NetApp, Inc NTAP reported third-quarter fiscal 2024 non-GAAP earnings of $1.94 per share, which surpassed the Zacks Consensus Estimate by 14.8% and increased 41.6% year over year. Management anticipated non-GAAP earnings in the range of $1.64-$1.74 for the same time frame.
Revenues of $1.61 billion increased 5.2% year over year. NTAP projected revenues in the $1.51-$1.67 billion range. The uptick was caused by solid demand across the latest all-flash products. Also, revenues beat the consensus mark by 0.9%.
NetApp now expects fiscal 2024 revenues to be in the band of $6.185-$6.335 billion. The company expects strength in all-flash products, and hyper-scaler first-party and marketplace services to drive revenues.
NetApp, Inc. Price and Consensus
NetApp, Inc. Price and Consensus
NetApp, Inc. price-consensus-chart | NetApp, Inc. Quote
The company now expects non-GAAP earnings per share (EPS) to be in the range of $6.40-$6.50 (previous prediction: $6.05-$6.25) for fiscal 2024. The Zacks Consensus Estimate for the metric is pegged at $6.16.
For fiscal 2024, NetApp expects non-GAAP gross margin to be 71-72% compared with the earlier anticipated 71%. Non-GAAP operating margin is projected to be nearly 27% compared with 26% projected earlier.
Following the announcement, shares were up 18% in the pre-market trading on Mar 1. In the past year, NTAP’s shares have risen 36.8% compared with the sub-industry’s growth of 125.9%.
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Top-Line Details
NTAP reports revenues under two segments — Hybrid Cloud and Public Cloud.
The Hybrid Cloud segment consists of revenues from the enterprise datacenter business, including product, support and professional services.
The Public Cloud segment comprises revenues from products, which are delivered as a service and include related support. The portfolio contains cloud automation and optimization services, as well as storage and cloud infrastructure monitoring services.
Revenues from the Hybrid Cloud segment increased 5.8% year over year to $1.46 billion. The Public Cloud segment’s revenues improved 0.7% from the year-ago quarter’s level to $151 million.
We projected fiscal third-quarter revenues from the Hybrid Cloud and Public Cloud segments to be $1,430.9 million and $158.7 million, respectively. Within the Hybrid Cloud segment, Product revenues (51.3% of segmental revenues) increased 9.5% year over year to $747 million.
Revenues from Support Contracts (43.3%) totaled $631 million, up 2.4% year over year. Professional and Other Services revenues (5.4%) amounted to $77 million, down 2.8% year over year.
Software product revenues amounted to $412 million, up 5.6% year over year. Region-wise, the Americas, Europe, Middle East and Africa, and Asia Pacific contributed 50%, 35% and 15% to total revenues, respectively.
Direct and Indirect revenues added 26% and 74%, respectively, to total revenues.
Key Metrics
During the fiscal third quarter, the company’s All-Flash Array Business’s annualized net revenue run rate was $3.4 billion, up 21% year over year. Total billings rose 7% year over year to $1.69 billion. Deferred revenues totaled $4.1 billion, down 2% on a year-over-year basis.
Public Cloud Services recorded annualized recurring revenues of $608 million, up 0.5% year over year.
Operating Details
Non-GAAP gross margin of 72.7% expanded 590 basis points (bps) from the prior-year levels.
The Hybrid Cloud segment’s gross margin was 73.4%, which expanded 680 bps year over year. The Public Cloud segment recorded a gross margin of 65.6%, which contracted 310 bps year over year.
Non-GAAP operating expenses amounted to $682 million compared with $648 million in the prior-year quarter. Non-GAAP operating income increased 30.4% year over year to $485 million. Non-GAAP operating margin expanded 580 bps to 30.2%.
Balance Sheet & Cash Flow
NetApp exited the quarter ending Jan 26, 2023, with $2.917 billion in cash, cash equivalents and investments compared with $2.620 billion as of Oct 27.
Long-term debt was $1.991 billion compared with $1.991 billion as of Jul 28. Net cash from operations was $484 million compared with $377 million in the previous quarter.
Free cash flow was $448 million (free cash flow margin of 27.9%) compared with $319 million in the prior-year quarter (20.9%).
The company returned $203 million to shareholders as dividend payouts and share repurchases in the fiscal third quarter.
NTAP also announced a dividend of 50 cents per share, payable on Apr 24, 2024, to shareholders of record at the close of business on Apr 5, 2024.
Q4 2024 Guidance
Management projects non-GAAP EPS to be between $1.73 and $1.83. The Zacks Consensus Estimate for the same is pegged at $1.74.
Net revenues are anticipated in the range of $1.585-$1.735 billion. The Zacks Consensus Estimate for the metric is pegged at $1.65 billion.
NetApp currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks from the broader technology space are Synopsys SNPS, Woodward WWD and Watts Water Technologies WTS. Cadence and Woodward sport a Zacks Rank #1 (Strong Buy) each, while Watts Water Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Synopsys’ 2024 EPS has improved 1.1% in the past 60 days to $13.56. SNPS’ long-term earnings growth rate is 17.5%.
Synopsys’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 4.1%. Shares of SNPS have risen 56.8% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2024 EPS has inched up 5.7% in the past 60 days to $5.27. WWD’s long-term earnings growth rate is 15.5%.
Woodward’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 27.2%. Shares of WWD have risen 42% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies’ fiscal 2024 EPS has improved 2.5% in the past 60 days to $8.54. WTS’ long-term earnings growth rate is 7.8%.
WTS’ earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 13.5%. Shares of WTS have risen 13.9% in the past year.
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