NetApp reported QQ1 2026 revenue of $1.559 billion, representing a modest year-over-year gain of 1.17% but a clear quarterâoverâquarter decline of 9.99% from the prior quarter. The gross margin stood at 70.43%, with operating income of $309 million and net income of $233 million, translating to an EPS of $1.15â$1.16 on a diluted basis. The company generated $673 million of operating cash flow and delivered free cash flow of $620 million, supported by disciplined working capital management and a relatively light capital expenditure profile. Net debt remained modest at roughly $0.4 billion, and the balance sheet shows a robust liquidity position with cash and shortâterm investments totaling about $3.324 billion.
Strategically, NetApp continues to monetize its softwareâdefined data management stack and cloud integrations (ONTAP, Astra, Cloud Volumes, Cloud Tiering, etc.) while pursuing a multiâcloud/partner ecosystem. The quarter reflects a normalization in revenue after a stronger prior year period, with a composition shift toward software and cloudâled solutions that typically carry higher margin profiles. Investors should monitor the pace of cloud adoption, the mix shift toward higherâmargin software and service revenue, and the sustainability of free cash flow in the face of potential macro headwinds and competitive dynamics.
Notes on performance drivers: The robust gross margin and FCF generation reflect a healthy mix of highâmargin software and cloud services within NetAppâs data management platform. The QoQ revenue decline signals seasonality and a normalization after a comparatively stronger yearâago quarter, rather than an abrupt deterioration in demand. The EBITDA/operating margin support a constructive view on profitability resilience even as the quarterly revenue cadence varies.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.56B
1.17%
-9.99%
Gross Profit
1.10B
0.00%
-7.96%
Operating Income
309.00M
9.57%
-11.21%
Net Income
233.00M
-6.05%
-31.47%
EPS
1.16
-3.33%
-30.54%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data was provided in the input. Consequently, no management quotes or thematic highlights from the QQ1 2026 earnings call can be cited here.
N/A
â N/A
N/A
â N/A
Forward Guidance
Forward guidance is not disclosed in the provided data. Management commentary (where available in the release or filings) typically emphasizes continued investment in cloudânative data services, Astra, and multiâcloud capabilities, along with disciplined capital allocation. Absent explicit guidance, key factors that investors should monitor include: (i) the trajectory of software/cloud revenue mix and its margin contribution; (ii) enterprise adoption of multiâcloud data services and AI workloads; (iii) execution of cost controls and R&D investments that sustain longâterm growth; (iv) currency effects given the LSE listing and USD reporting; and (v) the pace of customer deployments in storage and data management portfolios. If management targets midâ to longâterm margin stabilization or expansion, indicators to watch would include gross margin progression, operating margin expansion from software services, and free cash flow return on invested capital.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0K6F.L Focus
70.43%
N/A
N/A
N/A
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
NetApp QQ1 2026 results present a constructive but mixed investment thesis. The company demonstrates solid profitability and exceptional free cash flow generation, supported by a robust balance sheet and a highâmargin software/cloudServices mix. Revenue declined QoQ due to seasonality and normalization after a previous strength, but YoY performance remained positive and the gross margin remains a key differentiator in the hardware/storage landscape. The investment case rests on the trajectory of cloudâled data management adoption and the ramp of multiâcloud services (Astra, Cloud Volumes, Tiering) which typically carry higher gross margins and longerâterm recurring revenue. Relative to peers that are more hardwareâcentric or have weaker balance sheets, NetAppâs cash flow profile and leverage position are favorable.
Risks center on continued nearâterm revenue normalization, competitive pricing pressures, and macro uncertainties affecting enterprise IT spend. A disciplined capital allocation strategyâprioritizing highâmargin software/services, debt management, and buybacksâwill be critical to sustaining value creation. Given the current results, NetApp appears to offer a compelling FCF yield and a resilient balance sheet, with an investment horizon that benefits from a gradual shift toward higherâmargin software and cloud services in a multiâcloud environment. Investors should monitor: cloud adoption velocity, Astra and data services penetration, deferrals or acceleration of deferred revenue, and any commentary on forward targets for operating margins and free cash flow.
Key Investment Factors
Growth Potential
Cloudâled data management growth via Astra, ONTAP expansion, and cloud volumes services across major hyperscalers; multiâcloud adoption trends; expanding installed base of AllFlash and Fabric Attached Storage with higherâmargin software offerings.
Profitability Risk
Revenue normalization and cyclicality in enterprise IT hardware; competitive pressure from Pure Storage, Dell/EMC, HPE; dependency on large deal cycles; macroeconomic slowdown; execution risk in expanding software/ENG (Astra) footprint; FX exposure due to London listing; high deferred revenue base requiring continued service onboarding.
Financial Position
Strong liquidity and cash generation with $3.324B in cash and shortâterm investments; net debt of about $0.4B; high free cash flow generation (~$620M in QQ1 2026) provides flexibility for buybacks and dividends; conservative capex and ongoing focus on deleveraging and capital allocation.
SWOT Analysis
Strengths
Very healthy gross margin (~70.4%) and robust EBITDA/operating margins (~19.8%) signaling highâmargin software and data services mix.
Strong free cash flow generation ($620M) and solid cash position (cash + shortâterm investments ~ $3.324B).
Diversified product portfolio spanning hardware, software, and cloud services; multiâcloud capabilities and Astra revenue stream.
Moderate leverage with net debt â $0.4B, ample liquidity to fund buybacks and strategic investments.
Weaknesses
QoQ revenue decline (~9.99%) in QQ1 2026 indicates seasonality and potential nearâterm topâline pressure.
Deferred revenue base is substantial (~$2.27B current), which could compress nearâterm bookings and monetization mix if service uptake slows.
Exposure to hardware cycle volatility and competitive intensity in highâgrowth storage/cloud segments.
Opportunities
Acceleration of cloud migration and multiâcloud data management services (Astra, Cloud Volumes, Cloud Tiering) with higher margin contribution.
Expanding adoption of NetAppâs Astra data services and cloud integrations across Azure, AWS, Google Cloud to monetize softwareâasâaâservice revenue.
Strategic partnerships and ecosystem expansions to deepen penetration in enterprise IT workloads and AI data pipelines.
Threats
Intense competition from Pure Storage, Dell Technologies, HPE and other storage/cloud players could pressure pricing and share gains.
Macro headwinds, IT spend cycles, and currency volatility impacting demand timing and reported results on a London listing.
Reliance on large enterprise deployments and complex integration projects that can cause variability in quarterâtoâquarter performance.