NetApp Down 26%: What Would Its CEO Say?
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Shareholders in NetApp (NTAP) have endured a painful month. The stock lost 25.8% in the month to November 9, 2026, compared with a 3.3% decline for the S&P 500. Yet on the company’s September 2 earnings call, management sounded far more upbeat about the business.
The slide began near a one-year high of $239.18 on October 12, arriving weeks after management raised its revenue forecast for the year. So what would NetApp’s chief executive point to, and what would that leave open?
Management Would Start With NetApp’s Record Quarter
The case would begin with fiscal Q1 2027, which ended July 31, 2026. Management described the period on the call as “a record-setting first quarter.” Executives said NetApp beat its guidance on every metric, posting a 30% increase in revenue to $2.03 billion.
Management would add that profit grew much faster than sales. Adjusted earnings per share rose 66% to $2.58. Management said that figure was more than double the growth rate of revenue, demonstrating the company’s ability to turn sales into earnings.
These are fair points, and the reported figures back the sales growth. They do not settle how much of that quarter will repeat, because management also said the results included some accelerated purchases and pricing benefits.
Even Now, NetApp Costs More Than The S&P 500
Even after the decline, NetApp trades at 24.3 times its earnings over the past twelve months, compared with 21.8 for the S&P 500. The company’s forecast moved in the opposite direction from the stock. In September, management raised its fiscal 2027 revenue forecast to an $8.1 billion midpoint, up from $7.45 billion in May.
That forecast also shows growth cooling from the first quarter’s pace. Management expects revenue to grow about 23% in fiscal Q2 2027, after 30% in fiscal Q1, a quarter with one extra week. So investors are still paying more than the market’s multiple for a business whose own forecast points to slower growth in the months ahead.
NetApp’s Quarter Had An Extra Week And Costlier Parts
Fiscal Q1 ran one week longer than usual. Management said the extra week added about $65 million of revenue, and that revenue without it grew 26% from a year earlier.
NetApp also earns less on its fastest-growing sales. Product revenue rose 51% to $987 million, but management put the segment’s gross margin at 54.6%, compared with 93.2% for the support business. Management said the product margin fell 1.5 points from the quarter before, mainly because of higher component costs that were partly offset by better pricing.
With product sales taking a larger share of revenue, management expects gross margin to slip to 67% to 68% in fiscal Q2, down from 70.6% in fiscal Q1, both on its adjusted measure.
Few Peers Match NetApp’s Profit On Each Dollar
NetApp generated an operating margin of 26.0% over the past twelve months, compared with 19.0% for the S&P 500. That marked its highest margin at any of the last 40 quarter ends. Among five large technology peers, only Microsoft earned a wider operating margin. The five are Dell Technologies, Hewlett Packard Enterprise, IBM, Amazon.com and Microsoft, each measured over its own latest four quarters.
NetApp also turned 22.3% of its revenue into free cash flow, surpassing all five of those peers. The company ended July with $3.58 billion in cash and short-term investments, compared with $2.53 billion of debt.
NetApp’s revenue growth for fiscal Q2 2027 will offer the first look at results since the shares fell. That number will show whether the market or management has the company right. NetApp is expected to report the figure in December 2026.
Does This Mean You Should Act On NTAP?
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