NetApp(NTAP 2.74%) reported fiscal first quarter 2026 results on August 27, 2025, with non-GAAP revenue of $1.56 billion, up 3% year-over-year excluding divestitures, and non-GAAP diluted EPS of $1.55. The company raised its long-term non-GAAP public cloud gross margin target to 80%-85%, highlighted rapid growth in AI wins, and delivered record all-flash array revenue. The following insights detail key business drivers and strategic updates from the call.

All-flash array revenue sets record for NetApp

All-flash array revenue reached $893 million in fiscal Q1 2026, a 5% year-over-year increase, and 45% of installed systems under active support are now all-flash. NetApp achieved the number one position in the all-flash array market for calendar Q1 2025, according to IDC, reflecting strong customer engagement and competitive displacement.

"In Q1, our all-flash array revenue grew 5% year-over-year to $893 million, an annualized run rate of $3.6 billion. Exiting Q1, 45% of systems in our installed base under active support contracts are all-flash. Healthy customer engagement and strong interest in our unified and block-optimized all-flash storage portfolio have enabled us to displace competitive all-flash and hybrid flash footprints. This strength propelled us to the number one position in the all-flash array market for calendar Q1 2025, as reported by IDC."
-- George Kurian, CEO

This milestone demonstrates NetApp's ability to convert its large installed base to higher-value solutions, supporting margin expansion and reinforcing its leadership in a critical growth segment.

AI wins more than double, boosting NetApp relevance

NetApp closed over 125 AI infrastructure and data lake modernization deals in fiscal Q1 2026 (period ended July 26, 2025), up from about 50 in the prior-year period, with expanded reference architectures for NVIDIA Cloud Partners. These wins spanned data lakes, model training, and inference workloads, reflecting broadening enterprise adoption of AI solutions.

"We saw three types of wins in the quarter as you know, we noted in our prepared remarks, we had north of 125 wins for AI in the quarter as compared to 50 a year ago. So strong momentum. The three types of use cases were data lakes, which was about 20% of the total number. There was training, which is either fine-tuning a large model or, you know, taking a smaller model and customizing it for your enterprise or building a sovereign cloud model. For model training, we thought that was about 45% of the total number, and the remainder were RAG and agentic AI use cases. For data lake, it's typically a combination of flash-based storage for the hot tables and hot data and a large archive with object storage. For the other two, they are typically all-flash storage."
-- George Kurian, CEO

The surge in AI-related deals positions NetApp as a foundational platform for enterprise digital transformation, expanding its addressable market and deepening customer relationships.

NetApp public cloud margin target rises to 80%-85%

Public cloud revenue (excluding Spot) grew 18% year-over-year, and public cloud gross margin reached 80.1% in fiscal Q1 2026, prompting management to raise the long-term non-GAAP public cloud gross margin target from 75%-80% to 80%-85%. This improvement is driven by depreciation roll-off on early hardware and a higher mix of software revenue.

"On the public cloud front, we did we look the business itself has been improving in gross margin very steadily and actually at a very fast pace. And this past quarter, we just hit the high end of the prior long-term target range. Looking at where the business is headed, we feel comfortable that 80% to 85% is a good target range for it going forward, and that's why we raised it. The few things I would say that contribute to that are one, we're seeing a depreciation roll-off for some of the initial installed hardware. So that sort of helps with the margin. In addition, there's more software content in the revenue. And so both of these dynamics would help sort of continue to improve the gross margin going forward."
-- Wissam Jabre, CFO

Raising the public cloud gross margin target signals a sustainable shift toward higher profitability and a favorable software-driven revenue mix, supporting long-term earnings growth.

Looking ahead

For fiscal Q2 2026 (period ending October 24, 2025), NetApp projects non-GAAP revenue of $1.69 billion (±$75 million), up 2% year-over-year at the midpoint or up 3% year-over-year excluding Spot, with gross margin at 71% (±0.5%) and EPS of $1.84 to $1.94. Full-year fiscal 2026 guidance is unchanged: non-GAAP revenue of $6.625 billion to $6.875 billion (midpoint growth of 3% year-over-year, or 4% excluding Spot) and diluted EPS of $7.60 to $7.90. Management expects non-GAAP product gross margins to recover sequentially.