Key Takeaways
- NetApp’s fiscal Q1 2027 revenue reached $2.03 billion, representing a 30% year-over-year increase and surpassing the $1.84 billion analyst consensus
- The company delivered adjusted earnings per share of $2.58, significantly exceeding the $2.11 Wall Street projection
- NTAP shares plummeted 8.92% to $164.64 in extended trading despite beating estimates
- Operating cash flow declined 25% compared to last year, while free cash flow dropped 35%
- Full-year fiscal 2027 revenue guidance increased to a range of $7.98 billion to $8.23 billion
NetApp (NTAP) delivered record-setting first-quarter results on Wednesday, announcing revenue of $2.03 billion alongside adjusted earnings of $2.58 per share. The data storage company handily surpassed analyst projections across the board. Yet shares experienced a significant selloff in response.
In extended trading, NTAP plunged 8.92% to $164.64 following a 1.35% decline during regular hours to $180.68. The after-hours movement placed shares approximately 10% beneath their pre-announcement levels.
Year-over-year revenue expansion hit 30%, or 26% when accounting for an additional week included in the reporting period. Adjusted earnings per share surged 66% compared to the same quarter last year, demonstrating impressive operational efficiency. The earnings surprise of $0.47 represented a 22% upside versus consensus forecasts.
The all-flash array segment generated $1.31 billion, jumping 47% year-over-year. Hybrid cloud operations produced $1.82 billion in revenue, advancing 30%, while public cloud services contributed $206 million, marking a 28% increase. The company disclosed closing approximately 350 deals related to AI infrastructure and data lake modernization initiatives throughout the quarter.
Operating income advanced 61% to $645 million. The operating margin expanded to 31.9%, reflecting a 6.1 percentage point improvement from the prior-year period.
Behind the Market Reaction
While headline figures impressed, certain metrics within the financial report sparked investor apprehension. Operating cash generation decreased 25% year-over-year to $503 million, with free cash flow experiencing a steeper 35% contraction to $401 million.
Inventory balances swelled from $198 million to $375 million, while inventory turnover velocity ran at less than half the previous year’s rate. Restructuring expenses jumped dramatically to $56 million from merely $2 million in the comparable quarter.
Company leadership acknowledged that quarterly performance benefited from both the calendar anomaly and expedited purchasing decisions by a limited number of major clients. This disclosure likely triggered doubts regarding the sustainability of the current growth trajectory.
Forward-Looking Projections
NetApp elevated its fiscal 2027 full-year revenue projection to between $7.975 billion and $8.225 billion. The midpoint of $8.1 billion suggests approximately 17% annual growth and marks a $650 million upgrade from previous expectations.
Second-quarter guidance calls for revenue of $2.1 billion with a variance of $75 million in either direction, paired with adjusted earnings ranging from $2.54 to $2.64 per share. Gross margin projections land between 67% and 68%.
Full-year adjusted earnings guidance rose to $9.73 to $10.03 per share, up from the earlier range of $8.70 to $9.00.
Chief Executive George Kurian characterized the results as “a stellar start to the year,” emphasizing that the company surpassed its own internal Q1 projections across all key performance indicators. Chief Financial Officer Wissam Jabre highlighted that earnings growth outpaced revenue growth by a factor of two, underscoring strong operational discipline.
NTAP has traded between $93.69 and $209.06 over the past 52 weeks. Despite the after-hours decline, shares continue trading substantially above their 52-week low.
The company is currently working to integrate two newly acquired businesses, DataPelago and JetStream. Management reported returning $302 million to shareholders during the quarter through $200 million in share repurchases and $102 million in dividend payments.
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