NetApp CFO Fireside Chat at GS Communacopia + Tech Conf 2025: Strategic Growth, Cloud, AI, & Fin. Outlook

Key Takeaways

TL;DR: NTAP mgmt reiterated focus on high-growth/high-margin areas (all-flash, block storage, Public Cloud, AI, Keystone). Solid execution driving outperformance in all-flash (now #1 mkt share per IDC) and +80% y/y surge in Keystone (Storage-aaS) rev. Cloud segment profitability beat, w/ Public Cloud GM outlook raised to 80–85%. Mgmt expects topline accel. in H2 FY26, aided by GTM investments; cost visibility strong via proactive NAND procurement. High cash gen. supports up to 100% FCF return to holders, w/ flexibility for R&D/strategic M&A.

Fin. & Op. Perf. (Q1 FY26 Highlights)

• Rev. & EPS: Both “slightly better than midpoint of guidance” in Q1.
• FCF: Record ~$620mn; intent to return up to 100% FCF to holders in FY26.
• Growth Drivers: All-flash & Public Cloud saw y/y rev. growth; Public Cloud +18% y/y (adj. for divestitures).
• OP Margin: Continued strong margin profile.
• All-Flash Leadership: “Ranked #1 exiting cal Q1 2025 in all-flash mkt per IDC.”
• Keystone (Storage-aaS): +80% y/y rev. growth in Q1; “Unbilled RPOs...>$400mn” w/ large portion from Keystone.
• Public Cloud GM: Raised guide to 80%-85% (from 75%-80%); Q1 margin at 80%.

Strategic & Growth Priorities

• All-Flash Storage:
  • Growth: All-flash outpacing total storage mkt; leadership from portfolio strength in unified & block-optimized.
  • Transition: Cust. migrating from HDD to QLC SSD on TCO.
  • Nearline Storage: Remains HDD-heavy due to cost.
• Dedicated Block Storage (ASA):
  • ASA appliance targets underpenetrated block segment; incremental runway for NTAP to gain share/accel. rev.
  • Stand-alone block appliances deliver better perf./cost for target workloads vs unified.
• Public Cloud (Native Hyperscaler Integration):
  • ONTAP natively offered by Azure, GCP, AWS—“unique solution.”
  • Refocused on first-party/marketplace post-Spot & CloudCheckr divestitures; enabled higher growth, improved mix, better margins.
  • Growth now more software-only rev. & benefit from asset depreciation roll-off.
• AI:
  • Closed “125 AI infra & data lake modernization deals” last Q.
  • Unstructured data strength positions NTAP as key AI enabler.
  • Partnerships (NVIDIA, Intel, Cisco) crucial for “tried/tested” architectures; options-oriented approach for cust.
• Sales Org & GTM:
  • Recent “strategic senior hires in NA” to boost sales force productivity. Expect 1–2 Qs before impact.
  • Expanded capacity to support H2 growth accel.