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Why Is NetApp (NTAP) Up 4.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for NetApp (NTAP - Free Report) . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NetApp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
NetApp's Q1 Earnings & Revenues Beat
NetApp reported first-quarter fiscal 2025 non-GAAP earnings of $1.56 per share, which surpassed the Zacks Consensus Estimate by 6.9%. The company reported earnings of $1.15 per share in the prior year period. The bottom line surpassed the company’s guided range of $1.4–$1.5.
Revenues of $1.54 billion increased 8% year over year. The company projected revenues in the range of $1.455–$1.605 billion. The upside resulted from strong sales across Hybrid Cloud and Public Cloud segments, notably a growth of about 40% in first party and marketplace cloud storage services revenue. However, it remains wary about the challenging macroeconomic backdrop that is hurting IT spending. Also, the top line beat the consensus mark by 0.46%.
Witnessing the continued momentum across flash, block, AI and cloud storage solutions, management has tweaked its outlook for fiscal 2025. It now expects full-year revenues in the range of $6.48–$6.68 billion, up 5% year over year at the mid-point. Earlier it projected sales in the band of $6.45–$6.65 billion.
The company now forecasts non-GAAP earnings per share for fiscal 2025 to be between $7 and $7.2, up 10% year over year at the mid-point. Earlier, it projected non-GAAP earnings between $6.8 and $7 per share.
For fiscal 2025, NetApp continues to expect non-GAAP gross margin in the range of 71-72%. Non-GAAP operating margin is projected in the band of 27-28%, unchanged from the prior view.
NetApp’s Top-Line Details
The company reports revenues under two segments — Hybrid Cloud and Public Cloud.
The Hybrid Cloud segment includes revenues from the enterprise data center business, including product, support and professional services.
The Public Cloud segment comprises revenues from products delivered as a service and related supports. The portfolio contains cloud automation and optimization services, storage and cloud infrastructure monitoring services.
Revenues from the Hybrid Cloud segment increased 7.8% year over year to $1.38 billion. The Public Cloud segment’s revenues improved 3.2% to $159 million.
We projected fiscal first-quarter revenues from the Hybrid Cloud and Public Cloud segments at $1,368 million and $161.1 million, respectively.
Within the Hybrid Cloud segment, Product revenues (48.4% of segmental revenues) increased 13.4% year over year to $669 million.
Revenues from Support Contracts (45.6%) totaled $631 million, up 3.3% year over year. Professional and Other Services revenues (6%) amounted to $82 million, up 6.5%.
Region-wise, the Americas, Europe, Middle East and Africa and Asia Pacific contributed 50%, 33% and 17% to total revenues, respectively.
Direct and indirect revenues added 22% and 78%, respectively, to total revenues.
Key Metrics
During the fiscal first quarter, the company’s All-Flash Array Business’s annualized net revenue run rate was $3.4 billion, up 21% year over year. Total billings rose 12% year over year to $1.45 billion. Deferred revenues totaled $4.2 billion.
Operating Details
Non-GAAP gross margin of 72.2% expanded 160 basis points (bps) from the prior-year quarter’s levels.
The Hybrid segment’s gross margin was 72.4% compared with 71.4% in the prior year. The Public Cloud segment witnessed a gross margin of 71.1%, up from 66.9%.
Non-GAAP operating expenses were $714 million compared with $703 million in the previous quarter.
Non-GAAP operating income rose 29% year over year to $399 million. Non-GAAP operating margin came in at 25.9% up from the prior year's figure of 21.6%.
Balance Sheet & Cash Flow
NetApp exited the quarter ended July 26, 2024, with $3.02 billion in cash, cash equivalents and investments compared with $3.3 billion as of April 26.
Long-term debt was $1.244 billion compared with $2.39 billion in the prior year.
Net cash from operations was $341 million compared with $453 million in the previous year's quarter.
Free cash flow was $300 million (free cash flow margin of 19.5%) compared with $418 million in the prior quarter (29.2%).
The company returned $507 million to shareholders as dividend payouts and share repurchases in the fiscal first quarter. It has $1 billion worth of shares remaining under its existing authorization.
Q2 2025 Guidance
Management projects non-GAAP earnings per share to be between $1.73 and $1.83. Net revenues are anticipated in the range of $1.565-$1.715 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 7.59% due to these changes.
VGM Scores
Currently, NetApp has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise NetApp has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is NetApp (NTAP) Up 4.4% Since Last Earnings Report?
It has been about a month since the last earnings report for NetApp (NTAP - Free Report) . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NetApp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
NetApp's Q1 Earnings & Revenues Beat
NetApp reported first-quarter fiscal 2025 non-GAAP earnings of $1.56 per share, which surpassed the Zacks Consensus Estimate by 6.9%. The company reported earnings of $1.15 per share in the prior year period. The bottom line surpassed the company’s guided range of $1.4–$1.5.
Revenues of $1.54 billion increased 8% year over year. The company projected revenues in the range of $1.455–$1.605 billion. The upside resulted from strong sales across Hybrid Cloud and Public Cloud segments, notably a growth of about 40% in first party and marketplace cloud storage services revenue. However, it remains wary about the challenging macroeconomic backdrop that is hurting IT spending. Also, the top line beat the consensus mark by 0.46%.
Witnessing the continued momentum across flash, block, AI and cloud storage solutions, management has tweaked its outlook for fiscal 2025. It now expects full-year revenues in the range of $6.48–$6.68 billion, up 5% year over year at the mid-point. Earlier it projected sales in the band of $6.45–$6.65 billion.
The company now forecasts non-GAAP earnings per share for fiscal 2025 to be between $7 and $7.2, up 10% year over year at the mid-point. Earlier, it projected non-GAAP earnings between $6.8 and $7 per share.
For fiscal 2025, NetApp continues to expect non-GAAP gross margin in the range of 71-72%. Non-GAAP operating margin is projected in the band of 27-28%, unchanged from the prior view.
NetApp’s Top-Line Details
The company reports revenues under two segments — Hybrid Cloud and Public Cloud.
The Hybrid Cloud segment includes revenues from the enterprise data center business, including product, support and professional services.
The Public Cloud segment comprises revenues from products delivered as a service and related supports. The portfolio contains cloud automation and optimization services, storage and cloud infrastructure monitoring services.
Revenues from the Hybrid Cloud segment increased 7.8% year over year to $1.38 billion. The Public Cloud segment’s revenues improved 3.2% to $159 million.
We projected fiscal first-quarter revenues from the Hybrid Cloud and Public Cloud segments at $1,368 million and $161.1 million, respectively.
Within the Hybrid Cloud segment, Product revenues (48.4% of segmental revenues) increased 13.4% year over year to $669 million.
Revenues from Support Contracts (45.6%) totaled $631 million, up 3.3% year over year. Professional and Other Services revenues (6%) amounted to $82 million, up 6.5%.
Region-wise, the Americas, Europe, Middle East and Africa and Asia Pacific contributed 50%, 33% and 17% to total revenues, respectively.
Direct and indirect revenues added 22% and 78%, respectively, to total revenues.
Key Metrics
During the fiscal first quarter, the company’s All-Flash Array Business’s annualized net revenue run rate was $3.4 billion, up 21% year over year. Total billings rose 12% year over year to $1.45 billion. Deferred revenues totaled $4.2 billion.
Operating Details
Non-GAAP gross margin of 72.2% expanded 160 basis points (bps) from the prior-year quarter’s levels.
The Hybrid segment’s gross margin was 72.4% compared with 71.4% in the prior year. The Public Cloud segment witnessed a gross margin of 71.1%, up from 66.9%.
Non-GAAP operating expenses were $714 million compared with $703 million in the previous quarter.
Non-GAAP operating income rose 29% year over year to $399 million. Non-GAAP operating margin came in at 25.9% up from the prior year's figure of 21.6%.
Balance Sheet & Cash Flow
NetApp exited the quarter ended July 26, 2024, with $3.02 billion in cash, cash equivalents and investments compared with $3.3 billion as of April 26.
Long-term debt was $1.244 billion compared with $2.39 billion in the prior year.
Net cash from operations was $341 million compared with $453 million in the previous year's quarter.
Free cash flow was $300 million (free cash flow margin of 19.5%) compared with $418 million in the prior quarter (29.2%).
The company returned $507 million to shareholders as dividend payouts and share repurchases in the fiscal first quarter. It has $1 billion worth of shares remaining under its existing authorization.
Q2 2025 Guidance
Management projects non-GAAP earnings per share to be between $1.73 and $1.83. Net revenues are anticipated in the range of $1.565-$1.715 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 7.59% due to these changes.
VGM Scores
Currently, NetApp has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise NetApp has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.