Executive Summary
NetApp reported QQ1 2026 results with a modest year-over-year revenue decline of approximately 6.5% and a sequential decline of about 5.0%. The-quarter saw solid profitability, underpinned by a robust gross margin of roughly 70.4% and an operating margin of 19.8%, translating to an operating income of $309 million and net income of $233 million. Earnings per share stood at $1.16 ($1.15 diluted), underscoring disciplined cost management amid a backdrop of slower hardware demand and mixed cloud storage utilization.
Cash generation remained a standout feature, with $673 million of operating cash flow and $620 million of free cash flow generated in the quarter. Net debt remained manageable (net debt around $0.4 billion) against a strong liquidity position, including roughly $3.32 billion in cash and short-term investments. Management commentary, while not provided in the supplied transcript data, would typically be expected to emphasize continued growth in cloud-related data services (e.g., NetApp Astra, Cloud Volumes, and cloud integration capabilities) and ongoing efficiency initiatives that support high-margin profitability even as hardware demand cycles normalize. The balance sheet shows a substantial goodwill balance (~$2.73 billion) and a strong asset base, yet meaningful leverage existed via long-term debt (~$2.49 billion). Overall, NetApp appears positioned to convert cash generation into selective acquisitions, share repurchases, and potential debt management while pursuing expansion in cloud-enabled data management for enterprise customers.
Looking ahead, the key drivers will likely include continued adoption of hybrid cloud data management, normalization of hardware and software mix, and the pace of enterprise cloud migration. The company’s ability to sustain or enhance free cash flow, manage working capital efficiently, and navigate competitive dynamics will be critical to earnings trajectory and shareholder returns in the near term.
Key Performance Indicators
QoQ: -14.64% | YoY:-15.57%
QoQ: -22.07% | YoY:-19.93%
QoQ: -21.09% | YoY:-17.73%
Key Insights
Revenue: $1.559B, YoY: -6.48%, QoQ: -5.00%
Gross Profit: $1.098B, YoY: -6.07%, QoQ: -4.10%
Operating Income: $309M, YoY: -15.57%, QoQ: -14.64%
Net Income: $233M, YoY: -19.93%, QoQ: -22.07%
EPS (GAAP): $1.16, Diluted EPS: $1.15, YoY EPS: -17.73%, QoQ EPS: -21.09%
Gross Margin: ~70.4%
Operating Margin: ~19.8%
EBITDA: $309M, EBITDA Margin: ~19.8%
Effective Tax Rate (Income Tax Expense / Income Before Tax): ~23.3% (Tax expense $71M on $304M pretax)
Free Cash Flow: $620M; Operating Cash Flow: $673M; ...
Financial Highlights
Revenue: $1.559B, YoY: -6.48%, QoQ: -5.00%
Gross Profit: $1.098B, YoY: -6.07%, QoQ: -4.10%
Operating Income: $309M, YoY: -15.57%, QoQ: -14.64%
Net Income: $233M, YoY: -19.93%, QoQ: -22.07%
EPS (GAAP): $1.16, Diluted EPS: $1.15, YoY EPS: -17.73%, QoQ EPS: -21.09%
Gross Margin: ~70.4%
Operating Margin: ~19.8%
EBITDA: $309M, EBITDA Margin: ~19.8%
Effective Tax Rate (Income Tax Expense / Income Before Tax): ~23.3% (Tax expense $71M on $304M pretax)
Free Cash Flow: $620M; Operating Cash Flow: $673M; Capital Expenditures: $53M; Cash Conversion Efficiency: Strong despite modest top-line growth
Balance Sheet Highlights: Cash & Equivalents $2.085B; Short-Term Investments $1.239B; Total Cash & ST Inv $3.324B; Total Assets $9.680B; Total Liabilities $8.704B; Total Equity $0.975B; Long-Term Debt $2.485B; Net Debt ~$0.400B; Goodwill $2.734B; Intangible Assets $0.037B; Deferred Revenue $2.270B
Liquidity & Leverage Context: Robust liquidity with substantial liquid assets; Moderate long-term leverage; Positive free cash flow supports optionality for buybacks or strategic investments.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.56B |
-6.48% |
-5.00% |
| Gross Profit |
1.10B |
-6.07% |
-4.10% |
| Operating Income |
309.00M |
-15.57% |
-14.64% |
| Net Income |
233.00M |
-19.93% |
-22.07% |
| EPS |
1.16 |
-17.73% |
-21.09% |
Management Commentary
No earnings call transcript data provided in the dataset. As a result, management-specific quotes or verbatim guidance from the QQ1 2026 call are unavailable for synthesis here. Anticipated themes in a typical NetApp call would include cloud adoption progress, product mix shifts (hardware vs. software), operating efficiency initiatives, and any updates to customer multi-year commitments or ARR trajectory.
Forward Guidance
No formal forward guidance is provided in the supplied data for QQ1 2026. Based on the quarter’s performance and typical industry dynamics, the near-term trajectory would hinge on: (1) continued demand for cloud-enabled data management and hybrid cloud solutions (e.g., ONTAP enhancements, Cloud Volumes), (2) progression of Astra and other data-management software adjacencies converting into higher recurring revenue, and (3) macro IT spending and storage refresh cycles. Given the current profitability and strong FCF profile, NetApp has optionality to accelerate share repurchases or pursue selective acquisitions to bolster software capabilities. Investors should monitor quarterly ARR/recurring revenue progression, mix shifts toward software and cloud services, and any commentary on enterprise cloud adoption pace.