NetApp Inc. (NTAP) saw its shares plummet by over 16% after reporting earnings.
The data storage company reported weaker-than-expected fiscal third-quarter results and issued a cautious outlook for the remainder of the year. Despite the stock’s sharp decline, analysts reaffirmed their confidence in the company’s long-term prospects, arguing that NetApp remains in line with industry peers.
For the quarter ending in January, NetApp posted revenue of $1.64 billion, falling short of Wall Street’s consensus estimate of $1.7 billion, according to FactSet. The company did, however, meet earnings expectations with adjusted earnings per share (EPS) of $1.91. Looking ahead, NetApp projected fourth-quarter revenue of $1.73 billion, below analysts’ forecasts of $1.76 billion, and an adjusted EPS range of $1.84 to $1.94, compared to the expected $2.00.
Operational Strength Amid Sales Execution Issues
Despite the revenue miss, NetApp demonstrated operational strength in key areas. The company delivered a 2% year-over-year revenue increase and achieved an operating margin of 30%, exceeding expectations. NetApp’s All Flash array business grew by 10%, reaching an annualized revenue run rate of $3.8 billion, while its Keystone storage-as-a-service offering surged nearly 60% year-over-year. The company’s public cloud segment also saw robust 15% growth, driven by first-party and marketplace cloud storage services.
However, NetApp faced notable headwinds, particularly in sales execution. CEO George Kurian acknowledged that several large deals slipped out of the quarter, leading to the top-line shortfall. The company has since implemented tighter controls on deal progression, a move management believes will enhance execution going forward. Some of the delayed deals have already closed in the fourth quarter, adding to expectations of improved results.
Guidance and Market Reaction
NetApp’s revised guidance failed to inspire investor confidence, with the company lowering its fiscal 2025 revenue and profit outlook. The company now expects full-year revenue between $6.49 billion and $6.64 billion, down from its prior forecast of $6.54 billion to $6.74 billion. Adjusted EPS guidance was also trimmed to $7.17-$7.27 from the previous range of $7.20-$7.40. Management attributed part of the downward revision to foreign exchange headwinds, which shaved $30 million off projected revenue and reduced EPS by $0.08.
Analysts remain cautiously optimistic despite the lowered outlook. Evercore ISI analysts reiterated their ‘In Line’ rating on NetApp, though they reduced their price target from $140 to $120, reflecting a potential upside of nearly 19%. They highlighted the company’s strong performance in cloud services and AI infrastructure, despite the sales execution missteps.
NetApp’s revised guidance failed to inspire investor confidence, with the company lowering its fiscal 2025 revenue and profit outlook. The company now expects full-year revenue between $6.49 billion and $6.64 billion, down from its prior forecast of $6.54 billion to $6.74 billion. Adjusted EPS guidance was also trimmed to $7.17-$7.27 from the previous range of $7.20-$7.40. Management attributed part of the downward revision to foreign exchange headwinds, which shaved $30 million off projected revenue and reduced EPS by $0.08.
Analysts remain cautiously optimistic despite the lowered outlook. Evercore ISI analysts reiterated their ‘In Line’ rating on NetApp, though they reduced their price target from $140 to $120, reflecting a potential upside of nearly 19%. They highlighted the company’s strong performance in cloud services and AI infrastructure, despite the sales execution missteps.
Looking Ahead: Can NetApp Regain Investor Trust?
NetApp has been actively strengthening its partnerships with major cloud providers, including Amazon (AMZN) Web Services (AWS), Google (GOOG) Cloud, and Microsoft (MSFT) Azure. The company was recently recognized as a customer’s choice for primary storage in Gartner’s 2025 Voice of the Customer report, further validating its market presence.
While short-term volatility is evident, NetApp’s long-term fundamentals remain intact. The company’s expanding AI-related storage solutions, strategic partnerships, and commitment to operational discipline could pave the way for a rebound. However, investors may remain cautious until they see clear evidence that NetApp’s sales execution issues have been fully addressed.
Considering a $1,000 investment in these companies?
Our team at Stock Investor carefully curated a list of top stocks with the potential for significant returns, suitable for beginners and seasoned investors alike who are eager to learn a trade and unearth the best stocks to buy. Though not featured in this article, these selected stocks could be game-changers in the future.For those seeking dynamic trading experiences, consider joining our Swing Trade Alerts, Option Income Alert, or our Trading Room. Take advantage of our special offer today, starting at just $1 in the first month.
Unlock the secrets of Smart Money
Explore how billionaires and institutions are influencing the market. Follow their every move with DarkOption Flow and stay updated on essential market insights. Begin your journey to informed investing today!
Education
And if you're a fan of Invest opedia, you'll appreciate what we offer at SharperTrades even more. Explore our comprehensive option trading course and technical trading course, where you can learn trading, analyze stocks, delve into chart patterns for stocks, and gain invaluable insights for making the best company investments.
Unlock Your Stock Market Edge with SharperTrades. Dive into powerful trading tools, learn a trade, and receive expert guidance. Stay up-to-date with regular market updates. Learn trading, basics of investing, and how to pick the best stocks to buy. Whether you're a beginner or seasoned investor and trader, we've got you covered. Get started for free, today!