VALUATION HIGHLIGHTS

1. Services constitute 53% of the Trefis price estimate for NetApp's stock.
2. Product constitutes 41% of the Trefis price estimate for NetApp's stock.

WHAT HAS CHANGED?

1. Latest Earnings - Q3 FY'26

NetApp reported fiscal third quarter 2026 results that modestly exceeded expectations, reflecting steady execution in a mixed enterprise spending environment. Revenue rose 4% year-over-year to $1.71 billion, while non-GAAP EPS reached $2.12, ahead of consensus, supported by disciplined cost control and a record 31.1% non GAAP operating margin. Growth was driven by continued momentum in all flash arrays, where revenue climbed 11% to $1.0 billion, and public cloud services, up 27% to $174 million. Billings increased 10%, suggesting improved demand trends.

Note: NetApp's FY'25 ended on April 25, 2025. Q3 FY'26 refers to the quarter that ended on January 23, 2026.

2. Guidance

For fiscal year 2026 as a whole, NetApp updated its outlook to reflect modest growth and solid profitability. Revenues are expected in the range of around $6.772 billion to $6.922 billion, suggesting a year-over-year increase compared with prior guidance and consensus expectations. Non-GAAP earnings per share are projected around $7.92 to $8.02, with operating margins in the 29.3% to 30.3% band and gross margins of roughly 70.7% to 71.7%. These metrics imply that while top-line expansion remains measured, the company anticipates continued leverage on higher-margin products and disciplined cost management.

For the fourth quarter of FY26, the company sees sequential improvement, forecasting net revenues of about $1.795 billion to $1.945 billion, and non-GAAP EPS of $2.21 to $2.31, along with operating margins of around 30.5% to 31.5%.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of NetApp's value that present opportunities for upside or downside to the current Trefis price estimate of NetApp:

Storage Infrastructure

• Products Revenue: We currently forecast NetApp's Products revenue to grow at a CAGR of 3% through the end of the Trefis forecast period. However, there could be a 25% upside to the Trefis price estimate if NetApp's product revenue can grow at 9% instead, led by higher demand for next-generation storage solutions.
• Netapp's Gross Margin: We currently forecast that the company's gross margin will see modest growth to around 73% in the coming years. There could be a 15% upside to the Trefis price estimate if the gross margins improved to 76% by the end of our forecast period.

For additional details, select a driver above or select a division from the interactive Trefis split for NetApp at the top of the page.

BUSINESS SUMMARY

NetApp, Inc. is a global cloud-led, data-centric software company that provides organizations the ability to manage and share their data across on-premises, private, and public clouds. They provide a full range of enterprise-class software, systems, and services solutions that customers use to modernize their infrastructures, build next-generation data centers, and harness the power of hybrid clouds.

SOURCES OF VALUE

NetApp Gaining Share in Storage Infrastructure Market

Over the years, NetApp has witnessed an increase in its share of the storage infrastructure solutions market. Demand for NetApp's all-flash and hybrid systems, which are a combination of hardware and software, has risen strongly over the past couple of years. In addition, NetApp provides hardware and software support to its clients and customer education and training services, essentially covering an exhaustive group of cloud services.

KEY TRENDS

Demand for Cloud Storage Surging

The trend over the past few years has been away from hardware portable storage devices to cloud storage, and this has benefited NetApp. This trend is expected to continue as more and more enterprises switch to the cloud, pushing demand for NetApp's cloud solutions infrastructure products even higher.

Transition To Flash

There has been a sharp decline in NAND pricing over the last few quarters, and several companies are transitioning to flash-based storage devices. NetApp is benefiting from the trend with an increasing mix of flash-based storage device sales.