Executive Summary
NetApp delivered a modest top-line expansion in QQ3 2025, highlighting continued strength in AI-enabled storage and multi-cloud offerings while navigating near-term execution gaps and currency headwinds. Revenue reached $1.641 billion, up 2% year over year, with operating margin materially ahead of guide at approximately 30%, and EPS of $1.91 for the quarter (non-GAAP basis), in line with guidance despite some revenue and gross-margin shortfalls relative to plan. Management signaled a disciplined effort to tighten deal progression after several large opportunities slipped into Q4, with expectations that closing momentum will accelerate in Q4 and support the full-year targets, albeit with a lower fiscal 2025 guide driven by Spot divestiture and FX.
Management emphasized AI and data-centric platforms as enduring growth pillars, citing more than 100 AI infrastructure and data-lake modernization wins in the quarter and notable traction in StorageGRID object storage enhancements. The company announced a strategic divestiture of Spot by NetApp (CloudCheckr and related assets), which management projects to be largely neutral to EPS and to reduce cloud revenue by about $15 million in Q4. As the company heads into FY2026, NetApp maintains a growth trajectory in the mid-to-high single digits with a refocused margin and cash-flow discipline. Investors should monitor (i) FX-driven revenue impact, (ii) progress in closing larger deals in Q4, (iii) cloud-margin normalization post Spot divestiture, and (iv) the ramp of new AFF/A-Series/ASA platforms and Keystone-driven recurring revenue from multicloud deployments.
Key Performance Indicators
Key Insights
Revenue: $1.641B, +2% YoY; Gross margin: 71%; Operating margin: 30% (Q3); Net income: $299M; EPS (GAAP): $1.47; EPS (non-GAAP): $1.44; Q3 cloud revenue: $174M, +15% YoY; Public Cloud gross margin: 76% (vs 66% YoY); Deferred revenue: $4.1B (flat YoY); Remaining performance obligations (RPO): $4.5B; Unbilled RPO: ~$350M, +6% QoQ; DSO: 50 days; Inventory turns: 7x; Cash & equivalents: ~$2.26B; Total debt: $2.25B; Net debt: $0.739B; Free cash flow: $338M; Q4 guidance: Revenue $1.65–$1.80B; GM ...
Financial Highlights
Revenue: $1.641B, +2% YoY; Gross margin: 71%; Operating margin: 30% (Q3); Net income: $299M; EPS (GAAP): $1.47; EPS (non-GAAP): $1.44; Q3 cloud revenue: $174M, +15% YoY; Public Cloud gross margin: 76% (vs 66% YoY); Deferred revenue: $4.1B (flat YoY); Remaining performance obligations (RPO): $4.5B; Unbilled RPO: ~$350M, +6% QoQ; DSO: 50 days; Inventory turns: 7x; Cash & equivalents: ~$2.26B; Total debt: $2.25B; Net debt: $0.739B; Free cash flow: $338M; Q4 guidance: Revenue $1.65–$1.80B; GM 69–70%; Op margin ~28%; EPS $1.84–$1.94; Full-year FY25 guidance: Revenue $6.49–$6.64B; GM ~71%; Op margin 28%–28.5%; EPS $7.17–$7.27; FX impact to H2 revenue ~-$30M and ~-$0.08 per share; Spot divestiture impact to Q4 cloud revenue ~-$15M.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.64B |
2.18% |
-1.03% |
| Gross Profit |
1.15B |
-0.52% |
-2.72% |
| Operating Income |
362.00M |
-1.09% |
4.93% |
| Net Income |
299.00M |
-4.47% |
0.00% |
| EPS |
1.47 |
-3.29% |
0.00% |
Key Financial Ratios
operatingProfitMargin
22.1%
operatingCashFlowPerShare
$1.89
freeCashFlowPerShare
$1.66
dividendPayoutRatio
35.5%
Management Commentary
- Strategy and execution: George Kurian noted that although Q3 showed revenue growth, ‘inconsistent execution resulted in some deals slipping out of the quarter’ and a tighter pipeline discipline was instituted to accelerate momentum in Q4. (Quote reflects management action on deal progression)
- AI and multi-cloud emphasis: Kurian highlighted ‘the large market opportunity for enterprise GenAI’ and the role of NetApp in unifying data across hybrid multicloud environments, with AI-related wins and expanded StorageGRID capabilities driving growth. “Over 100 AI infrastructure and data lake modernization wins” were cited in Q3. (Theme: AI-led growth and product roadmap)
- Public cloud and partnerships: The management commentary stressed that first-party and marketplace cloud storage services grew “well over 40%” YoY, contributing to 15% Public Cloud revenue growth, with ongoing hyperscaler collaborations (Amazon FSx for NetApp ONTAP, Azure NetApp Files, Google Cloud readiness). (Theme: market positioning and ecosystem leverage)
- Strategic divestiture impact: The call explicitly discussed Spot by NetApp divestiture and its modest revenue impact in Q4, signaling a strategic pivot toward a more focused cloud-first services portfolio. (Theme: portfolio optimization and guidance adjustment)
"In Q3 FY 2025, we delivered revenue growth of 2% year-over-year and continued our disciplined management of the business yielding operating margin of 30% above expectations. Although within our guidance range, we are not satisfied with our top line performance."
— George Kurian
"Our disciplined operational management yielded operating margin above our guidance and EPS inline with our guidance, despite revenues towards the lower-end of our expectations in Q3."
— Mike Berry
Forward Guidance
- Full-year guidance: Revenue expected between $6.49B and $6.64B (~5% YoY at midpoint); gross margin ~71%; operating margin guidance 28% to 28.5%; tax rate 20–21%; net interest income ~$55M; EPS guidance $7.17–$7.27 (midpoint $7.22, +12% YoY).
- Q4 guidance: Revenue $1.65–$1.80B; gross margin 69–70%; operating margin ~28%; net interest income ~$10M; tax rate 20–21%; EPS $1.84–$1.94.
- Offsets to guidance: FX headwinds reduced reported H2 revenue by about $30M and EPS by roughly $0.08; the Spot divestiture reduces Q4 cloud revenue by about $15M but is expected to be largely neutral to EPS.
- Outlook implications: Management remains focused on margin expansion and free cash flow despite a slightly reduced revenue trajectory due to Spot divestiture and macro FX, with optimism on Q4 execution improving and AI-driven demand sustaining a longer-term growth trajectory. Investors should monitor: (i) realization of Q4 deal closures, (ii) trend in cloud gross margins post-Spot, (iii) progression of Keystone/StorageGRID-driven recurring revenue, and (iv) currency-related volatility and public sector demand dynamics.