NetApp Earnings: Strategic Products Continue To Drive Results

-8.10%
Downside
105
Market
96.70
Trefis
NTAP: NetApp logo
NTAP
NetApp

NetApp (NASDAQ:NTAP) announced its fiscal Q3 earnings on February 14, reporting 8% annual growth in net revenue to $1.5 billion. Through the course of the current fiscal year, NetApp has witnessed solid revenue growth, driven by the company’s Strategic Product segment. Solid demand for NetApp’s all-flash storage product line led to significant revenue growth in the latter half of the year. NetApp’s gross margin has also improved through the year due to a higher mix of strategic products sold. We have created an interactive analysis where we have summarized the company’s Q3 fiscal 2018 results and also added Q4 expectations. You can change expected revenue, gross margin and income margin figures for NetApp to gauge how it will impact expected EPS.

See our complete analysis for NetApp

Key Growth Trends

Relevant Articles
  1. Up 27% Over The Past Year, Will Higher Margins And Cloud Sales Drive NetApp Stock Higher Post Q3 Earnings?
  2. Up 28% Since The Beginning Of 2023, What’s Next For NetApp Stock?
  3. What To Expect From NetApp’s Q4 Results?
  4. NetApp Stock Looks Attractive Despite Easing IT Spending
  5. Despite A Rise In Sales, Here’s Why NetApp Stock Has Underperformed The S&P
  6. After Strong Outperformance, Can NetApp Stock Maintain Its Streak?

NetApp’s strong performance was driven largely by strength in product sales combined with a higher mix of flash products (which have typically higher margins) in recent quarters. Strategic product sales were up 26% y-o-y to $647 million. Comparatively, mature product sales were flat over the comparable prior year period at $273 million. As a result of increased product sales, NetApp’s share in the storage systems market has risen in recent quarters. According to data compiled by IDC, NetApp’s market share has improved from 11.2% in the first half of 2016 to 13.5% through the first two quarters of 2017. We forecast NetApp’s market share to eventually increase to over 15% through the end of our forecast period.

An increasing mix of strategic products, which include certain high-margin flash storage products, has driven product gross margins in recent quarters. NetApp’s non-GAAP product gross margin improved by 1 percentage point in the January ended quarter to 62.6%.

For the coming quarter, NetApp’s net revenue is expected to continue to increase in high single digits in the coming quarters. The company has given revenue guidance of around $1.6 billion, which is 8% higher on a y-o-y basis. However, gross margin is expected to be around 50 basis points lower at 62%.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own