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FLASH AI adds impetus to NetApp revenue rise The AI revenue boost NetApp enjoyed in its May earnings has accelerated with record breaking $2 billion revenues for its first fy2027 quarter, a 30 percent Y/Y increase, soaring past its $1.9 billion high-end outlook. This increase beat Dell's 26 percent storage revenue rise in its latest quarter, but not, alas, its $4.9 billion in storage revenue. NetApp reported $375 million in GAAP net income, a 61 percent annual increase, $1.31 billion in all-flash array revenues, up 47 percent on the year, and a welcome 28 percent increase in public cloud sector revenues to $206 million. The 30 percent revenue growth was a sharp increase on last quarter’s 12 percent Y/Y rise and the prior quarter’s 4 percent growth. The company said it closed 350 AI and data lake deals in the quarter. CEO George Kurian said: “We delivered a stellar start to the year, exceeding our Q1 guidance on every metric and delivering a record-setting first quarter. Our disciplined approach converted robust topline growth into significant profitability, even in a challenging component cost environment with gross profit growing 29 percent to a record $1.43 billion, operating margin reaching 31.9 percent, and EPS up 66 percent from Q1 a year ago. Adjusting for the additional week in Q1, our performance still stands as one of the best in the company’s history.” He said: “We are … seeing a clear, structural improvement in the underlying demand environment.” Financial summary - Gross margin: 70.6% vs 70.1% a year ago - Operating cash flow: $503 million vs $673million a year ago - Free cash flow: $401 million vs $620 million a year ago - EPS: $1.88 vs year-ago $1.15 - Cash, cash equivalents & restricted cash: $3.6 billion vs $2.1 billion a year ago - Gross debt outstanding: $2.5 billion with net cash of $1.1 billion NetApp’s product revenue of $987 million was up 51 percent year-over-year. Support revenue of $720 million was up 11 percent year-over-year. CFO Wissam Jabre said: “Overall, Q1 was an excellent start to the fiscal year, highlighted by strong revenue growth amid heightened AI and cloud-driven storage solutions demand.” Overall, Kurian said: “Our record Q1 was fueled by robust growth in public cloud, all-flash, and Keystone (subscription) revenues.” Public cloud represents just 10 percent of NetApp’s revenues but it’s very profitable. Some of the all-flash increase was down to NAND price increases. The rising AI tide is lifting all boats, include NetApp’s. Kurian said: “AI is no longer a future aspiration; it’s a business imperative. As organizations move to operationalize AI, the challenge is not just compute, but data readiness. …The NetApp Platform enables customers to make all data AI-ready in place.” NetApp saw direct AI-fuelled demand and also its customers refreshing outdated kit as they modernized their storage. Kurian said in the earnings call: “There is, however, also, as other people have noted, including the hyperscalers, a broad-based modernization of a variety of adjacent workloads and infrastructures. When you use AI, you also want to modernize your databases. You also want to modernize your unstructured data environment to get them ready, and we saw that happening pretty much across all the industries and all the customer segments.” This Q1 revenue jump has spurred NetApp’s estimates of future revenues, with Kurian saying: “Given our strong start and the success we’re seeing across our business, we are materially raising our outlook for the year.” In more detail he said: “I think as I noted with regard to what gives us confidence, it is the fact that all of our product lines, all of our customer segments by size, all of the types of commercial vehicles we use, multi-year agreements, storage-as-a-service, traditional CapEx transactions, as well as the performance through all of our routes to market, have outperformed materially. And the outlook for the year is very strong.” Next quarter’s revenues are being guided to $2.1 billion ± $75 million, a 23 percent mid-point rise. Last quarter’s full fy2027 year outlook of $7.45 billion ± $125 million, a 7.6 percent Y/Y mid-point increase, has been lifted to $8.1 billion ±$125 million, a substantial 17 percent more than last year at the mid-point. NetApp and VCF NetApp announced new capabilities in ONTAP have been tested and validated to support VMware Cloud Foundation (VCF) 9.1. VCF provides a unified private cloud platform for running both traditional (virtualized) and modern (containerized) workloads. NetApp’s support for VMware vSphere Kubernetes Service (VKS) has been tested and validated to support VCF 9.1 environments. NetApp first-party cloud storage services are the only external enterprise storage certified to support ACF environments across the major hyperscale clouds (AWS, Azure and GCP). With entitlement through VCF license portability, customers can deploy VCF in certified hyperscaler environments and run their VMware workloads on VCF in the cloud without refactoring.
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