NetApp delivered a strong Q3 with revenue and EPS beating expectations. Management guided Q4 revenue inline but EPS above consensus, while noting significant price increases for memory. The AI portfolio is seeing early traction, with AFX off to a strong start and AIDE launching next quarter. The company is navigating memory cost inflation through pricing, supplier management, and product mix shifts. Q3 revenue of $1.71B (+4% YoY; +6% ex-Spot), EPS $2.12 (+11% YoY), record operating income.
NetApp delivered a strong Q3 with revenue and EPS beating expectations. Management guided Q4 revenue inline but EPS above consensus, while noting significant price increases for memory. The AI portfolio is seeing early traction, with AFX off to a strong start and AIDE launching next quarter. The company is navigating memory cost inflation through pricing, supplier management, and product mix shifts. Q3 revenue of $1.71B (+4% YoY; +6% ex-Spot), EPS $2.12 (+11% YoY), record operating income.
Management highlighted strong momentum in AI, with ~300 customers selecting NetApp to prepare data for AI and as the storage foundation for AI innovations. They noted early success of the AI-focused AFX product and the upcoming general availability of the AI Data Engine (AIDE)…
Management highlighted strong momentum in AI, with ~300 customers selecting NetApp to prepare data for AI and as the storage foundation for AI innovations. They noted early success of the AI-focused AFX product and the upcoming general availability of the AI Data Engine (AIDE)…
All-flash array revenue hit a record $1.0B, up 11% YoY.
Public cloud revenue ex-Spot grew 17% YoY; Keystone grew ~65% YoY.
Management highlighted strong momentum in AI, with ~300 customers selecting NetApp to prepare data for AI and as the storage foundation for AI innovations. They noted early success of the AI-focused AFX product and the upcoming general availability of the AI Data Engine (AIDE), which is expected to drive differentiation and growth.
Management is bullish on the second half, citing a strong pipeline of large deals, recovery in federal, and policy to navigate memory cost inflation. Despite memory headwinds, they expect margin stability and strong EPS growth.
No explicit capital expenditure or capacity investment discussion was provided beyond general operational discipline and investments in key growth areas.
Management expressed confidence in their strategic position, citing record profitability, strong AI momentum, and ability to navigate memory inflation through pricing and portfolio flexibility.
“NetApp helps customers modernize their environments with a unified adaptive data foundation that extends across on-premises and cloud delivering high performance availability and integrated security as data center demands grow customers are”
“As you know, in the prior supply chain situations that we experienced a few years ago, we were able to manage through that without having really long extended lead times because we use merchant silicon that's off the shelf.”
“our Q3 results were not a result of pull-ins. And importantly, our Q4 guidance does not rely on pull-ins.”
“Within our mix of business this quarter, roughly 60% were still in the data prep, data readiness, data lake models, and 40% were in production training or production inferencing use cases.”
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| EPS | FY2026 Q4 | $2.21–$2.31above vs consensus | $2.26 | GUIDED |
| Revenue | FY2026 Q4 | $1.795B–$1.945Binline vs consensus | $1.87B | MAINTAINED |
| Issued | Metric | Target | Guide | Actual | Outcome |
|---|---|---|---|---|---|
| FY2026 Q2 | EPS | FY2026 Q3 | $2.01–$2.11 | $2.12 | Met / beat |
| FY2026 Q2 | Gross margin | FY2026 Q3 | 72.3%–73.3% | 70.58% | Missed |
| FY2026 Q2 | Op margin | FY2026 Q3 | 30.5%–31.5% | 25.16% | Missed |
| FY2026 Q2 | Revenue | FY2026 Q3 | $1.615B–$1.765B | $1.713B | Met / beat |
AWS is a key distribution partner; NetApp's FSx for NetApp ONTAP is winning workloads in AWS, indicating strong joint go-to-market traction.
“a retailer, after experiencing a ransomware attack, moved off a competitor's infrastructure to the cloud. They chose AWS FSx for NetApp ONTAP for its support of immutable volume copies providing data protection against cyber attacks.”
… our customer base. Let me share a couple of examples of how our cloud services are displacing competitors. A multinational insurance company aiming to overcome the complexity of its legacy infrastructure and improve agility selected Azure NetApp Files for its proven performance, ease of use, and enterprise-grade reliability. ANS is now the cornerstone of their cloud transformation. Similarly, a retailer, after experiencing a ransomware attack, moved off a competitor's infrastructure to the cloud. They chose AWS FSx for NetApp ONTAP for its support of immutable volume copies providing data protection against cyber attacks. FSXN is now their default storage service in AWS. As a leading enterprise storage solution provider and the only one with first-party data storage services native to the public cloud, NetApp is uniquely equipped to help customers easily connect their data with the leading cloud-based AI applications and accelerate modern workloads like AI in the cloud. In Q3, we introduced a new capability enabling Amazon S3 access points for Amazon FSx for NetApp ONTAP. This allows enterprises to make their workflows simpler and more efficient by connecting the many …
Azure NetApp Files is gaining traction with large enterprises migrating to the cloud, which bodes well for Microsoft's cloud platform.
“A multinational insurance company aiming to overcome the complexity of its legacy infrastructure and improve agility selected Azure NetApp Files for its proven performance, ease of use, and enterprise-grade reliability.”
… year, driven by first party and marketplace services, which grew 27%. These services are a powerful driver for new customer acquisition. About half of the revenue driven by new first-party and marketplace customers in Q3 came from new to NetApp customers, highlighting the role cloud plays in expanding our customer base. Let me share a couple of examples of how our cloud services are displacing competitors. A multinational insurance company aiming to overcome the complexity of its legacy infrastructure and improve agility selected Azure NetApp Files for its proven performance, ease of use, and enterprise-grade reliability. ANS is now the cornerstone of their cloud transformation. Similarly, a retailer, after experiencing a ransomware attack, moved off a competitor's infrastructure to the cloud. They chose AWS FSx for NetApp ONTAP for its support of immutable volume copies providing data protection against cyber attacks. FSXN is now their default storage service in AWS. As a leading enterprise storage solution provider and the only one with first-party data storage services native to the public cloud, NetApp is uniquely equipped to help customers easily connect their data with the …
NetApp management explicitly notes that its customer purchasing behavior in Q3 and Q4 is not driven by pull-ins ahead of memory price increases, contrary to market speculation. — This suggests that the strength in Q3/Q4 is durable fundamental demand, and memory supply constraints are not causing customers to over-order, reducing future demand risk.
Yes, thank you. Maybe, George, you can just help us think about some of the purchasing behavior trends you're seeing in storage, if there's any concern around supply availability, which is causing people to perhaps pre-buy, perhaps pre-buy ahead of some of the price increases that the industry knows is coming. be helpful to get sort of what you're picking up from your customer conversations. And I have a quick follow-up.
Yeah, thanks for the question, Bamsi. You know, while we can certainly understand the behavior that you were describing, our Q3 results were not a result of pull-ins. And importantly, our Q4 guidance does not rely on pull-ins. As we have said from the start of this fiscal year, we expected increasing momentum through the second half of the year for a few different reasons. First, as we said, Europe started to get better through the second quarter, and as you saw in Q3, we have increased momentum in Europe. We said that U.S. public sector would be less of a headwind in the second half of the year, and while it hasn't fully recovered, it was you know, met our software expectations in Q3. And we said that we were working on large deals that would happen in the second half of the year at the start of our fiscal. And we have been working on those deals, and we have seen some of them come through in Q3, and we expect more to come through in Q4. Finally, with regard to what we see broadly in the markets, IT spending has always been tied to customers' business outlook. And what we see today is that business outlook is pretty favorable. It is quite similar to what we saw last quarter, but in certain markets like Europe, things are picking up. And so IT spending, you can see in the public reports, is expected to be reasonably durable this coming 12 months. Customers then prioritize business projects and associated with those business projects, infrastructure projects, like we said, cyber resilience, cloud transformation, data center infrastructure upgrades, as well as AI projects. And we are well positioned to capture our share of those markets. And we are seeing that reflected in the mix of our business, high performance flash to support AI workloads, growing number of AI use cases, and of course, growth in cloud. We'll tell you more. It's a dynamic environment. We'll tell you more when we report next quarter.
NetApp's AI deal mix shows 60% of AI business is in data prep/readiness and 40% in production training/inferencing, indicating a meaningful shift from pilots to production workloads. — The shift of AI storage workloads from preparation to production these early stages suggests AI infrastructure investment is progressing past the initial buildout phase.
Yeah, thanks for taking my question. I have two of them. George, first one, I'm just kind of curious, where do we think we are in enterprise AI storage adoption cycle? It looks like last year they were still going through pilot and data preparedness. Do you think we enter production this year, or do you think that's still – TBD, and then add a follow-up.
I think as we said, our AI business has grown in terms of AI customer wins. I think this quarter, a year ago, it was around 100 plus wins. It's now close to 300. So we're seeing acceleration in our AI business. Within the AI business itself, There are industries and use cases that are certainly more advanced and more repeatable in customers, and there are others that are further behind. So, for example, in regulated industries where their data is well organized, you are seeing customers put stuff into production, or if you want to call it a pilot, it's a very large-scale pilot. Healthcare, life sciences, you know, some parts of you know, public sector, manufacturing, there are lots of use cases there that are starting to progress well beyond what's the pilot. Within our mix of business this quarter, roughly 60% were still in the data prep, data readiness, data lake models, and 40% were in production training or production inferencing use cases.