NetApp, Inc. Q3 FY2026 earnings call

Good day and welcome to the call. George Kurian mentioned they delivered strong Q3 with $1.71 billion revenue, up 4% y/y. Super Bowl 60 showed their technology in action. In AI, ~300 customers selected NetApp for AI prep. AFX had strong early momentum with wins in key industries. AI Data Engine's early access program was successful. All-flash array had record revenue. Cyber resilience capabilities helped win customers. Keystone revenue grew 65% y/y. Public cloud services revenue grew 17% y/y. Introduced new capabilities for cloud services. Addressed memory price inflation by raising prices, working with partners/suppliers, and having a broad portfolio.

Hybrid cloud revenue was $1.54 billion, up 5% year-over-year, driven by product, support, and Keystone. Keystone revenue grew approximately 65% year-over-year. Public cloud revenue of $174 million was in line with last year's third quarter revenue, excluding spot public cloud revenue was up 17% year over year, driven by strong demand for first-party and marketplace storage services. All-flash array revenue grew 11% year-over-year to $1 billion in Q3 for an annualized run rate of $4.2 billion.

Q4 revenue expected $1.87 billion ±$75 million, midpoint 8% y/y growth. Q4 gross margin 69.5%-70.5%, operating margin 30.5%-31.5%, EPS $2.21-$2.31. FY2026 revenue $6.772-$6.922 billion, midpoint 4% y/y growth. Gross margin 70.7%-71.7%, operating margin 29.3%-30.3%, EPS $7.92-$8.02.

Discussed memory price inflation affecting the market, which may impact margins and demand. Also, dynamic competitive environment and supply chain uncertainties related to components like DRAM, NAND, etc.

Q: Param Singh asked about product growth incremental drivers and pricing in memory environment.

A: Large deals closed in Q3 with more expected in Q4. Adjust prices, work with partners/suppliers, offer alternatives.

Q: Catherine Murphy asked about AI deal mix and AFX/AIDE outlook.

A: Strong AI momentum across industries. AFX is new, needs customer qualification. AIDE differentiates new and brownfield environments.

Q: Samik Chatterjee asked about price increases and customer response.

A: Raised prices in line with market, offered range of options.

Q: Aaron Rakers asked about pricing on NAND, supply commitments, and customer behavior change.

A: Raised prices at start of quarter, give customers time to plan. Interest in hybrid, Keystone, etc.

Q: Bamsi Mohan asked about purchasing behavior and supply availability.

A: Q3 results not from pull-ins. Q4 guidance not relying on pull-ins. Business outlook favorable.

Q: Eric Woodring asked about balancing margins and demand in memory inflation.

A: Anticipate pricing and supply environment, focus on gross profit, offer multiple options.

Q: Christian Carr asked about enterprise AI storage adoption cycle and lead times.

A: AI business growing, 60% in data prep, 40% in production. Lead times not uniformly extended, work on alternate silicon.

Q: Steven Fox asked about hybrid array sales and HDB procurement.

A: More discussions on HFA after price increase. Good HDB procurement ability.

Q: Tim Long asked about public cloud growth and margin.

A: Public cloud growth via cohort management, connecting to AI, scaling go to market. Public cloud margin high, profitable.

Q: Jason Adair asked about Q4 gross margin and cost of services.

A: Q4 gross margin driven by revenue mix. Minor fluctuations in cost of services.

Q: George asked about development organization and AI efficiency.

A: Prudent with expenditure, use AI in software development, accelerate innovation.

Q: David Vogt asked about federal category recovery and purchase commitments.

A: Q3/Q4 better than Q2, Q4 improves from Q3. Purchase commitments for fiscal 26, no concern on working capital.

Q: Simon Leopold asked about competitive environment and HFA interest.

A: Competitive industry, more HFA discussions.

Q: Alec Valero asked about AI agents impact.

A: AI agents need high-quality data and guardrails, AFX and AI Data Engine help.

Q: ASEA Merchant City asked about neocloud opportunities.

A: Growing interest in neocloud with AFX, working on differentiated value proposition.