook for this coming year powered by our confidence in our position and what we see as growing evidence that enterprise AI is happening in front of our eyes.

Thank you for your question. Our AI business performed really strongly in the quarter. We noted about 500 AI wins in the quarter, 1,100 for the full year. Those compared to roughly 400 for the whole of the prior fiscal year. So you are seeing strong uptick in enterprise AI. In enterprise AI configuration, all elements of our flash portfolio performed strongly: high performance flash, capacity flash, and block storage. And so we see customers deploying these high performance compute and storage environments to make sure that the GPUs are fully used. They're expensive GPUs, they need to be fed with a lot of data. What we also saw was that in the non-demanding AI environments, customers are starting to buy more of hybrid flash which we are uniquely positioned to deliver under a single operating system. So both all-flash and hybrid flash grew, and all-flash grew particularly in the AI use cases.

All of the 500 AI wins are on-prem wins. And they combine a mix of enterprise as well as neo cloud. I think if you look at the mix of the use cases they are roughly the same pattern as we saw before. Half of them are really tied to data preparation, large-scale analytic environments that are now being

The remainder are roughly half and half between training and fine-tuning large language models and inferencing. So it's roughly 50-25-25 roughly speaking. That pattern has stayed pretty similar through all of the year. In terms of how we see that play into our business next year in fiscal year 27, this is what gives us confidence to show an acceleration in our business. We think that the strength is broad-based across segments, verticals, and geographies. We think that we are very well positioned because of our installed base of data, hybrid cloud data infrastructure pipelines that make it much easier for customers to use AI, and the fact that we can offer customers life cycle cost management from super high performance flash to exceptionally cost-effective disk-based environments. So we're optimistic. We see the demand. We see the momentum in our business. And we are investing some additional sales resources just like we did last year to support our outlook.

Thanks Eric. The guide is based on the information we have at this time. We look at how the business would develop through the next few quarters based on what we know from a component cost perspective. If component costs vary moving forward, we'll continue to take action to mitigate the impact to margins and we will do whatever we can to improve from that. This is really the comment around product gross margin. I do have to remind that we're not really moving from our long-term target for product gross margin, which is still in the mid-50s to high 50%. So that's still our long-term target and we will strive to get there in the future. What we also are looking at is the total gross margin for the company. The public cloud business has seen some really nice uptick in fiscal 26, and as that business grows, it does give us a tailwind to the margin line. The same thing for the Keystone business that continues to grow at a nice pace and build momentum, and that has a little bit of a tailwind as well. The last few comments on margin: we also are targeting gross profit because that's what drives our earnings power, so we look at gross profit growth year-over-year as something we continue to improve.

I think what we saw in the large deal pipeline were some related to infrastructure modernization, which could be people bringing forward spending, but a very large part of the pipeline were related to AI wins. Those were projects that we had worked on and some that we saw accelerate as business needs came on. What I feel really good about is that especially in our AI business, the number of customers we are able to win in accounts that are not traditionally NetApp large installed base accounts have been super strong. That gives me confidence that we are winning on customers' business priorities which are durable even in the face of commodity price variations.

Thanks for your question, Wamzi. What I said was that on the face of the Q4 P&L, the impact of pull forward demand was minimal. Our Q4 results from a revenue standpoint were tied to big deals that we told you about when we guided the fiscal year. We are seeing some accelerated decision making, and we also know that many customers don't have the flexibility to do so. Our goal is to make sure that we can meet customer demand, balance cost and availability of supply, and maintain lead times within customers' normal expectations. We feel really good about the momentum in our business and we'll tell you more through the course of the year. What I feel confident about is that we have factored to the best of our knowledge the risks of pull-ins and the dynamics it creates through the fiscal year, and we'll tell you more as part of our go forward plan.

On public cloud, we continue to see super strong demand for our cloud storage services both first party and marketplace. They grew 30% year-over-year and given their growth rate relative to the rest of the cloud portfolio, they are the predominant part of the cloud business overall. We see continued momentum in that part of our business which should cause cloud to grow faster next year than it did the prior year at really strong gross margins. Super excited about the cloud. We did a lot of innovations through the course of the year. As I said in my comments, we are starting to see some of the AI use cases also show up in the cloud and customers starting to use our tools in the cloud for AI use cases. With regard to Keystone, we see a broad-based shift in the market towards consumption-based offerings like Keystone. Some of that is driven by customers having used public cloud and now getting confident about how to operate their own environments like the public cloud. There was possibly some customers who bought Keystone because they felt it would be a more optimal way to balance cost and use in a time of inflationary cost. But in general, a storage as a service business should grow faster than our traditional business. Tim, just to clarify, I think part of your question on public cloud included the Google agreement. I want to clarify that the agreement is more in the hybrid cloud segment, so it's independent of the comments on public cloud. It helps our hybrid cloud business, which helped us in Q4 and will help us going forward on support revenue as well.

You're welcome.

We think we have broad-based durable demand in our business driven by customers prioritizing data infrastructure for AI. You saw that in our Q4 print, which did not benefit from any pull forwards. We see the same roughly speaking demand pattern at the start of the new fiscal year, so the first half and second half roughly in the same percentages, adjusting for the extra week in the first quarter. It's early in the year, we feel really good about the momentum in our business. We acknowledge that there are probably some amounts of pull forwards, but the demand is broad-based and we'll provide updates as we go through the year.

Google Distributed Cloud is where Google brings its advanced technology stack to a disconnected or lightly connected data center. It could be for regulated industries, public sector environments, or national security environments. NetApp was chosen by Google to be a large chunk of the data infrastructure within the Google Distributed Cloud architecture. There are two benefits to NetApp: it allows us to broaden our reach into sovereign and secure environments that are incrementally expanding for NetApp, and it allows us to build really secure differentiated hybrid infrastructures across on premises and public cloud and secure clouds for these clients. This is the expansion of the Google Distributed Cloud deal that we had worked on since 2024. We have expanded our franchise with them quite substantially with this relationship.

Thanks.

The quick answer is NAND prices would manifest in the product gross margin, that's where the main impact is. The rest of the margin line shouldn't be as affected, there's a bit in Keystone but it's recognized over time. On the second part, we talked about raising prices to offset component cost inflation. Our goal is to protect the profitability of our business and we will continue to do so if needed. Beyond those qualitative comments, I'd rather not quantify it because it's too early in the year. Let's wait till we see how Q1 develops.

We are pleased with the progress on AFX and the early feedback on AI Data Engine. AFX has already had good wins in neocloud, financial services, hedge funds, and life sciences, which were the target customers for it. We are seeing more customers beginning to qualify it. It will take time, it's a new architecture, but it is serving the purpose for what we created it for. With regard to AI Data Engine, we have brought it to certain clients and we are seeing good feedback on the value and benefits it provides, especially as our large installed base of customers with huge amounts of unstructured data on NetApp want to organize that data for AI projects. AI Data Engine is a big help to them.

From an installed base perspective, it kicked up another 1% to 48% of the installed base. With regard to performance in the quarter, it was really about having differentiated solutions for a broad range of priority customer use cases. We raised prices during the quarter, but we have not seen that materially translate into the transactions we recorded in the quarter. It takes a little bit of time to flow through. In the past it has taken about three quarters. We have tightened up our agreements with customers, so you should see that flow through over the next quarter to two quarters.

We constantly look at opportunities for M&A and make decisions on whether that is the right use of capital. We feel good about our portfolio, but we won't rule anything in or out at this point in the year.

I don't want to comment about their environment. This is a large top five US neocloud where they were looking to expand their offerings especially to serve high performance use cases for enterprise AI, and we were fortunate to be chosen to be the platform to do so. Our experience in architecting solutions for hyperscale is playing out to our advantage when we speak with neoclouds as they begin to broaden the set of use cases and offerings they have for the enterprise.

There are two use cases as you correctly said. One for our installed base: it creates a very sticky competitive mode where we are able to give them a huge amount of value for their existing infrastructure. We can choose to monetize that as either a standalone software subscription or as part of a broader offering including storage. For net new environments, I was particularly pleased that a very large percentage of our AI wins were from customers where we are not the incumbent data infrastructure provider. There, we combine AI Data Engine together with our storage so they can build a really good data lake or data prep environment. We saw momentum on that this past quarter.

It really depends on the volume of data and the type of data and services we are offering. Broadly speaking, it's tied to the infrastructure, the size of the data set, and the value we are offering the customer related to the type of data use cases.

We have built out a specialist team to pursue AI opportunities, both those focused on completely new segments like neocloud and sovereign cloud, or to help our frontline teams drive AI wins in the enterprise. We have also expanded coverage of accounts because we feel good about our opportunity to gain share. We have added more accounts to our directly managed coverage resources. It's a sign of confidence. We have seen momentum building through the course of this year and our outlook for next year feels really robust.

At a high level, we're not providing specific guidance numbers. I think what we see is continued strength in our first party and marketplace cloud storage services. Those have grown consistently above the overall cloud business and are now a much bigger part of the cloud business than they were a year ago. Our view of how the cloud portfolio evolves next year is essentially if you remove spot from the compare to last year, we see the same trends continuing. But because cloud storage is a bigger part of the mix, you can do the math on what that does to the overall cloud business.

Thank you, Chris. FY26 was a record year for NetApp, reflecting strong execution and accelerating demand for AI and cloud solutions. Our hybrid cloud intelligent data infrastructure platform is at the center of customers' data-driven transformations, delivering secure real time zero-copy data activation for AI. Our broad portfolio allows us to deliver the right balance of cost and performance for our customers, strengthening our resilience in a dynamic market. Continued innovation and strategic partnerships are expanding our opportunities and driving sustainable growth, and strong financial results and disciplined capital allocation enable us to invest in the future and return value to shareholders. As we look to FY27, we are confident in our strategy and our ability to deliver ongoing growth and leadership in AI and cloud. Thank you.