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NetApp's Q2 Earnings Top Estimates, Stock Up on Raised Guidance
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NetApp, Inc. (NTAP - Free Report) reported second-quarter fiscal 2025 non-GAAP earnings of $1.87 per share, which beat the Zacks Consensus Estimate by 4.5% and jumped 18.4% year over year. The bottom line also surpassed the company’s guided range of $1.73-$1.83.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Revenues of $1.66 billion increased 6% year over year and came within the guided range of $1.565-$1.715 billion. This upside resulted from strong sales across Hybrid Cloud and Public Cloud segments, notably growth of about 19% in all-flash storage and strong growth in first-party and marketplace cloud storage services revenues. Also, the top line beat the consensus mark by 0.8%.
Management has raised its outlook for fiscal 2025 driven by continued momentum across flash, block, AI and cloud storage solutions. It now expects full-year revenues in the range of $6.54-$6.74 billion, up 6% year over year at the mid-point. Earlier it anticipated sales in the band of $6.48-$6.68 billion.
The company now forecasts non-GAAP earnings per share for fiscal 2025 to be between $7.20 and $7.40, up 13% year over year at the mid-point. Earlier, it expected non-GAAP earnings between $7.00 and $7.20 per share. For fiscal 2025, NetApp continues to expect non-GAAP gross margin in the range of 71-72%. Non-GAAP operating margin is anticipated in the band of 28-28.5% compared with 27-28%, unchanged from the prior view.
Image Source: Zacks Investment Research
Following the announcement, NTAP shares are up 4.6% in the pre-market trading session today. In the past year, shares have gained 62.4% compared with the sub-industry’s growth of 23.6%.
NTAP’s Top-Line Details
NTAP 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 6% year over year to $1.49 billion. The Public Cloud segment’s revenues improved 9% to $168 million. Driven by strength in the cloud storage business, NTAP now expects cloud revenues to return to double-digit growth year over year from the current quarter.
We expected fiscal second-quarter revenues from the Hybrid Cloud and Public Cloud segments at $1,484 million and $159 million, respectively.
Within the Hybrid Cloud segment, Product revenues (51.5% of segmental revenues) increased 9% year over year to $768 million.
Revenues from Support Contracts (42.6%) totaled $635 million, up 2% year over year. Professional and Other Services revenues (5.9%) amounted to $87 million, up 10%.
Region-wise, the Americas, Europe, Middle East and Africa, and Asia Pacific contributed 52%, 33% and 15% to total revenues, respectively.
Direct and indirect revenues added 23% and 77%, respectively, to total revenues.
Key Metrics of NTAP
In the fiscal second quarter, the company’s All-Flash Array Business’s annualized net revenue run rate was $3.8 billion, up 19% year over year. Total billings rose 9% year over year to $1.59 billion. Deferred revenues totaled $4.1 billion. Remaining performance obligations (RPO) were $4.4 billion while Unbilled RPO was $330 million. Revenues from Keystone storage as a service solution were up 55% year over year.
NTAP’s Operating Details
Non-GAAP gross margin of 72% unchanged from the prior-year quarter’s levels.
The Hybrid segment’s gross margin was 71.8% compared with 72.7% in the prior year. The Public Cloud segment witnessed a gross margin of 73.8%, up from 66.2%.
Non-GAAP operating expenses were $719 million compared with $706 million in the previous quarter.
Non-GAAP operating income rose 13.4% year over year to $475 million. Non-GAAP operating margin was 28.6%, up from the prior year's figure of 26.8%.
NTAP’s Balance Sheet & Cash Flow
NetApp exited the quarter ended Oct. 25, 2024, with $2.22 billion in cash, cash equivalents and investments compared with $3.02 billion as of July 26.
Long-term debt was $1.244 billion unchanged as of July 26.
Net cash from operations was $105 million compared with $135 million in the previous year's quarter.
Free cash flow was $60 million (free cash flow margin of 3.6%) compared with $97 million in the prior quarter (6.2%). Lower free cash flow was mainly due to upfront payments for strategic SSD purchases, which are expected to be utilized during fiscal 2025.
The company returned $406 million to its shareholders as dividend payouts and share repurchases in the fiscal second quarter. NetApp has $800 million worth of shares remaining under its existing authorization. NTAP also announced a dividend of 52 cents per share payable on Jan. 22, 2025, to its shareholders of record as of the close of business on Jan. 3.
NTAP’s Q3 Guidance
Management expects non-GAAP earnings per share to be between $1.85 and $1.95. The Zacks Consensus Estimate is pegged at $1.79 per share.
Net revenues are anticipated in the range of $1.61-$1.76 billion. The Zacks Consensus Estimate is pegged at $1.65 billion.
Recent Performance of Other Companies in Tech Space
Seagate Technology Holdings plc (STX - Free Report) reported first-quarter fiscal 2025 non-GAAP earnings of $1.58 per share, beating the Zacks Consensus Estimate by 6.8%. The company reported a non-GAAP loss of 22 cents per share in the year-ago quarter. This improvement in the bottom line was driven by a favorable mix shift to mass-capacity products and a better pricing environment. Non-GAAP revenues of $2.168 billion beat the Zacks Consensus Estimate by 2.4%. The figure increased 49% on a year-over-year basis and 15% sequentially. Shares of STX have gained 30.5% in the past year.
Badger Meter, Inc (BMI - Free Report) reported EPS of $1.08 for the third quarter of 2024, beating the Zacks Consensus Estimate by 5.9%. Quarterly net sales were $208.4 million, up 12% from $186.2 million in the year-ago quarter. This uptick resulted from continued strong yet normalizing demand for its tailorable water management solutions. Shares of BMI have gained 47.3% in the past year.
Iridium Communications (IRDM - Free Report) reported EPS of 21 cents for the third quarter of 2024, beating the Zacks Consensus Estimate by 5%. The company incurred a loss of a cent per share in the prior-year quarter. Quarterly revenues were $212.8 million, up 8% from the year-ago level, driven by strength across all three segments. The Zacks Consensus Estimate was pegged at $205.7 million. Shares of IRDM have lost 23.7% in the past year.
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NetApp's Q2 Earnings Top Estimates, Stock Up on Raised Guidance
NetApp, Inc. (NTAP - Free Report) reported second-quarter fiscal 2025 non-GAAP earnings of $1.87 per share, which beat the Zacks Consensus Estimate by 4.5% and jumped 18.4% year over year. The bottom line also surpassed the company’s guided range of $1.73-$1.83.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Revenues of $1.66 billion increased 6% year over year and came within the guided range of $1.565-$1.715 billion. This upside resulted from strong sales across Hybrid Cloud and Public Cloud segments, notably growth of about 19% in all-flash storage and strong growth in first-party and marketplace cloud storage services revenues. Also, the top line beat the consensus mark by 0.8%.
Management has raised its outlook for fiscal 2025 driven by continued momentum across flash, block, AI and cloud storage solutions. It now expects full-year revenues in the range of $6.54-$6.74 billion, up 6% year over year at the mid-point. Earlier it anticipated sales in the band of $6.48-$6.68 billion.
The company now forecasts non-GAAP earnings per share for fiscal 2025 to be between $7.20 and $7.40, up 13% year over year at the mid-point. Earlier, it expected non-GAAP earnings between $7.00 and $7.20 per share. For fiscal 2025, NetApp continues to expect non-GAAP gross margin in the range of 71-72%. Non-GAAP operating margin is anticipated in the band of 28-28.5% compared with 27-28%, unchanged from the prior view.
Image Source: Zacks Investment Research
Following the announcement, NTAP shares are up 4.6% in the pre-market trading session today. In the past year, shares have gained 62.4% compared with the sub-industry’s growth of 23.6%.
NTAP’s Top-Line Details
NTAP 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 6% year over year to $1.49 billion. The Public Cloud segment’s revenues improved 9% to $168 million. Driven by strength in the cloud storage business, NTAP now expects cloud revenues to return to double-digit growth year over year from the current quarter.
We expected fiscal second-quarter revenues from the Hybrid Cloud and Public Cloud segments at $1,484 million and $159 million, respectively.
NetApp, Inc. Price, Consensus and EPS Surprise
NetApp, Inc. price-consensus-eps-surprise-chart | NetApp, Inc. Quote
Within the Hybrid Cloud segment, Product revenues (51.5% of segmental revenues) increased 9% year over year to $768 million.
Revenues from Support Contracts (42.6%) totaled $635 million, up 2% year over year. Professional and Other Services revenues (5.9%) amounted to $87 million, up 10%.
Region-wise, the Americas, Europe, Middle East and Africa, and Asia Pacific contributed 52%, 33% and 15% to total revenues, respectively.
Direct and indirect revenues added 23% and 77%, respectively, to total revenues.
Key Metrics of NTAP
In the fiscal second quarter, the company’s All-Flash Array Business’s annualized net revenue run rate was $3.8 billion, up 19% year over year. Total billings rose 9% year over year to $1.59 billion. Deferred revenues totaled $4.1 billion. Remaining performance obligations (RPO) were $4.4 billion while Unbilled RPO was $330 million. Revenues from Keystone storage as a service solution were up 55% year over year.
NTAP’s Operating Details
Non-GAAP gross margin of 72% unchanged from the prior-year quarter’s levels.
The Hybrid segment’s gross margin was 71.8% compared with 72.7% in the prior year. The Public Cloud segment witnessed a gross margin of 73.8%, up from 66.2%.
Non-GAAP operating expenses were $719 million compared with $706 million in the previous quarter.
Non-GAAP operating income rose 13.4% year over year to $475 million. Non-GAAP operating margin was 28.6%, up from the prior year's figure of 26.8%.
NTAP’s Balance Sheet & Cash Flow
NetApp exited the quarter ended Oct. 25, 2024, with $2.22 billion in cash, cash equivalents and investments compared with $3.02 billion as of July 26.
Long-term debt was $1.244 billion unchanged as of July 26.
Net cash from operations was $105 million compared with $135 million in the previous year's quarter.
Free cash flow was $60 million (free cash flow margin of 3.6%) compared with $97 million in the prior quarter (6.2%). Lower free cash flow was mainly due to upfront payments for strategic SSD purchases, which are expected to be utilized during fiscal 2025.
The company returned $406 million to its shareholders as dividend payouts and share repurchases in the fiscal second quarter. NetApp has $800 million worth of shares remaining under its existing authorization. NTAP also announced a dividend of 52 cents per share payable on Jan. 22, 2025, to its shareholders of record as of the close of business on Jan. 3.
NTAP’s Q3 Guidance
Management expects non-GAAP earnings per share to be between $1.85 and $1.95. The Zacks Consensus Estimate is pegged at $1.79 per share.
Net revenues are anticipated in the range of $1.61-$1.76 billion. The Zacks Consensus Estimate is pegged at $1.65 billion.
NTAP’s Zacks Rank
NetApp currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performance of Other Companies in Tech Space
Seagate Technology Holdings plc (STX - Free Report) reported first-quarter fiscal 2025 non-GAAP earnings of $1.58 per share, beating the Zacks Consensus Estimate by 6.8%. The company reported a non-GAAP loss of 22 cents per share in the year-ago quarter. This improvement in the bottom line was driven by a favorable mix shift to mass-capacity products and a better pricing environment. Non-GAAP revenues of $2.168 billion beat the Zacks Consensus Estimate by 2.4%. The figure increased 49% on a year-over-year basis and 15% sequentially. Shares of STX have gained 30.5% in the past year.
Badger Meter, Inc (BMI - Free Report) reported EPS of $1.08 for the third quarter of 2024, beating the Zacks Consensus Estimate by 5.9%. Quarterly net sales were $208.4 million, up 12% from $186.2 million in the year-ago quarter. This uptick resulted from continued strong yet normalizing demand for its tailorable water management solutions. Shares of BMI have gained 47.3% in the past year.
Iridium Communications (IRDM - Free Report) reported EPS of 21 cents for the third quarter of 2024, beating the Zacks Consensus Estimate by 5%. The company incurred a loss of a cent per share in the prior-year quarter. Quarterly revenues were $212.8 million, up 8% from the year-ago level, driven by strength across all three segments. The Zacks Consensus Estimate was pegged at $205.7 million. Shares of IRDM have lost 23.7% in the past year.