NetApp Crushes Q1 Earnings Expectations, Raises Outlook

NetApp, a leading provider of hybrid cloud and all-flash storage solutions, delivered impressive fiscal first quarter 2027 results that exceeded Goldman Sachs' expectations. The company reported adjusted earnings per share of $2.58, surpassing analysts' projections of $2.11 per share. Revenue also outperformed forecasts, reaching $2.03 billion compared to the anticipated $1.83 billion.

Gross margins reached 70.6%, landing at the high end of NetApp's guidance range of 69.1% to 70.7%. EBIT margins of 31.9% surpassed both Goldman Sachs and consensus estimates, indicating strong profitability. The company's hybrid cloud revenue grew 30% year-over-year, with all-flash storage accelerating to 47% year-over-year growth.

Public Cloud revenue increased 28% year-over-year, or 19% excluding an extra week, driven by first-party sales and hyperscaler marketplace activity. NetApp closed approximately 350 AI deals in the fiscal first quarter, down from 500 in the prior quarter, though deal sizes increased as customers moved from proof of concept to production.

The company raised its fiscal 2027 outlook to total revenue of $7.975 billion to $8.225 billion from $7.325 billion to $7.575 billion previously. NetApp increased its diluted earnings per share guidance to $9.73 to $10.03 from $8.70 to $9.00 prior, while adjusting non-GAAP EBIT margin expectations to 30.3% to 31.3% from 29.1% to 30.1%. Despite the strong performance, NetApp's stock is currently overvalued relative to its Fair Value estimate.