All-flash array topline boost puts NetApp on track to strongest year yet

NetApp notched up record all-flash array revenues in its latest quarter and is looking at its strongest ever revenue year.

Revenues in its third fiscal 2026 quarter, ended January 23, of $1.71 billion were up 4 percent year-on-year and within its guidance range.

CEO George Kurian said: “We are pleased to announce another strong quarter with accelerating revenue and earnings growth, driven by a record quarter in all-flash array revenue, strong performance in first-party and marketplace cloud storage services, growing leadership in enterprise AI, and operational discipline.”

He added: “Our accelerating growth, coupled with continued operational discipline, has enabled us to drive profitability metrics higher. Operating income and EPS achieved record highs.” 

Financial summary

• Gross margin: 71.2 percent vs 70.7 percent a year ago, driven up by public cloud
• Operating cash flow: $317 million vs $385 million a year ago
• Free cash flow: $271 million vs $338 million a year ago
• EPS: $2.12 vs year-ago $1.91
• Cash, cash equivalents & restricted cash: $1.64 billion vs $1.5 billion a year ago
• Gross debt outstanding: $2.5 billion with net cash of $522 million 

All-flash array revenues were a record $1.05 billion, increasing 11 percent Y/Y and providing a $4.2 billion run rate. Will this good run continue in the face of NAND price rises and delivery shortages? Possibly not.

Kurian said NetApp had raised its prices “and will do so again, as needed. …And … unlike our all-flash only competitors, we have a broad portfolio that includes hybrid flash arrays, giving us the opportunity to better service price-sensitive workloads.”

NetApp’s hybrid cloud segment recorded $1.54 billion in revenues, up 5 percent annually, driven by Product, Support, and Keystone, its storage-as-a-service offering. Keystone revenue grew about 65 percent from a year ago.

But its public cloud segment showed no Y/Y growth, at $174 million. Within the public cloud sector segment first party and marketplace cloud storage services grew 27 percent Y/Y, with half of the revenue, Kurian said, coming “from new to NetApp customers, highlighting the role cloud plays in expanding our customer base.”

NetApp says it is delivering significant momentum in AI with 300 wins for data preparation and foundational storage, compared to around a 100 a year ago. NetApp’s new disaggregated AFX storage system for AI started shipping this quarter. In the earnings call, Kurian reported: “strong early momentum with AFX, in its first quarter of shipment. We have secured significant AFX wins across key industries, including neocloud, financial services, and semiconductor.” Its new AI Data Engine software ships this quarter and could/should bulk up its AI business further.

Looking ahead, Kurian said: “Building on our strong portfolio and momentum, we are well-positioned to drive sustained growth and are confident in our ability to deliver long-term value for our shareholders.” And this: “We … are on track to deliver our strongest year yet.” 

The revenue outlook for the next quarter is $1.87 billion +/- $75 million, which represents 8.1 percent Y/Y growth at the mid-point. Its full fy2026 expectation is now $6.822 billion +/- $100 million, up 3.8 percent on the year-ago $6.57 billion at the mid-point.

Comment

All-flash storage supplier Everpure released its latest quarterly results yesterday.

We can monitor the difference between Everpure and NetApp quarterly revenues and see if one company is outpacing the other. A chart of both company’s quarterly revenues by fiscal year shows that Everpure is catching up with NetApp and that the catch-up pace has accelerated in the last four quarters; 

The chart is normalized to NetApp fiscal years and shows each company’s quarterly revenue number since NetApp’s fiscal 2015. 

With Everpure totally dependent on flash hardware it’s more exposed to flash supply chain issues than NetApp, so the catch up acceleration may fizzle out.

This chart supports the view that NetApp’s concern is to deliver consistent returns to its shareholders, in terms of profits enabling share repurchases and dividends. It focusses on operational discipline and measured growth to achieve this consistency.

Everpure regards itself more as a growth and innovation company, looking to build up its revenue base, with profit as a percentage of revenue averaging 5.1 percent in the last 7 quarters, while NetApp’s average is more than three times higher at 17.8 percent. Different companies; different business models.