What To Expect From NetApp’s Q4 Results?

NTAP: NetApp logo

NetApp (NASDAQ:NTAP) a company which provides on-premises data storage systems and public cloud services, is poised to report its Q4 FY’23 results towards the end of May. We expect the company’s revenues for the quarter to come in at about $1.56 billion, slightly ahead of estimates, although this would mark a decline of about 8% versus last year.  We estimate that earnings will come in at about $1.36 per share, ahead of consensus estimates. See our analysis of NetApp Earnings Preview for a closer look at what to expect when the company publishes earnings.

NetApp’s bread-and-butter Hybrid Cloud business has been witnessing some headwinds of late due to weaker information technology spending and cost optimization by large businesses. Over Q3 FY’23, NetApp’s revenue declined by 5.4% to $1.53 billion, with adjusted earnings also falling by a similar magnitude. Hybrid cloud sales declined by about 9% year-over-year to about $1.38 billion. However, the company’s public cloud business has been gaining traction, with revenues rising by about 36% over the last quarter. Although the business remains small, with sales at about $150 million, or about 10% of total revenue, the segment remains important to the company given the industry’s push toward cloud-based storage.

So, is NetApp stock still worth a look despite the current headwinds? We believe it is. The company has taken steps to cut costs and boost profitability in the face of weakening demand, indicating that it would lay off about 8% of its workforce.  NetApp’s hybrid cloud business could also benefit given the greater control that it offers. NetApp is also strong in the traditional storage space, particularly in areas such as all-flash arrays, and this could help the company as technologies such as artificial intelligence (AI) continue to expand. We also believe that NetApp’s valuation is attractive, with the stock trading at about 12x consensus FY’23 earnings. We remain positive on NTAP stock with a $74 price estimate, which is about 12% ahead of the current market price. See our analysis on NetApp Valuation: Is NTAP Stock Expensive Or Cheap? for more details on what’s driving our price estimate for NetApp.

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Returns May 2023
MTD [1]
YTD [1]
Total [2]
 NTAP Return 0% 5% 79%
 S&P 500 Return -1% 7% 84%
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[1] Month-to-date and year-to-date as of 5/14/2023
[2] Cumulative total returns since the end of 2016

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