NetApp (NTAP 2.49%), a leading provider of enterprise data storage and management solutions, reported its Q1 FY2026 earnings on August 27, 2025. The most important news from the release was that revenue (GAAP) came in at $1.56 billion, slightly ahead of the midpoint of non-GAAP guidance but only 1% above the prior year (GAAP). Non-GAAP earnings per share (EPS) was $1.55, exceeding estimates. It slipped 1.7% from the prior year (GAAP). Product gross margin (GAAP) saw a notable decline, but strong growth in cash flow and continued momentum in public cloud and all-flash product lines stood out. Overall, the quarter met expectations on the top line, showed stability in critical segments, and revealed ongoing headwinds in certain profitability metrics.
| Metric | Q1 FY2026(ended July 25, 2025) | Q1 FY2025(ended July 26, 2024) | Y/Y Change |
|---|---|---|---|
| EPS (Non-GAAP) | $1.55 | $1.56 | -0.6 % |
| Revenue (Non-GAAP) | $1,559 million | $1,541 million | 1.2 % |
| Operating Margin (Non-GAAP) | 25.7 % | 25.9 % | (0.2) pp |
| Free Cash Flow (Non-GAAP) | $620 million | $300 million | 106.7% |
| Billings (Non-GAAP) | $1,511 million | $1,449 million | 4.3% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q4 2025 earnings report.
What NetApp Does and Where It’s Headed
NetApp is a technology company specializing in enterprise data management, focusing on hardware and software solutions that help organizations store, manage, and protect vast amounts of digital data. Its customers include businesses ranging from small enterprises to the world’s largest companies, providing products for both private data centers and public cloud environments.
Recently, NetApp’s strategy has centered on integrating its solutions with the largest public cloud providers and expanding product offerings in cloud storage, artificial intelligence (AI) infrastructure, and cybersecurity. The company’s key success factors include its ability to innovate with AI-ready storage, deepen partnerships with hyperscale cloud vendors (like Amazon Web Services, Microsoft Azure, and Google Cloud), and maintain a strong balance sheet to invest in further growth.
Quarter in Review: Revenue, Margins, and Segment Highlights
with net revenue (GAAP) reaching $1.56 billion—slightly above expectations and 1% higher than the prior year period. This outcome was at the upper end of the company’s guidance range. NetApp’s billings, which capture new sales activity, rose 4% year-over-year, marking the seventh consecutive quarter of year-over-year billings growth. These results indicated steady, but not rapid, top-line expansion.
Non-GAAP operating margin held nearly flat at 25.7%, but product gross margin (non-GAAP) slid to 54.0%, down nearly six percentage points from Q1 FY2025. Support services gross margin (GAAP) provided a partial offset, rising slightly. Cash provided by operations (GAAP) reached $673 million, translating to record free cash flow (non-GAAP) of $620 million, more than double the prior year’s figure for the same quarter.
Within NetApp’s product suite, its all-flash array storage systems led the way in growth, with all-flash revenue up 6% year-over-year to $893 million. All-flash storage refers to high-speed, fast-access systems favored by enterprises for AI workloads and data analytics. In the cloud segment, public cloud revenue (GAAP) grew 1%, and accounted for about 10% of total revenue. First-party and marketplace public cloud storage services revenue grew 33% year-over-year, reflecting strong customer demand for cloud-integrated storage.
AI-enabled products and cyber-resilient storage solutions are driving technology adoption. During the quarter, NetApp introduced the AIPod Mini, an artificial intelligence computing storage solution designed with Intel components, and enhanced integration with NVIDIA’s AI Data Platform. Its ONTAP operating system for enterprise storage received recognition from SE Labs for AI-driven ransomware protection, helping reinforce NetApp’s reputation for cybersecurity leadership. NetApp achieved the #1 all-flash market share position for calendar Q1 2025 as reported by IDC, underscoring its standing in core storage segments despite pricing and competitive challenges from companies like Dell EMC and HPE.
NetApp’s business profile remains well balanced across industries and regions. Americas contributed just over half of revenue, while EMEA (Europe, Middle East, and Africa) and APAC (Asia-Pacific) held steady at 32% and 17%, respectively. Direct sales made up 24% of total revenue, with the majority coming from indirect channels such as distributors and resellers. The company repurchased shares and paid dividends totaling $404 million, confirming a continued commitment to returning capital to shareholders. The quarterly dividend was $0.52 per share.
Looking Ahead: Guidance and What to Watch
Management reaffirmed its outlook for FY2026, projecting GAAP revenue between $6.625 billion and $6.875 billion. For Q2 FY2026, guidance calls for GAAP revenue of $1.615 billion to $1.765 billion, representing up to 8.4% sequential growth at the midpoint. Non-GAAP earnings per share for FY2026 are anticipated to be $7.60 to $7.90. These targets reflect continued, disciplined execution but no significant near-term acceleration beyond what was previously expected. Operating margins (non-GAAP) are forecast to remain in the high 28% to 29% range for FY2026, consistent with prior guidance.
Investors should monitor several key risks and opportunities in the quarters ahead. While AI and cloud-related storage demand continues to lift specific product lines, competitive pressures and pricing challenges are weighing on product gross margins. Management noted caution in public sector and European markets in their outlook for FY2026. Product developments, customer wins in AI infrastructure, and stabilization in margins will be important indicators. Tariffs are expected to have a modest headwind, impacting gross margin by 0.4 to 0.6 percentage points in FY2026. Dividend payments and share buybacks remain central to NetApp’s capital allocation strategy.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
