NetApp Posts Record Fiscal Year, AI Wins Fuel Growth

What happened

NetApp delivered fiscal fourth-quarter revenue of $1.95 billion, up 12% year-over-year and 14% sequentially, exceeding the high end of its guidance range. Non-GAAP earnings per share reached $2.43, up 26% from the prior year. For the full fiscal year, revenue totaled $6.93 billion, up 5% year-over-year, while operating cash flow climbed to $2.07 billion and free cash flow rose close to 40% to $1.87 billion. The company reported approximately 500 AI and data preparation wins in the fourth quarter, bringing the full-year total to more than 1,100. All-flash revenue hit $1.2 billion in Q4, up 18% year-over-year, while public cloud revenue reached $182 million, up 11%. NetApp also completed a multi-year agreement with Google Cloud to deliver AI-ready data infrastructure to Google Distributed Cloud environments. The company returned $303 million to shareholders in Q4 through share repurchases and dividends and announced a $1 billion increase to its buyback authorization.

Why it matters

NetApp's record results reflect growing enterprise demand for AI infrastructure and hybrid cloud storage. The company's ability to secure more than 1,100 AI-related customer wins during fiscal 2026 suggests it is benefiting from the shift toward production AI workloads, not just experimentation. All-flash storage, which supports high-performance AI environments, grew 18% in Q4, indicating sustained momentum in a key product category. The expanded Google Cloud partnership also positions NetApp for growth in regulated and secure cloud environments. For fiscal 2027, management guided revenue to $7.325 billion to $7.575 billion, implying 8% growth at the midpoint, reinforcing expectations that AI-driven storage demand could continue. However, investors should note that gross margins are expected to fall to 68.5% to 69.5% due to elevated memory costs, a headwind that could weigh on near-term profitability despite strong revenue growth.

Bigger picture

NetApp's performance aligns with broader trends in enterprise AI adoption and hybrid cloud infrastructure. As organizations move AI workloads from experimentation to production, demand for high-performance storage is increasing, particularly in on-premises and hybrid environments. The company's focus on all-flash arrays and AI-optimized storage solutions positions it to capture a portion of this spending cycle. At the same time, rising NAND and DRAM costs are pressuring margins across the storage industry, and NetApp's decision to prioritize customer relationships over aggressive price increases may limit near-term margin expansion. The partnership with Google Cloud for Google Distributed Cloud also reflects growing demand for sovereign and secure cloud infrastructure in regulated industries and government sectors. Morgan Stanley's price target increase to $137 suggests growing analyst confidence in NetApp's ability to sustain AI-driven growth, though margin recovery will remain a key focus for investors.

What to watch

Investors should monitor whether all-flash storage growth remains elevated and whether AI-related customer wins continue to broaden beyond NetApp's existing customer base. Gross margin trends will be critical, particularly whether product margins improve as anticipated during fiscal 2027. Watch for updates on the Google Cloud partnership and whether it generates meaningful revenue in subsequent quarters. Also track management commentary on component costs and pricing actions, as margin recovery depends on both supply conditions and customer acceptance of higher prices. Finally, fiscal first-quarter results will provide insight into whether demand momentum continues, especially given the inclusion of an extra week expected to contribute approximately $65 million of revenue.