NetApp Shares Drop 8% Despite Record Quarter Fueled by Surging AI Demand and Cloud Growth

AI demand lifts HPE and NetApp to record quarters, investors sell both

AI demand lifts HPE and NetApp to record quarters, investors sell both Shares in Hewlett Packard Enterprise Co. and NetApp Inc. both fell in late trading today despite the two companies beating Wall Street expectations for their July quarters and raising their full-year outlooks. For its fiscal third quarter, which ended on July 31, HPE reported adjusted earnings of $1.11 per share, up from 44 cents a year earlier, on revenue of $12.2 billion, up 34% year-over-year. Analysts were expecting 93 cents per share on revenue of $11.91 billion. Unadjusted diluted earnings came in at $1.06 per share against 21 cents in the same quarter of fiscal 2025. Net earnings attributable to HPE were $1.54 billion, helped by a $444 million gain on the sale of an equity interest. Adjusted operating margin widened 770 basis points to 16.2%. Operating cash flow was $1.6 billion and free cash flow $1 billion, both up from a year ago. Cloud and AI, the segment that holds the server business, was the larger of the two revenue engines at $9 billion, up 25.4% year-over-year. Servers accounted for $6.8 billion of that and grew 35.3%. Storage revenue rose 10.2% to $1.3 billion. Segment operating margin more than doubled to 17% from 7%. Networking revenue of $2.9 billion was up 74.9% from the prior-year period, a figure that mostly reflects the Juniper Networks Inc. acquisition rather than fresh demand. Strip that out and the segment grew 10%. Data center networking revenue of $382 million more than doubled, and routing revenue of $788 million was up 270%. Normalized order growth reached 42% in the quarter, running well ahead of revenue. Artificial intelligence orders set a company record at $3.1 billion, of which $2.4 billion came from AI systems and about $700 million from networking equipment sold into AI buildouts. HPE finished the quarter with a record AI backlog of $7.6 billion, $6.8 billion of it in AI systems. Supply constraints are still capping how quickly that converts into revenue. Chief Executive Antonio Neri put the quarter down to what he called "surging customer demand" across the portfolio. AI, he said in the earnings release, is becoming a multi-year growth driver for the company. At least 75% of free cash flow will go back to shareholders in the fourth quarter, Chief Financial Officer Marie Myers said, pointing to the record order backlog. Two deals landed after the quarter closed. HPE expanded its networking arrangement with Oracle Corp. to cover the database company's AI data center buildout, an agreement announced this morning, and it signed a $3.5 billion inferencing deal with an unnamed hyperscaler. The Oracle agreement also carries an equity component. HPE issued Oracle warrants to purchase shares of HPE common stock as part of the deal. How many shares those warrants cover, at what price and under what conditions were all left undisclosed, as was any estimate of the dilution. Juniper integration is also running ahead of schedule. HPE now expects $600 million in annualized cost synergies by the end of fiscal 2028, and net leverage has fallen to 1.8 times, clearing the company's 2 times target more than a year early. Shares still slipped after the bell. HPE stock has more than doubled this year on the strength of the AI order book, and consensus going into the print sat above the range management guided to in June, so a 19% earnings beat cleared a bar that was already high. NetApp's fiscal 2027 first quarter also ended on July 31. The storage company posted adjusted earnings of $2.58 per share, up from $1.55 a year earlier, on record revenue of $2.03 billion, up 30% year-over-year. Analysts were expecting $2.12 per share on revenue of $1.84 billion. Billings grew 36% to $2.06 billion and adjusted operating margin was 31.9%. All-flash array revenue hit a record $1.3 billion, up 47%, and public cloud revenue of $206 million grew 28%. Free cash flow was the weak spot at $401 million, down 35% from $620 million a year earlier. NetApp bought DataPelago Inc. during the quarter for an undisclosed sum. The startup builds data infrastructure software aimed at speeding up AI workloads. Chief Executive George Kurian said the quarter beat guidance on every metric and was NetApp's best first quarter ever. The company raised full-year revenue guidance to a range of $7.98 billion to $8.23 billion and adjusted earnings guidance to $9.73 to $10.03 per share, well clear of the $9.01 analysts had penciled in. Second-quarter revenue is forecast at $2.03 billion to $2.18 billion, with adjusted earnings of $2.54 to $2.64 per share. NetApp will pay a quarterly dividend of 52 cents per share on Oct. 28. Investors fixed on the cash flow number rather than the beats. NetApp shares dropped more than 8% in extended trading.

Netapp Expands Cloud Migration Capabilities With AWS Transform Integration - NetApp (NASDAQ:NTAP)

NetApp, Inc. (NASDAQ:NTAP) shares are trading higher on Thursday after the company reported strong first-quarter results and an upbeat outlook on Wednesday. Today, NetApp, along with Amazon Web Services (AWS), disclosed that AWS Transform will now support Amazon FSx for NetApp ONTAP. It will enable enterprises to simplify application and data migration to AWS. Expand Storage Migration Tools The generally available AWS Transform, an agentic AI service that automates workload discovery, planning and cloud migration, allows customers to move attached storage from on-premises and cloud environments directly to Amazon FSx for ONTAP. The integration enables block storage to be migrated alongside compute and networking in the same migration wave, eliminating intermediate storage platforms and separate migration tools while reducing related costs and risks. Customers migrating from NetApp ONTAP or other on-premises block storage can move to a fully managed, production-ready service combining ONTAP capabilities with AWS scalability and resiliency. Markets This NetApp Analyst Is No Longer Bearish; Here Are Top 5 Upgrades For Monday Wall Street analysts upgraded PTGX, LECO, and JHX. See analyst ratings and price targets for these stocks. 1 min read Read this article Post-migration benefits include built-in data protection, rapid cloning for development and testing, support for multiple application types and storage-efficiency features. Earnings Snapshot The company reported fiscal 2027 first-quarter adjusted earnings of $2.58 per share, up 66% year over year. That beat the consensus estimate of $2.12. Revenue rose 30% to $2.03 billion, topping the $1.84 billion Street estimate. Trending NetApp raised its fiscal 2027 adjusted earnings guidance to $9.73 to $10.03 per share. The range topped the $9.01 analyst estimate. The company now expects revenue of $7.98 billion to $8.23 billion, compared with the $7.54 billion consensus estimate. Following the earnings release, a couple of analysts made changes to their price targets on NetApp. * Wedbush analyst Matt Bryson maintained the stock with a Neutral rating and raised the price forecast from $150 to $170. * Susquehanna analyst Mehdi Hosseini maintained the stock with a Neutral and raised the price forecast from $185 to $195. Top ETFs Holding NetApp Stock * GraniteShares 2x Long NTAP Daily ETF (NASDAQ:NTAL): 66.75% Weight * SEI QiM US Large Cap Value Active ETF (NASDAQ:SEIV): 2.34% Weight * Counterpoint Quantitative Equity ETF (NYSE:CPAI): 2.45% Weight Significance: Because NTAP carries such a heavy weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock. NTAP Price Action: NetApp shares were up 1.38% to $183.26 at the time of publication on Thursday, according to Benzinga Pro data. Photo via Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

What's Going On With NetApp Stock Thursday? - NetApp (NASDAQ:NTAP)

NetApp Inc. (NASDAQ:NTAP) stock fell in Thursday's premarket trading despite strong first-quarter results and an upbeat outlook. The company reported fiscal 2027 first-quarter adjusted earnings of $2.58 per share, up 66% year over year. That beat the consensus estimate of $2.12. Revenue rose 30% to $2.03 billion, topping the $1.84 billion Street estimate. Excluding an additional week, revenue increased 26%. The extra week contributed about $65 million, mainly from Support and Public Cloud. Gross profit climbed 29% to a record $1.43 billion. Gross margin fell 50 basis points to 70.6% but exceeded the company's guidance. Operating margin expanded 6.1 percentage points to 31.9%. Operating cash flow totaled $503 million, while free cash flow reached $401 million. NetApp returned $302 million to shareholders. That included $200 million in share repurchases and $102 million in dividends. The company ended the quarter with $3.6 billion in cash and short-term investments. It had $2.5 billion in gross debt, leaving $1.1 billion in net cash. During the earnings call, NetApp CEO George Kurian said strength across the company's all-flash arrays, Keystone and cloud storage businesses could remain durable for multiple quarters. He said AI projects and broader data modernization drove demand across industries and customer segments, giving NetApp confidence to materially raise its full-year outlook. NetApp also said it expects second-quarter gross margin of 67% to 68%, down sequentially from 70.6% in the first quarter. The company attributed the expected decline mainly to a higher mix of lower-margin product revenue. Double-Digit Growth Across Businesses Hybrid Cloud revenue jumped 30% to $1.82 billion. Excluding the extra week, revenue grew 27%. Product revenue surged 51% to $987 million. Support revenue rose 11% to $720 million, while Professional Services revenue increased 15% to $112 million. Public Cloud revenue climbed 28% to $206 million. Excluding the extra week, revenue rose 19%. Deferred revenue increased 7% to $4.85 billion. Remaining performance obligations grew 14% to $5.65 billion. However, higher component costs pressured product profitability. Product gross margin fell 150 basis points sequentially to 54.6%. Management said pricing actions helped offset some cost increases. Still, the company expects less benefit from pricing during the second quarter, which could pressure margins. Public Cloud gross margin reached 86.4%. That marked an increase of 70 basis points sequentially and more than 6 percentage points year over year. All-flash array revenue surged 47% to $1.31 billion. NetApp cited growing demand from mission-critical and GPU-intensive artificial intelligence workloads. Markets This NetApp Analyst Is No Longer Bearish; Here Are Top 5 Upgrades For Monday Wall Street analysts upgraded PTGX, LECO, and JHX. See analyst ratings and price targets for these stocks. 1 min read Read this article AI Deals And Acquisitions Fuel Growth NetApp secured about 350 AI and data-lake modernization deals. The company said deal sizes increased as more projects moved into production. Trending Major wins included Samsung Electronics, an Asian neocloud provider, a large U.S. utility and several public-sector customers. NetApp AFX with NVIDIA SuperPOD also supported advanced AI workloads. NetApp acquired DataPelago during the quarter. The deal added its Nucleus engine, which processes data in place and reduces costly data movement. The company acquired Jetstream at the start of the second quarter. Jetstream provides cloud-native VMware disaster recovery and continuous data protection. NetApp Raises Full-Year Outlook NetApp raised its fiscal 2027 adjusted earnings guidance to $9.73 to $10.03 per share. The range topped the $9.01 analyst estimate. The company now expects revenue of $7.98 billion to $8.23 billion, compared with the $7.54 billion consensus estimate. For the second quarter, NetApp forecast adjusted earnings of $2.54 to $2.64 per share. Analysts expected $2.17. The company projected revenue of $2.025 billion to $2.175 billion, above the $1.846 billion consensus estimate. NTAP Price Action: NetApp shares were down 7.92% at $166.45 during premarket trading on Thursday, according to Benzinga Pro data. The stock is up 68.80% year to date. Photo via Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

NetApp Q1 FY27 slides reveal strong AI demand despite stock selloff By Investing.com

NetApp Inc. (NASDAQ:NTAP) delivered a record-setting first quarter for fiscal year 2027 on September 2, 2026, with revenue surging 30% year-over-year to $2.03 billion and non-GAAP earnings per share jumping 66% to $2.58. Despite handily beating Wall Street estimates and raising full-year guidance, the stock fell 8.92% in after-hours trading to $164.64 as investors questioned whether the exceptional growth pace can be sustained. The data infrastructure company's presentation highlighted broad-based strength across its AI and hybrid multicloud solutions, with management emphasizing that artificial intelligence has evolved from "a future aspiration" to "a business imperative" for enterprise customers. However, the market's negative reaction suggests concerns about growth deceleration in the second half of the fiscal year and the impact of one-time factors including an extra week in the quarter and accelerated purchases by large customers. Quarterly Performance Highlights NetApp's first quarter results exceeded guidance across every metric, as illustrated in the following performance summary: The company's revenue of $2.03 billion represented a 30% year-over-year increase, or 26% excluding the benefit of an extra week in the quarter. This performance beat analyst expectations of $1.83 billion by $200 million, a 10.93% surprise. Non-GAAP earnings per share of $2.58 came in $0.47 above the consensus estimate of $2.11, representing a 22.27% beat. CEO George Kurian stated in the presentation: "NetApp's record-setting start to FY27 reflects strong execution and growing demand for our AI and hybrid multicloud solutions. Our continued innovation in the NetApp Platform and strategic investments are attracting new customers and expanding relationships, setting the stage for ongoing growth and leadership in a rapidly evolving market." The company's billings -- a key forward-looking indicator -- reached $2.06 billion, up 36.1% year-over-year, while remaining performance obligations grew 14.3% to $5.65 billion, suggesting continued momentum in customer commitments. Revenue Growth Drivers NetApp's revenue growth was driven by exceptional performance across its key product categories, as shown in the following revenue composition chart: All-flash arrays and Public Cloud solutions now comprise 75% of the company's total revenue, demonstrating the successful shift toward higher-growth, higher-margin products. All-flash array revenue reached a record $1.31 billion, up 47% year-over-year, while Public Cloud revenue hit $206 million, up 28% year-over-year. The billings trend further underscores the company's momentum: Management disclosed that NetApp won approximately 350 AI and data lake modernization deals during the quarter, reflecting the growing demand for AI-ready infrastructure. The company's hybrid cloud revenue reached $1.82 billion, up 30% year-over-year, while maintaining strong gross margins of 68.8% in that segment. The all-flash revenue trajectory illustrates the strength of this core growth driver: Profitability & Operational Efficiency NetApp demonstrated significant operating leverage in the quarter, with earnings per share growing more than twice as fast as revenue. CFO Wissam Jabre noted in the presentation: "NetApp delivered an exceptional first quarter, demonstrating the strength of our business model and ability to capitalize on market opportunities. Broad-based demand for the NetApp Platform underpins our raised FY27 outlook." Non-GAAP operating margin expanded 610 basis points year-over-year to 31.9%, despite a 50-basis-point decline in gross margin to 70.6%. The gross margin compression was primarily due to a higher mix of product revenue, which typically carries lower margins than services and support contracts. The company's earnings per share growth trajectory demonstrates strong profitability expansion: Operating income reached $645 million, up 61% year-over-year, reflecting disciplined expense management alongside revenue growth. Free cash flow for the quarter totaled $401 million, representing a 19.8% margin, though this metric typically shows quarterly volatility due to the timing of collections and payments. NetApp returned $302 million to shareholders during the quarter through $200 million in share repurchases and $102 million in dividends, reducing the diluted share count by 1.5% year-over-year to 200 million shares. Strategic Platform Positioning The company's presentation emphasized its evolution into what it calls "The Intelligent Data Infrastructure Company," built around a comprehensive platform designed for the AI era. The platform architecture rests on four key pillars: This strategic positioning addresses a critical enterprise challenge: as data increasingly spans data centers, clouds, the edge, and AI infrastructure, organizations need unified solutions that can turn distributed data into AI-ready knowledge without requiring it to be moved, copied, or consolidated. NetApp received significant industry recognition during the quarter, reinforcing its competitive position. The company was named a Leader in the 2026 Gartner Magic Quadrant for Enterprise Storage Platforms and placed first in the Hybrid Cloud Storage Use Case in the 2026 Gartner Critical Capabilities report with a score of 4.62 out of 5. Additionally, NetApp was recognized as a Leader in the Forrester Wave for Object Storage Solutions in Q2 2026. The presentation highlighted key innovations during the quarter, including simplified AI workload management, enhanced cloud migration capabilities with large file support, expanded partnerships for integrated AI and security solutions, and improved automation for Kubernetes and virtualized environments. Forward-Looking Statements NetApp raised its full-year fiscal 2027 guidance significantly, reflecting confidence in sustained demand for AI and modernization solutions. The company now expects revenue of $7.975 billion to $8.225 billion, with a midpoint of $8.1 billion -- an increase of $650 million from prior guidance. This implies approximately 17% year-over-year growth at the midpoint. For the second quarter of fiscal 2027, NetApp guided for revenue of $2.025 billion to $2.175 billion (midpoint $2.1 billion) and non-GAAP earnings per share of $2.54 to $2.64. The company expects non-GAAP gross margin of 67% to 68% and operating margin of 30.9% to 31.9% for the second quarter. Management indicated that product gross margin should be slightly better than previously expected for the remainder of the year, helped by pricing actions in response to rising component costs and favorable product mix. However, the implied growth rate for the second half of the fiscal year represents a deceleration from the exceptional first-quarter performance. Market Context & Investor Concerns Despite the strong results and raised guidance, NetApp's stock fell sharply in after-hours trading, declining 8.92% to $164.64. The negative market reaction appears driven by several factors that emerged during the earnings discussion. First, management acknowledged that some of the first quarter's strength came from accelerated purchases by a small number of large customers, raising questions about demand sustainability. Second, the quarter benefited from an extra week, which contributed approximately 4 percentage points to the reported 30% revenue growth. Third, the raised full-year guidance implies a significant deceleration in growth during the second half of the fiscal year compared to the first quarter's performance. Analysts on the earnings call pressed management on whether the quarter reflected true underlying demand strength or represented a pull-forward of future purchases. CEO Kurian identified three contributing factors: accelerated buying by some large customers, pricing benefits from higher component costs, and a broader improvement in underlying demand tied to AI and infrastructure modernization initiatives. The company's forward guidance suggests management expects more normalized growth patterns in coming quarters, adjusted for typical seasonality. While the raised full-year outlook demonstrates confidence in the business trajectory, investors appeared to focus on the implied sequential deceleration rather than the absolute strength of the results. Additional risks highlighted in the presentation's safe harbor statement include potential impacts from global economic conditions, inflation, interest rates, geopolitical conflicts, cybersecurity threats, supply chain disruptions, and regulatory changes -- all factors that could affect future performance despite the strong first-quarter results. NetApp's stock remains well above its 52-week low of $93.69 but has moved further from its 52-week high of $209.06 following the after-hours decline. The company's market capitalization stood at approximately $35.94 billion based on the regular session close of $180.68. Full presentation: This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

NetApp earnings today: AI momentum meets high expectations By Investing.com

NetApp Inc. reports first-quarter fiscal 2027 results today after the market close, with the storage company announcing results on Sept. 2 after the market close. Analysts expect earnings per share of $2.11 on revenue of $1.83 billion, representing year-over-year growth of 36.13% and 17.31%, respectively -- though both figures reflect sequential declines from the company's typically strong fourth-quarter results of $2.43 per share and $1.95 billion in May. The bar is high following NetApp's spectacular last quarter, when shares jumped 46.5% compared to an implied move of 9.4% after the company beat on both top and bottom lines. This time around, shares may move 9.7% based on options data, suggesting investors anticipate another volatile reaction. Analysts rate the stock a Buy with a mean price target of $189.19, implying 3.29% upside from the current $183.16. The consensus reflects cautious optimism, with 8 Buy ratings and 12 Holds among the 20 analysts covering the company. Recent activity has tilted positive: NetApp's price target was raised to $206 from $180 at BofA, while Morgan Stanley upgraded the stock to Hold from Sell in August, raising its target to $173 from $137. EPS estimates have risen 0.56% over the past 60 days, while revenue estimates have climbed 0.46% during the same period, signaling modest but steady confidence heading into the print. Both metrics have remained essentially flat over the past week. What Investors Are Watching The quarter's key question is whether NetApp can translate artificial intelligence opportunities into sustained revenue growth. Accelerating adoption of AI and analytics workloads is driving demand for unified, high-performance data infrastructure, with NetApp securing over 125 AI wins in Q1, more than doubling year-over-year. Investors want evidence these design wins are converting to production deployments and meaningful revenue. Public Cloud growth remains a critical metric for the company's strategic transformation. NetApp's cloud services, including partnerships with Amazon, Microsoft and Google, represent a higher-margin, recurring revenue opportunity that could help offset pressure in traditional storage hardware. Margin sustainability will also face scrutiny. NetApp's 70.74% gross margin and 41.08% projected EPS growth suggest strong operational leverage, but the company must balance investments in AI capabilities against competitive pressures from both hyperscalers building proprietary storage solutions and nimbler cloud-native competitors. The results arrive as AI infrastructure demand reaches all-time highs, with forecasts showing 100 GW of data centers to be built between 2026 and 2030, with AI making up to half of all workloads by 2030. NetApp's ability to capture its share of this spending boom while maintaining profitability will determine whether recent analyst upgrades prove prescient -- or premature. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.