VALUATION HIGHLIGHTS
- Services constitute 55% of the Trefis price estimate for NetApp's stock.
- Product constitutes 42% of the Trefis price estimate for NetApp's stock.
WHAT HAS CHANGED?
- Latest Earnings - Q3 FY'25
NetApp reported its third-quarter fiscal year 2025 earnings, slightly beating earnings per share (EPS) but missing revenue forecasts. The company posted an EPS of $1.91, just above the forecast of $1.90. However, revenue came in at $1.64 billion, below the expected $1.69 billion. NetApp delivered 2% year-over-year (y-o-y) revenue growth in Q3 FY 2025, with an operating margin of 30%. Product revenue rose by 1% y-o-y, while support revenue decreased by 2%. Public cloud revenue was a bright spot, showing a robust 15% y-o-y increase.
Note: NetApp's FY'24 ended on April 26, 2024. Q3 FY'25 ended on January 24, 2025.
- Guidance
The company expects full-year 2025 revenue to range between $6.49 billion to $6.64 billion. It also expects non-GAAP operating margin of around 28%-28.5% resulting in adjusted EPS expectation of $7.17 to $7.27.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of NetApp's value that present opportunities for upside or downside to the current Trefis price estimate of NetApp:
Storage Infrastructure
- Products Revenue: We currently forecast NetApp's Products revenue to grow at a CAGR of 3.5% through the end of the Trefis forecast period. However, there could be a 25% upside to the Trefis price estimate if NetApp's product revenue can grow at 9% instead, led by higher demand for next-generation storage solutions.
- Netapp's Gross Margin: We currently forecast that the company's gross margin will see modest growth to around 70% in the coming years. There could be a 15% upside to the Trefis price estimate if the gross margins improved to 74% by the end of our forecast period.
For additional details, select a driver above or select a division from the interactive Trefis split for NetApp at the top of the page.
BUSINESS SUMMARY
NetApp, Inc. is a global cloud-led, data-centric software company that provides organizations the ability to manage and share their data across on-premises, private and public clouds. They provide a full range of enterprise-class software, systems, and services solutions that customers use to modernize their infrastructures, build next-generation data centers, and harness the power of hybrid clouds.
SOURCES OF VALUE
NetApp Gaining Share in Storage Infrastructure Market
Over the years, NetApp has witnessed an increase in its share of the storage infrastructure solutions market. Demand for NetApp's all-flash and hybrid systems, which are a combination of hardware and software, has risen strongly over the past couple of years. In addition, NetApp provides hardware and software support to its clients and customer education and training services, essentially covering an exhaustive group of cloud services.
KEY TRENDS
Demand for Cloud Storage Surging
The trend over the past few years has been away from hardware portable storage devices to cloud storage, and this has benefited NetApp. This trend is expected to continue as more and more enterprises switch to the cloud, pushing demand for NetApp's cloud solutions infrastructure products even higher.
Transition To Flash
There has been a sharp decline in NAND pricing over the last few quarters, and several companies are transitioning to flash-based storage devices. NetApp is benefiting from the trend with an increasing mix of flash-based storage device sales.
