NetApp (NTAP) Q1 2025 earnings summary

Executive summary

• Achieved 8% year-over-year revenue growth in Q1 FY25 to $1.54 billion, with record operating margin and EPS, driven by strong execution in flash, cloud, and AI segments amid macro uncertainty.

• All-flash array annualized revenue run rate increased 21% year-over-year to $3.4 billion; cloud storage services revenue grew ~40% year-over-year.

• Raised FY25 outlook for revenue ($6.48–$6.68 billion) and EPS ($7.00–$7.20), citing momentum in flash, cloud, and AI, and maintained disciplined operational management.

• Announced CFO Mike Berry's retirement by May 2025 after significant contributions since FY21; initiated a restructuring plan reducing workforce by 2%.

• Introduced new AFF A-Series all-flash arrays, GenAI and cyber solutions, and received Microsoft Partner of the Year award for Azure migration.

Financial highlights

• Q1 FY25 revenue was $1.54 billion (+8% y/y); billings grew 12% to $1.45 billion.

• Product revenue rose 13% to $669 million; services revenue increased 4% to $872 million; public cloud revenue up 3% to $159 million.

• Consolidated gross margin was 72% (GAAP 71.3%); product gross margin 60%, support gross margin 92%, public cloud gross margin 71%.

• Operating margin reached 26% (non-GAAP 25.9%); EPS was $1.56 (non-GAAP), both Q1 records; GAAP EPS was $1.17.

• Operating cash flow was $341 million, down 25% year-over-year; free cash flow was $300 million (19.5% of revenue), down 28% year-over-year.

Outlook and guidance

• FY25 revenue guidance raised to $6.48–$6.68 billion (5% y/y growth at midpoint); EPS expected at $7.00–$7.20 (10% y/y growth); gross margin 71–72%; operating margin 27–28%.

• Q2 FY25 revenue expected between $1.565–$1.715 billion; EPS guidance $1.73–$1.83 (non-GAAP), $1.27–$1.37 (GAAP).

• FY25 capital expenditures expected at $100–$150 million; next dividend of $0.52 per share payable October 23, 2024.