NetApp (NTAP) Q3 FY26 earnings call: guidance and Q&A

What is driving the incremental growth on the product side, and how persistent is it? How is NetApp managing product gross margins given rising component costs, particularly NAND and HDDs?

George Kurian stated that product growth is driven by large deals that have been in the pipeline for several quarters, with some closing in Q3 and more expected in Q4. Wissam Jabre explained that the company manages gross margins by adjusting prices, working with customers for agility, qualifying multiple suppliers, and offering alternatives like hybrid flash or Keystone. He noted HDD price increases are minor compared to NAND.

“We have, as we guided from the start of the year, been working on large deals that for many quarters, some of those deals closed in Q3 and a number of them are expected to close in Q4.”

asked by Paramveer Singh · answered by George Kurian

Can you share insights into the mix of 300 AI deals across use cases and customer types, and the potential contributions and margin profile of AFX and AIDE in FY27?

George Kurian highlighted strong AI momentum across public sector, manufacturing, healthcare, life sciences, financial services, and semiconductors. He noted 60% of Q3 AI business was in data prep/data lake models, and 40% in production/training/inferencing. AFX saw strong early momentum but is not expected to ramp as quickly as C-Series, while AIDE provides differentiation for both new and brownfield environments. FY27 outlook will be discussed later.

“Within our mix of business this quarter, roughly 60% were still in the data prep, data lake models and 40% were in production, training or production inferencing use cases.”

asked by Katherine Murphy · answered by George Kurian

What is the magnitude of price increases taken, and how are customers responding, especially considering budget constraints?

George Kurian stated that price increases were implemented at the start of the quarter, roughly in line with the market, and varied by product. He reiterated that customers budget in dollars tied to IT spending priorities, and NetApp offers a range of options (hybrid flash, all-flash, Keystone, cloud) and features to optimize flash use, making these conversations ongoing.

“We raised prices at the start of this quarter, and those increases were roughly in line with what you saw in the market. They varied, of course, by type of product.”

asked by Samik Chatterjee · answered by George Kurian

Are customers pre-buying due to supply availability concerns or anticipated price increases? How is supply availability for SSDs and LTAs evolving?

George Kurian clarified that Q3 results and Q4 guidance are not driven by pull-ins. He attributed momentum to improving conditions in Europe, softer US public sector headwinds, and closing large deals. He stated NetApp is not experiencing supply shortages for SSDs and is not aware of upcoming ones, working closely with multiple suppliers and qualifying alternate components. He did not comment on specific LTA changes.

“Our Q3 results were not a result of pull-ins. And importantly, our Q4 guidance does not rely on pull-ins.”

asked by Wamsi Mohan · answered by George Kurian

How is NetApp balancing protecting margins and limiting demand destruction or market share losses given anticipated multiple memory price hikes?

George Kurian anticipates tight supply and pricing to continue, emphasizing securing adequate supply from multiple vendors and maintaining competitive pricing. He stated the core focus is on driving gross profit dollars. NetApp offers a full portfolio (storage-efficient flash, hybrid flash, cloud, Keystone) to provide value for customers' budget dollars, noting that customers budget based on business priorities.

“It is our responsibility to be in the spending priority stream of our customers and to give them the best value offering for the budget dollars they have to spend, and so we bring a lot of different options.”

asked by Erik Woodring · answered by George Kurian

Are customers actively moving from all-flash to hybrid flash arrays due to price increases? What is the ability to procure HDDs?

George Kurian noted increased interest and discussions around hybrid flash arrays (HFA) since price increases, which were more pronounced on AFAs, but it's too early to call it a trend. Regarding HDDs, he stated NetApp feels good about its ability to procure what's needed, even with elevated demand, as they primarily use HDDs dissimilar to the highest-capacity, most constrained ones.

“It's too early to draw a trend. We are certainly seeing more interest from customers around some of those topics that you mentioned, hybrid flash, Keystone and other alternatives.”

asked by Steven Fox · answered by George Kurian

What are NetApp's opportunities and traction with neoclouds or sovereign clouds, beyond hyperscalers?

George Kurian indicated growing interest from neoclouds, citing a win in a large Asian neocloud with AFX. He highlighted NetApp's differentiated value proposition, including multi-tenancy, integrated security, performance, and scale, proven in hyperscalers, which neoclouds now seek. He also noted the advantage of NetApp's hybrid bridge for enterprise AI use cases as neoclouds address this market.

“We are working with other neoclouds to provide a differentiated value proposition that includes the rich suite of cloud-ready data services like multi-tenancy, like integrated security, all of the things that we have proven in the hyperscalers, which now these neoclouds want in their environment.”

asked by Asiya Merchant · answered by George Kurian