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NetApp (NTAP)
NASDAQ:NTAP
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NetApp
(NASDAQ:NTAP)
69Neutral
Positive Factors
AI Traction
NetApp reported consistent AI traction with more than 100 deals in the quarter and multiple service provider wins, expecting a second half 2025 and beyond inflection with increasing enterprise AI deployments.
Deal Closure
Management has identified the problem of deal pushouts and has already closed many of the larger deals that were delayed.
Public Cloud Growth
Public Cloud revenue grew by 15% year-over-year, with first-party and marketplace services increasing by 46% year-over-year.
Negative Factors
Gross Margin Decline
Gross margin came in at 70.7%, which was lower than the guidance range of 71-72%.
Product Revenue
Guidance was below expectations and product revenue growth seems to have decelerated.
Revenue Guidance
The lowered FY25 guidance reflects a $30M FX headwind, the divestiture of Spot ($15M), and global public sector caution.
NetApp (NTAP) vs. S&P 500 (SPY)
Market Cap
$16.84B
Dividend Yield2.71%
Average Volume (3M)2.81M
Price to Earnings (P/E)15.1
Beta (1Y)1.39
Revenue Growth5.46%
EPS Growth23.49%
CountryUS
Employees11,800
SectorTechnology
Sector Strength40
IndustryComputer Hardware
Share Statistics
EPS (TTM)5.40
Shares Outstanding206,376,660
10 Day Avg. Volume2,760,227
30 Day Avg. Volume2,805,755
Financial Highlights & Ratios
PEG Ratio0.64
Price to Book (P/B)N/A
Price to Sales (P/S)2.88
Price to Cash Flow (P/CF)12.20
P/FCF Ratio12.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$122.33Price Target Upside60.75% Upside
Rating ConsensusHold
Number of Analyst Covering13
NetApp Business Overview & Revenue Model
Company DescriptionNetApp, Inc. provides cloud-led and data-centric services to manage and share data on-premises, and private and public clouds worldwide. It operates in two segments, Hybrid Cloud and Public Could. The company offers intelligent data management software, such as NetApp ONTAP, NetApp Snapshot, NetApp SnapCenter Backup Management, NetApp SnapMirror Data Replication, NetApp SnapLock Data Compliance, NetApp ElementOS software, and NetApp SANtricity software; and storage infrastructure solutions, including NetApp All-Flash FAS series, NetApp Fabric Attached Storage, NetApp FlexPod, NetApp E/EF series, NetApp StorageGRID, and NetApp SolidFire. It also provides cloud storage and data services comprising NetApp Cloud Volumes ONTAP, Azure NetApp Files, Amazon FSx for NetApp ONTAP, NetApp Cloud Volumes Service for Google Cloud, NetApp Cloud Sync, NetApp Cloud Tiering, NetApp Cloud Backup, NetApp Cloud Data Sense, and NetApp Cloud Volumes Edge Cache; and cloud operations services, such as NetApp Cloud Insights, Spot Ocean Kubernetes Suite, Spot Security, Spot Eco, and Spot CloudCheckr. In addition, the company offers application-aware data management service under the NetApp Astra name; and professional and support services, such as strategic consulting, professional, managed, and support services. Further, it provides assessment, design, implementation, and migration services. The company serves the energy, financial service, government, technology, internet, life science, healthcare service, manufacturing, media, entertainment, animation, video postproduction, and telecommunication markets through a direct sales force and an ecosystem of partners. NetApp, Inc. was incorporated in 1992 and is headquartered in San Jose, California.
How the Company Makes MoneyNetApp generates revenue through the sale of hardware and software products, as well as cloud and support services. The company's revenue model includes product sales, which comprise the majority of its earnings, driven by its storage systems and data management software. Additionally, NetApp derives income from providing support services and maintenance contracts that offer technical assistance and updates to its customers. The company also earns from its cloud offerings, which include hybrid cloud solutions that enable customers to manage data across on-premises and cloud environments. Key partnerships with major cloud providers such as Amazon Web Services, Microsoft Azure, and Google Cloud, as well as strategic alliances with technology firms, enhance its product offerings and expand its market reach, contributing significantly to its revenue.
NetApp Financial Statement Overview
Summary
NetApp demonstrates strong profitability and operational efficiency, evidenced by high profit margins and revenue growth. However, the company relies significantly on debt, which poses financial risks. Cash flow generation remains healthy, but declining free cash flow growth suggests potential caution.Income Statement
NetApp's TTM (Trailing-Twelve-Months) income statement demonstrates strong profitability. The gross profit margin is 70.5%, indicating effective cost management in production. The net profit margin is 17.5%, showcasing a healthy bottom line. Revenue growth is impressive at 3.8% from the previous year, signaling robust demand for its offerings. EBIT and EBITDA margins are at 20.8% and 26.2% respectively, reflecting solid operational efficiency.85
Very Positive
Balance Sheet
The balance sheet presents a mixed financial position. The debt-to-equity ratio stands at 2.00, suggesting a high reliance on debt, which could pose risks in adverse market conditions. However, the return on equity is a strong 114.3%, indicating effective use of shareholder funds. With an equity ratio of 11.1%, there is a relatively low proportion of equity financing, which may limit financial flexibility.72
Positive
Cash Flow
Cash flow analysis shows a solid performance with a stable free cash flow to net income ratio of 1.11, indicating that the company generates adequate free cash flow relative to its net income. The operating cash flow to net income ratio is 1.27, reflecting efficient cash generation from core operations. However, free cash flow growth has declined by 17.3%, suggesting potential challenges in maintaining free cash flow levels.78
Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 6.51B | 6.27B | 6.36B | 6.32B | 5.74B | 5.41B | Gross Profit |
| 4.59B | 4.43B | 4.21B | 4.22B | 3.81B | 3.62B | EBIT |
| 1.35B | 1.21B | 1.02B | 1.16B | 1.03B | 945.00M | EBITDA |
| 1.71B | 1.58B | 1.43B | 1.36B | 1.29B | 1.24B | Net Income Common Stockholders |
| 1.14B | 986.00M | 1.27B | 937.00M | 730.00M | 819.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 4.38B | 3.26B | 3.07B | 4.13B | 4.60B | 2.88B | Total Assets |
| 7.24B | 9.89B | 9.82B | 10.03B | 9.36B | 7.52B | Total Debt |
| 1.33B | 2.65B | 2.39B | 2.64B | 2.63B | 1.67B | Net Debt |
| -441.60M | 749.00M | 73.00M | -1.50B | -1.96B | -1.21B | Total Liabilities |
| 4.03B | 8.74B | 8.66B | 9.19B | 8.68B | 7.28B | Stockholders Equity |
| 3.21B | 1.15B | 1.16B | 838.00M | 685.00M | 242.00M |
| Cash Flow | Free Cash Flow | ||||
| 1.26B | 1.53B | 868.00M | 985.00M | 1.17B | 936.00M | Operating Cash Flow |
| 1.44B | 1.69B | 1.11B | 1.21B | 1.33B | 1.06B | Investing Cash Flow |
| 163.00M | -735.00M | -1.39B | -561.00M | 21.00M | 1.27B | Financing Cash Flow |
| -1.90B | -1.34B | -1.51B | -1.02B | 444.00M | -1.96B |
NetApp Technical Analysis
Negative
76.10
Price Trends
105.32
Negative
112.76
Negative
117.62
Negative
Market Momentum
-5.13
Negative
33.59
Neutral
16.66
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTAP, the sentiment is Negative. The current price of 76.1 is below the 20-day moving average (MA) of 89.81, below the 50-day MA of 105.32, and below the 200-day MA of 117.62, indicating a bearish trend. The MACD of -5.13 indicates Negative momentum. The RSI at 33.59 is Neutral, neither overbought nor oversold. The STOCH value of 16.66 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for NTAP.
NetApp Risk Analysis
NetApp disclosed 38 risk factors in its most recent earnings report. NetApp reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
NetApp Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $16.84B | 15.10 | 114.33% | 2.71% | 5.46% | 23.49% | |
69 Neutral | $17.70B | 13.01 | 32.21% | ― | 124.51% | 87.78% | |
68 Neutral | $14.13B | 12.21 | -109.27% | 4.25% | 24.17% | ― | |
68 Neutral | $11.88B | 7.29 | 13.99% | ― | 38.59% | ― | |
61 Neutral | $22.42B | 8.54 | 84.33% | 5.00% | 1.03% | -18.56% | |
60 Neutral | $13.32B | 121.54 | 8.29% | ― | 11.92% | 74.08% | |
57 Neutral | $18.57B | 9.42 | -13.42% | 2.72% | 5.01% | -23.43% |
* Technology Sector Average
Performance Comparison
NTAP
NetApp
76.10
-27.71
-26.69%
HPQ
HP
22.61
-5.71
-20.16%
STX
Seagate Tech
66.73
-19.88
-22.95%
SMCI
Super Micro Computer
29.82
-63.03
-67.88%
WDC
Western Digital
30.54
-24.58
-44.59%
PSTG
Pure Storage
37.18
-16.57
-30.83%
NetApp Earnings Call Summary
Earnings Call Date: Feb 27, 2025 | % Change Since: -35.22% | Next Earnings Date: May 29, 2025
Earnings Call Sentiment Neutral
The earnings call presented both positive achievements and challenges. While there was strong growth in specific segments like all-flash arrays and public cloud, and improvements in operating and public cloud gross margins, there were notable execution challenges and unfavorable currency impacts. The company's guidance adjustments and sector-specific weaknesses also added caution. However, the company's strategic positioning and product strength provide a balanced outlook.Highlights
Operating Margin Success
Achieved an operating margin of 30%, above expectations, indicating disciplined management of the business.
Strong Growth in All-Flash Array Business
All-flash array business grew 10% year-over-year, reaching an annualized revenue run rate of $3.8 billion.
Keystone Revenue Growth
Keystone, the Storage as a Service offering, saw revenue growth of nearly 60% year-over-year.
Public Cloud Segment Growth
Public Cloud segment revenue grew 15% year-over-year, with first-party and marketplace cloud storage services growing by over 40%.
Improvements in Public Cloud Gross Margins
Public cloud gross margins improved to 76%, up from 66% in the prior year, marking a 1,000 basis point improvement.
Recognition for Primary Storage
Named a customer's choice for primary storage in Gartner's 2025 Voice of the Customer report.
Lowlights
Sales Execution Challenges
Inconsistent execution resulted in some deals slipping out of Q3, impacting top-line performance.
Impact of Strong U.S. Dollar
The stronger U.S. dollar negatively impacted revenue and EPS, with an expected impact of approximately $30 million less in reported revenue.
Slight Decrease in FY 2025 Guidance
Guidance for FY 2025 was slightly decreased due to the divestiture of Spot by NetApp and FX headwinds.
Decline in Support Revenue
Support revenue declined 2% year-over-year, though it was roughly flat in constant currency.
Global Public Sector Weakness
Expected global public sector weakness, particularly in the U.S., has tempered growth expectations.
Company Guidance
During the NetApp third quarter fiscal year 2025 earnings call, the company provided guidance adjusting its outlook for the fourth quarter and full fiscal year 2025, citing the recent divestiture of Spot by NetApp, the impact of a stronger U.S. dollar, and underperformance in Q3 revenue. The company now expects fiscal year 2025 revenue to range between $6.49 and $6.64 billion, representing approximately 5% year-over-year growth at the midpoint, with consolidated gross margin around 71% and operating margin between 28% and 28.5%. The earnings per share (EPS) forecast for the year is between $7.17 and $7.27, reflecting 12% growth at the midpoint. For the fourth quarter, revenue is projected to be between $1.65 and $1.80 billion, with an EPS range of $1.84 to $1.94. Despite Q3 challenges, the company remains focused on enhancing sales execution and controlling expenses, while maintaining a strong market position in AI and cloud solutions, with the anticipation of continued growth in these areas.NetApp Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
NetApp Expands Board with New Director Appointment
Positive
Mar 26, 2025
On March 21, 2025, NetApp’s Board of Directors expanded its board from nine to ten members and appointed Frank Pelzer as a new director. Pelzer, who will serve on the Audit Committee, is recognized as a financial expert and brings extensive experience in modern financial operations within cloud and as-a-service companies. His appointment is expected to drive NetApp’s strategic initiatives and enhance shareholder value as the company continues to innovate in data and intelligence.
Executive/Board ChangesBusiness Operations and Strategy
NetApp Appoints Elizabeth O’Callahan as Chief Administrative Officer
Positive
Feb 26, 2025
On February 26, 2025, NetApp announced the appointment of Elizabeth O’Callahan as the Chief Administrative Officer, effective March 3, 2025. In her expanded role, O’Callahan will oversee Legal, Compliance, Government Relations, Sustainability, Human Resources, Workplace Experience, and Corporate Communications. This strategic leadership change aims to enhance operational excellence and align with NetApp’s corporate strategy, reinforcing its commitment to talent development and long-term growth.
Executive/Board ChangesBusiness Operations and Strategy
NetApp Appoints Wissam Jabre as New CFO
Positive
Jan 28, 2025
On January 28, 2025, NetApp announced the appointment of Wissam Jabre as the new Executive Vice President and Chief Financial Officer, effective March 10, 2025. Jabre, who has extensive experience in leading finance organizations, will replace Michael J. Berry, who is retiring but will remain as a senior advisor during the transition. The appointment is expected to drive sustained growth and long-term value for stakeholders as NetApp continues to expand its market share with its intelligent data infrastructure platform.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.