Latest quarter
NetApp reported Q1 FY2027 revenue of $2.0 billion, up 29.9% from $1.6 billion a year earlier, and said revenue exceeded the $1.8 billion consensus. The company reported adjusted EPS, as the consensus counts it, of $2.58, exceeding the $2.13 consensus, while diluted EPS was $1.88, up 63.5% from $1.15 in Q1 FY2026.
The filing said higher product revenue, led by all-flash array systems and supported by price increases, drove the year-over-year revenue increase; the additional week contributed approximately $65 million of services revenue. The filing also attributed support-revenue growth partly to the additional week, Keystone storage-as-a-service revenue growth to professional and other services, and public-cloud growth to customer demand and the additional week.
NetApp reported gross margin of 70.1%, compared with 70.4% a year earlier, as higher component costs affected margins. Operating margin was 23.9%, compared with 19.8% a year earlier, while free cash flow was $401.0 million, compared with $620.0 million in Q1 FY2026. The filing said the company used $200.0 million for share repurchases and $102.0 million for dividends during the quarter.
| Q1 FY2027 | Q1 FY2026 | Change | |
|---|---|---|---|
| Revenue | $2.0 billion | $1.6 billion | 29.9% |
| Diluted EPS | $1.88 | $1.15 | 63.5% |
| Gross margin | 70.1% | 70.4% | −0.4 percentage points |
| Operating margin | 23.9% | 19.8% | 4.1 percentage points |
| Free cash flow | $401.0 million | $620.0 million | −35.3% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $2.58 | $2.13 | Beat by 21.1% |
| Revenue | $2.0 billion | $1.8 billion | Beat by 9.86% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
George Kurian said the demand profile in Q1 was broad-based across customer sizes, geographies, industries, workloads, on-premises offerings, Keystone and cloud. He said NetApp saw some accelerated purchasing among its largest customers, but added that those purchases occurred at a very small percentage of customers and were not material to the overall business.
Kurian said the company saw AI-specific build-outs, including GPU-connected environments and data-lake modernization, alongside modernization of databases and unstructured-data environments. He said NetApp won approximately 350 AI and data-lake modernization deals in Q1 and that deal sizes were increasing as customers moved from proof-of-concept projects to production workloads.
On pricing and costs, Kurian said the company adjusted pricing as silicon and commodity costs increased. Wissam Jabre said Q1 product gross margin exceeded the company’s expectations, helped in part by favorable product mix, and said the outlook for product margin over the rest of FY2027 had improved slightly compared with the outlook provided 90 days earlier. Jabre said price increases should materialize sooner than in the past because NetApp has taken actions to be more agile.
When analysts asked about the durability and composition of demand, Kurian said some customers could accelerate purchases while deferring lower-priority projects, and that NetApp would not quantify the AI-driven share of revenue. He said the company also would not break out the contribution from accelerated purchases.
Jabre said NetApp held higher inventory at the end of Q1 to secure supply for demand growth. He said expense growth reflected higher variable-compensation accruals as performance exceeded expectations and continued investment in AI solutions. Kurian said the company acquired DataPelago for AI-driven analytics and inferencing, and acquired Jetstream at the start of Q2 to support cloud-native disaster recovery for VMware environments.
For Q2 and the rest of FY2027, Jabre said the company’s outlook incorporates the pricing, mix and cost factors it sees when projecting the business. Kurian said NetApp had raised Q2 and full-year guidance and would provide additional information as the year progresses.
Guidance
NetApp said it raised FY2027 revenue guidance to $8.0 billion–$8.2 billion and non-GAAP EPS guidance to $9.73–$10.03. The company also raised its FY2027 non-GAAP operating-margin outlook to 30.3%–31.3%. NetApp’s current FY2027 non-GAAP gross-margin outlook is 68.1%–69.1%; Jabre said the revised range reflects a higher expected product-revenue mix, while product gross-margin expectations improved slightly.
| Metric | For | Guide | Previous guide | Change |
|---|---|---|---|---|
| EPS, non-GAAP | FY2027 | $9.73–$10.03 | — | New |
| EPS, GAAP | FY2027 | $7.35–$7.65 | — | New |
| Operating margin, non-GAAP | FY2027 | 30.3%–31.3% | — | New |
| Operating margin, GAAP | FY2027 | 24.3%–25.3% | — | New |
| Gross margin, non-GAAP | FY2027 | 68.1%–69.1% | — | New |
| Gross margin, GAAP | FY2027 | 67.1%–68.1% | — | New |
| Revenue | FY2027 | $8.0 billion–$8.2 billion | — | New |
| EPS, non-GAAP | Q2 FY2027 | $2.54–$2.64 | — | New |
| EPS, GAAP | Q2 FY2027 | $1.97–$2.07 | — | New |
| Operating margin, non-GAAP | Q2 FY2027 | 30.9%–31.9% | — | New |
| Operating margin, GAAP | Q2 FY2027 | 24.9%–25.9% | — | New |
| Gross margin, non-GAAP | Q2 FY2027 | 67.0%–68.0% | — | New |
| Gross margin, GAAP | Q2 FY2027 | 66.0%–67.0% | — | New |
| Revenue | Q2 FY2027 | $2.0 billion–$2.2 billion | — | New |
| Gross margin, Public Cloud | long-term | 80.0%–85.0% | — | New |