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NTAP
Earnings call · Jul 2026 (Q1 FY27)

NetApp Q1 FY27 earnings call NTAP

Sep 2, 2026 Source

Executive summary

NetApp Q1 FY27 — Record Revenue and EPS Driven by AI and Cloud Demand

NetApp delivered a record Q1 FY27, exceeding guidance across all metrics, driven by strong demand for AI and cloud-driven storage solutions. The company is seeing broad-based structural improvement in demand, leading to a material increase in its full-year outlook, despite some accelerated purchases and component cost pressures. Strategic acquisitions in AI data infrastructure and cloud-native disaster recovery further strengthen its market position.

Highlights

5

  • Revenue increased 30% year-over-year to $2.03 billion, exceeding guidance.

  • Non-GAAP EPS grew 66% year-over-year to $2.58, outperforming expectations.

  • Non-GAAP operating margin reached 31.9%, up 6.1 percentage points year-over-year.

  • All-flash array revenue surged 47% year-over-year to $1.31 billion.

  • Public cloud revenue grew 28% year-over-year to $206 million.

Concerns

3

  • Product gross margin declined 150 basis points sequentially to 54.6%, primarily due to higher component costs.

  • Inventory expanded both year-over-year and quarter-over-quarter, with inventory turns down sequentially to 6.

  • Some accelerated purchase decisions contributed to Q1 results, implying potential pull-forward of demand, though management noted this was not a material part of the overall business.

Guidance & targets

CategoryTargetConfidence
Revenue
$2.1 billion, plus or minus $75 million
high materiality
High
Gross margin
67% to 68%
medium materiality
High
Operating margin
30.9% to 31.9%
high materiality
High
Earnings per share
$2.54 and $2.64
high materiality
High
Fiscal year 2027 revenue
$7.975 billion to $8.225 billion
high materiality
High
Fiscal year 2027 gross margin
68.1% to 69.1%
medium materiality
High
Fiscal year 2027 operating margin
30.3% to 31.3%
high materiality
High
Fiscal year 2027 earnings per share
$9.73 to $10.03
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Hybrid Cloud
Revenue growth was 27% year-over-year adjusting for the additional week. Product revenue was 49% of total revenue, compared to 42% in the same period last year. Product gross margin was down sequentially mainly due to higher component costs, partially offset by better pricing. Professional Services gross margin improved 4.5 percentage points sequentially.
Revenue ex-extra week: $1.755 billion (up 27% YoY)Product revenue: $987 million (up 51% YoY)Product gross margin: 54.6%Support revenue: $720 million (up 11% YoY)Support revenue ex-extra week: $670 million (up 4% YoY)Support gross margin: 93.2%Professional Services revenue: $112 million (up 15% YoY)Professional Services gross margin: 36.6%
$1.82 billion30%—68.8%
Public Cloud
Revenue growth was 19% year-over-year adjusting for the additional week. Gross margin benefited slightly from the additional week and has operated above the 80% to 85% long-term target range in the past three quarters.
Revenue ex-extra week: $191 million (up 19% YoY)Gross margin sequential change: up 70 bpsGross margin year-over-year change: up over 6 percentage points
$206 million28%—86.4%

NTAP operating KPIs by quarter

NTAP operating KPIs stated on its earnings calls, by fiscal quarter
KPI Jan 2025 Q3 FY25 Apr 2025 Q4 FY25 Jul 2025 Q1 FY26 Oct 2025 Q2 FY26 Jan 2026 Q3 FY26 Apr 2026 Q4 FY26This call Jul 2026 Q1 FY27Change vs prior quarter
Billings
$1.71B Billings of $1.71 billion increased 2% year-over-year. Source transcript
$2.03B Q4 billings of $2.03 billion were up 12% year-over-year. Source transcript
—————+18.7%
Remaining performance obligation (RPO)
$4.5B Remaining performance obligations were $4.5 billion. Source transcript
$4.97B Q4 Remaining Performance Obligations were $4.97 billion, up approximately $500 million from Q1. Source transcript
$4.94B Q1 remaining performance obligations were $4.94 billion, up 11%. Source transcript
$4.9B Remaining performance obligations were $4.9 billion, growing 11% year-over-year. Source transcript
$5.11B Remaining Performance Obligations were $5.11 billion, growing 14% year-over-year. Source transcript
$5.65B Remaining performance obligations were $5.65 billion, up 14% year-over-year. Source transcript
$5.65B Remaining performance obligations were $5.65 billion, up 14% year-over-year. Source transcript
0%
Unbilled remaining performance obligation
~$350M Unbilled RPO was approximately $350 million, up 6% quarter-over-quarter. Source transcript
~$430M Unbilled Remaining Performance Obligations, which is a key indicator of future Keystone revenue growth was approximately $430 million, up 23% quarter-over-quarter. Source transcript
$415M Unbilled RPO, a key indicator of future Keystone revenue was $415 million, up 40% year-over-year. Source transcript
$456M Unbilled RPO, a key indicator of future Keystone revenue, was $456 million, up 39% year-over-year. Source transcript
$482M Unbilled RPO, a key indicator of future Keystone revenue, was $482 million, up 38% year-over-year. Source transcript
$807M Unbilled remaining performance obligations, a key indicator of future Keystone storage-as-a-service revenue growth, were $807 million, up 88% year-over-year. Source transcript
—+67.4%
Installed base penetration All-flash
43% The penetration of our all-flash footprint into our installed base is now 43% -- so it's up, again, modestly every quarter, which is a reflection of both the scale of our installed base and the fact that we are growing new footprints in that installed base. Source transcript
44% In the fourth quarter, all-flash made up approximately 2/3 of Hybrid Cloud segment revenue, and 44% of systems in our installed base under active support contracts are all-flash. Source transcript
—
~46% Exiting the quarter, approximately 46% of installed base systems under active support contracts are All Flash. Source transcript
————

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Deferred revenue $4.85 billion Q1 FY27 end

up 7% YoY

Remaining performance obligations $5.65 billion Q1 FY27 end

up 14% YoY

Product announcements

ProductTypeDetails
DataPelago acquisitionlaunch
JetStream acquisitionlaunch

Deals & partnerships

DataPelago Acquisition of an innovator in AI data infrastructure.

Acquired DataPelago, whose nucleus software engine enables high-performance in-place data processing, eliminating costly data movement and streamlining AI readiness.

JetStream Acquisition of a leader in cloud native disaster recovery for VMware environments.

Acquired JetStream, which enables continuous protection and recovery of VMware workloads across diverse storage environments with seamless replication to NetApp cloud offerings like Azure NetApp Files.

Samsung Electronics Significant agreement to support its EDA environment and AI Center of Excellence.

Signed a significant agreement with Samsung Electronics to support its EDA environment and AI Center of Excellence.

NVIDIA Superpod Integration with NetApp AFX for a public sector organization's AI modernization.

A public sector organization awarded NetApp a strategic deal to modernize and expand its intelligence capabilities and deliver real-time analytics, leveraging NetApp AFX integrated with NVIDIA Superpod.

Asian neo cloud provider Supplying high availability, secure and scalable storage for new customer-facing AI services.

Secured a significant win with an Asian neo cloud provider, supplying high availability, secure and scalable storage for new customer-facing AI services. This win displaced existing vendors and established a strong foundation for NetApp in one of the providers' most strategic AI initiatives.

Risks & headwinds

Challenging component cost environment Q1 FY27

Product gross margin down 150 bps sequentially to 54.6%

Mitigation:Better pricing and favorable product mix partially offset the impact; management expects slight improvement in product gross margin outlook for the rest of the year.

Inventory expansion Q1 FY27

Inventory expanded year-over-year and quarter-over-quarter; inventory turns were 6, down sequentially.

Mitigation:Strategic purchases and managing supply to support growing demand.

Accelerated purchase decisions / pull-forward demand Q1 FY27

Some accelerated purchase decisions and pricing benefits contributed to Q1 results.

Mitigation:Management states this is not a material part of the overall business and is limited to a small percentage of large customers.

What to watch in Q2 FY27

Product Gross Margin Trajectory

Q2 FY27 and beyond
Current 54.6% in Q1 FY27, down 150 bps sequentially
Target Improvement from Q1 levels, better than prior guidance for the rest of the year

Why it matters

Indicates the company's ability to manage component cost inflation and pricing power, impacting overall profitability.

Now fast forward to today, we did manage Q1 product gross margin in a really great way. I think we did a great job in execution and we outperformed our expectations for Q1. So that's sort of the first point I want to make. The second point is when we compare now Q2 to Q4 for the rest of the year to where it was 90 days ago, we're now expecting it to be slightly better.

Q&A highlights

How to distinguish between structural demand improvement and temporary factors like accelerated purchases or pricing benefits, especially given the implied deceleration in H2 FY27 guidance.

George Kurian highlighted broad-based strength across all product lines, customer segments, and commercial vehicles. He noted that accelerated purchases were from a small percentage of large customers, often involving pulling forward transactions expected over multiple quarters, but not widespread. The overall budget priority for data infrastructure has increased due to AI modernization.

“What we saw in the results in Q1 was certain transactions that we expected to be built out over multiple quarters happening within a quarter. That doesn't mean that those same customers didn't defer other projects to accommodate these projects, right? And so I would tell you that it's a percentage of our business, we did not see it in Q4, but we saw it in Q1, and we felt like it was appropriate for us to acknowledge it. But it is not a material part of the overall business.”

asked by Joseph Cardoso · answered by George Kurian

2 min read 6 chapters

Detailed narrative

Record Q1 Performance and Broad-Based Demand

NetApp achieved a record Q1 FY27, exceeding guidance across all metrics with $2.03 billion in revenue, up 30% YoY, and non-GAAP EPS of $2.58, up 66% YoY. This performance was broad-based, showing strength across all customer types, geographies, industry verticals, and commercial vehicles, including multiyear agreements, Keystone, and traditional CapEx transactions. The company noted that even adjusting for an extra week, the results were among the best in its history, reflecting strong execution and a healthier demand environment.

AI and Data Readiness as a Business Imperative

AI is no longer an aspiration but a business imperative, with NetApp positioning its platform to make data AI-ready in place. The platform offers unified storage, robust security, and a single control plane across hybrid multi-cloud environments, eliminating the need for data movement. This approach empowers enterprises to accelerate AI and analytics while maintaining governance, enabling a confident transition from AI experimentation to production. The company won approximately 350 AI and data lake modernization deals in Q1, with increasing deal sizes.

Strategic Acquisitions to Enhance Cloud and AI Capabilities

NetApp strengthened its leadership through two strategic acquisitions. In Q1, it acquired DataPelago, an innovator in AI data infrastructure, whose nucleus software engine enables high-performance in-place data processing, streamlining AI readiness. At the start of Q2, NetApp acquired JetStream, a leader in cloud-native disaster recovery for VMware environments, which will offer a simpler path to cloud modernization and position NetApp as a recovery destination for VMware deployments, even from competitors' infrastructure.

Momentum in Public Cloud and All-Flash Solutions

Public cloud revenue grew 28% YoY to $206 million (19% ex-extra week), driven by strong adoption of first-party and marketplace storage services, particularly for VMware migrations. All-flash array revenue reached $1.31 billion, up 47% YoY, as customers standardize NetApp for mission-critical and GPU-intensive AI workloads. The company is also seeing accelerating interest and stronger contribution from hybrid flash solutions.

Demand Dynamics, Pricing, and Inventory Management

The company observed accelerated purchase decisions and pricing benefits, alongside a clear structural improvement in underlying demand, especially related to AI modernization. While component costs increased, pricing actions helped offset this, leading to better-than-expected product gross margins. Management clarified that accelerated purchasing was limited to a small percentage of large customers and not a material part of the overall business. Inventory levels increased due to strategic purchases to secure supply and meet growing demand.

Raised Full-Year Outlook Reflects Confidence

Given the strong Q1 performance and continued business momentum, NetApp materially raised its full-year FY27 outlook. Revenue guidance was increased by $650 million at the midpoint to $7.975 billion to $8.225 billion, implying 17% YoY growth. Non-GAAP EPS guidance was also raised to $9.73 to $10.03, representing 22% YoY growth at the midpoint. This reflects strong confidence in the company's strategy and execution.

AI-generated summary of the company's earnings call. Not investment advice.