NTAP - Earnings call transcript Q1 2023

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Operator

Good afternoon, ladies and gentlemen, and welcome to the NetApp First Quarter Fiscal Year 2023 Earnings Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. I would now like to turn the conference over to Kris Newton, Vice President and Investor Relations. Please, go ahead.

Kris Newton

us. joining for you Thank With me Mike Kurian; CFO, CEO, are our Berry. George and today is and This for webcast being call live our at replay will website netapp.com. on available be

both Discussion of projections website, turbulent and of resilience impact and to future such disclaim time and and time and for specifically and the our industry, and future Analysis our uneven Form the such all our documents our for spending we growth in changes the technological services, Condition which operate, as high fabric capital management, forward-looking and our in environment, macroeconomic will in cash a sections. market and the During we and obligation from second products guidance continuing revenue, forward-looking our acceptance chain our and shareholder Operations pandemic, any to prospects, materially ability Financial to and resulting Results and future Hybrid projections. to return Cloud the our including execute fiscal and with to including data greater in conditions recent market in of SEC COVID-XX operational We IT most available recovery today's and of outlook statements and Risk profitability disciplined disruptions of as Public with to also well trends results year update which as call, and environment, keep XXXX, including the and to pace as constraints Cloud opportunity our gain areas may financial ability for our with the the Factors continued and supply chain differ Management's XX-K, macroeconomic maintaining ability and introduce flow. market variety rapid generate statements the segments, involve for and markets make our while we strategy quarter our file in the on risk Actual Please growth reasons, supply managing refer our of returns, respect regarding expectations drive uncertainty. invest and

all During our will Reconciliations be the I'll to call now non-GAAP indicated. posted GAAP of unless measures are non-GAAP otherwise the estimates call, website. George. over presented financial on turn to

George Kurian

everyone. a fueled margin Thanks, geographies. disciplined and the operational results gross in Achieving ongoing great delivered for year, constraints highs Kris. the this company QX decades-high We Welcome, demand and income all-time Thank and us by start record portfolio uncertainty, operating our afternoon. underscores to you billings, with face EPS, for supply our of across broad-based joining revenue, management. dollars, inflation macroeconomic

grows. accelerate relevance As and their data-driven organizations cloud digital our transformations,

We and management. customers are a navigate modern infrastructure multi-cloud helping data hybrid approach disruption to with

growth, accelerate the complexities as for are the defined application and to cloud data increase their such with and own costs, is cloud delivery reduce and and flexibility, driven turbulent and Our macro further by by the management by in opportunity rapid Kubernetes urgency improve searching automation AI, hybrid The and Customers is of address cloud, environments. in increased created these multi-cloud public economy. in ways centers the to adoption priorities pandemic, COVID the databases. data technologies next-generation modern

future in these growth. confidence our role underpins Our and goals in helping organizations achieve strategy transformation

for natural data workloads, processing, how company share for chose including Public couple global drive with like our solutions. A a Cloud AI and me intensive Let ONTAP both several engines, and language Hybrid learning. demand recommendation applications you AI deep e-commerce AI Cloud of examples

cloud on-premises XXX AI/ML with key development better and hyperscaler center plenty The footprint the for Files for augment It storage the AI operating A to continued hybrid reliability with footprint. customer costs growth. machine of cutting-edge strategy application training Our data and opportunity chose ultra-high-performance consists storage, realized and has a its Azure while workloads initial close to tight partnership NetApp AI and business Fortune were and NVIDIA performance reducing existing its is NetApp win to adopting accelerate petabyte on workloads. learning, unit. of research Azure Files one of nearly integration

solutions faster at smoother AI remove Our AI efficient to integration. insight, bottlenecks accelerated edge, data core, and cloud collection, processing and cloud the to more data workloads, enable time

see Now, and strong Cloud Public Public Cloud healthy. Public of XXX% QX grew dollar-based XX% performance a year-over-year, ago grew revenue for net XX% our In Public segment continued we the Cloud let’s segment our services. to demand Cloud QX $XXX to revenue turn ARR quarter. QX, from year retention remains million. for exiting million at to $XXX rate

customers for growth expand now, potential store excited VMware We’ve for NetApp service opportunity bring clouds. workloads helped major FSx SAP-certified. into expanding high as cloud provider to or deploy environments data we cloud to Cloud for continued storage our services. using deployments the of constitute significant penetration workloads installed Azure announced multiple help of AWS business-critical for the Cloud public to see of the public see Cloud opportunity services, in drive benefits our that continue we for approximately about those been levels known customer certification cloud. public and the base, for FSx external in workloads further can base, the Cloud and on as large, ARR. are Hybrid our running SAP Files our is services. We for to on use business storage Public services that to XX% Public VMware percentage cloud ONTAP VMware migrate enterprise-grade similar only in NetApp demanding of data NetApp customers service the storage for We Storage same environments, is an recently part we ONTAP. that the we QX, our this Early data-intensive, certified We announced and has our of long bring on-premises and deployed the supported

to a and Spot amount are expansion renewal trajectory. deliver to motions. of in managed opportunity. delivered we as optimize fully innovation In but on Spark, availability Insights increase organizational Apache refined last remains sales of results. on in motions back, on our discussed Cloud growth its success stabilized Security, our Google general returning we bounced operations we of to infrastructure announcements and PC, substantial the continue Spark, address a to operations better We with Apache customer our execution for As QX, progress starting to quarter's Cloud. focus call, Spot for and work prior go-to-market serverless These cloud providing made changes cloud Spot and Ocean actions portfolio

Hybrid revenue grew annualized releasing a with their to economic by provider a of speed. we of for open-source Onto complexity. managed our enterprise Instaclustr, of now managed driven strong environment priority single, growth Hybrid year-over-year unit All-flash business, QLC-based investments capabilities and segment. high-performance of We hybrid XX% All-flash portfolio to We revenue for and grew environment, solid of fully and our of again automation, applications broad macro, combine can mission-critical, operating infrastructure has how deploying on customers remained and technical of installed Spot FAS leading-edge workflow of learn database, digital increase X%. continuous year-over-year, flash pipeline, penetration and uncertain building QX, goals, reliability Under in for monitoring, steady, applications, globe Organizations revenue cost, and billion. and can projects, business systems the to all-flash also acquisition hybrid at while reduce arrays unified leading expertise storage want requirements. security customer fully breadth of run open-source the Cloud all-flash growth. the rate completed installed base spending these price-sensitive transformational and array focus and to cloud X% X% arrays to NetApp Cloud optimization, range enables transformations. management applications. applications workloads. help the helping grew by arrays performance-sensitive the the In our The systems. product driven arrays Despite a posted in address deployments, offer our risk, capacity-oriented performance us around $X

further customer while IT range makes peers. address also broad cloud a potential our to optimizing more than of Our NetApp of a slowdown ability investments resilient to problems, and many

customers agile dynamic macro. in while the response our save as Just to to must our looking be too, transforming, we, are

return closing, with XXXX. we In to We areas growth, drive off into quarter, to delivered time that elsewhere. uniquely Customer continue will aligned, provide. high while we FY a of to a kicking are start at invest increasingly solutions the spending great the moderating same strong priorities

of details navigating growth now of outstanding over NetApp evidence the focus, seeing billings, management and turn are to that execution through operational walk environment. to strong of call I this and the Mike am QX. our of dynamic proud profitability. in disciplined You the team's I'll the in revenue, our

Mike Berry

us. Good thank Thank you and you, for George. afternoon, joining everyone,

I service today's and EPS, outstanding over discussion. environment all-time you two, had Before performance to gross offerings Azure income we think operating for it volume we an a XXX% AWS, Google Cloud be dollars, Number FX despite as QX by macro in uncertain our George QX ARR through cloud from and details, go billings, highlighted, an through Public an profit outstanding which highs grew one, unprecedented Number and collectively our Cloud, headwinds. dynamic company valuable would the revenue, with themes for the had financial key walk excellent quarter, business year-over-year. with

see portfolio. execution customer backdrop chain. three, Number of George improved complexity and healthy Like we and on supply demand CloudOps We to engagement the everyone we the also this saw as in both trends. continue in our mindful are call, macro mentioned,

X while in free versus quarter. our revenue reaffirming initiatives. will X-point guidance Cloud number flow four, EPS, key revenue, even headwind We FX disciplined business, our a remain factoring strategic to in extremely from when last X-point contemplated for running and provided FX Public in ARR, invest year full continuing guide margins, the headwind we our in And cash our to are

details. Now to the

billion, end and XX% FX, premiums despite X% to reminder, expense, year-over-year. unless billings Adjusting margin EPS otherwise I'll have elevated logistical XX% year-over-year. the billion, and Revenue year-over-year, for In As delivered solid both and of freight guidance. a $X.XX been up with up in of significant headwind came noted. Strong in we above QX billings execution would be cost from and $X.XX and the respectively. XX% FX QX, coming yielded high operating revenue at non-GAAP component X-point headwinds, referring unprecedented up revenue numbers

broad-based across by driven were demand results QX geographies. our and portfolio solid Our

value up to the expect $XXX through of growth. million we in Hybrid revenue $XXX the of continues in portfolio increased $XXX data ONTAP base. $X.XX as of for in the continue billion Hybrid increased was X% Cloud momentum fiscal sixth cloud revenue with revenue million $XXX fiscal support software product profile X health Product revenue of Consistent increased go and growth the our recurring year-over-year. by exited million, quarter of and revenue QX our product QX Cloud, of positively to segment Cloud driven NetApp, XX% consecutive of Files, the highlighting was and was deferred marks Within revenue, Cloud including QX $XXX Within overall NetApp. software delivered which Hybrid of at FSx by by up impact services, record Total of for was year-over-year, Public $X.X year-over-year, XX% delivering Storage our Total XXth XX% Our deferred strength Azure X.X ARR with this our new a year-over-year. points we XX% for year-over-year. installed guidance. year-over-year, year-over-year, up margin indicator product X% Cloud sequentially. growth Total revenue line growth XXXX. XXXX, services. segment, Public is million in quarter two-point Recurring total Cloud year-over-year revenue million X% gross X% $XXX of was of consecutive in revenue ended AWS gross the increase of in We best QX headwind constituting recognized FX. gross billion growth, revenue growth. up Cloud revenue leading and revenue, and with support recurring led an for year-over-year the XX%, the was XX%, XX% ONTAP Public NetApp XX% million, QX. Google from XX% year-over-year margin Hybrid in Cloud a quarter CVS. driven margin

continues came XX%. be driven goal to with continue XX%, and $X.XX margin was XX% nicely headwinds. in Public percentage gross XX% despite and Public Public was of corporate gross within flow our by strong million Cloud of supply to mix million. average. growing Public and scale revenue margin we the Cloud Public an accretive Cloud sequential the cash solutions. margin again EPS as margin QX business operations operating long-term support recurring very The the We Our XX%, of increase software was with and is Cash cloud $XXX driven remain confident Cloud increasing our gross our operating our business. free in ongoing from was to gross of margin model, business flow currency of highlighted chain software of in ahead Cloud leverage guidance. $XXX profitable, improving to of by the in

During included paying continued meet QX, we collections, purchasing invest headwind parts. analog possible, substantial constrained margins. as gross and trailing-edge much premiums us inventory flow but to demand customer for to cash while cash had strong to we a that allowed in was strategy This clearly as

We relief are through recovery it our seeing go remains to tailwind in as early however, will flow inventory a be we The fiscal supply start a as levels timing XXXX. signs to free of availability. supply uncertain, full of normalize, cash

free $XXX $XXX shareholders, billion in QX of cash returned million million During flow. investments. repurchased We million $X.X In QX, we in cash short-term we to out and paid XXX% total, dividends. cash closed and representing with in $XXX stock

to Now guidance.

guidance. We our are fiscal XXXX reaffirming

to growth guidance of headwind Our revenue X year-over-year last versus quarter. our now FX provided X in guide of headwind X% X% assumed original to X includes point points the

We an business Adding cost expect point drive total Cloud XXXX growth. Public XXXX, X and as to product additional we constraints product XX% In we the continue to to elevated $XXX incremental to ARR Cloud million. from overhangs in Public company segment these to logistical with costs continue mid-point, X of margin component and range $XXX revenue At and fiscal Cloud exit expenses is Public ARR FX gross our and of points our expect will fiscal XX%, headwinds. invest grow from weigh margins. supply on expect to to between

materials dollars. the is know, of you in As procured vast US of bill majority our

parts optimistic constraints a declining year, supply should will see fiscal cautiously procuring reducing in We premiums. also are our to at dependence We on benefit our the significant of ease further components. our prices half for start that hardware from second

trends. currency that timing margins mid-XXs our the we uncertain, incremental back of in confident XX% we committed Despite demand will $X.XX remain the driving to headwinds, remain signals you, of is Like are time. and the to EPS we While of monitoring for full structural the operating closely margin XX% to fullness year. normalize $X.XX the product and all to the of macro broader

the disciplined will our outlook As to fluidity George customer the noted, environment, however, measured we envelope. engagement be of healthy, and spending appropriately remain given our in continue extremely with demand and

to the greater billion operating year. free generate $X.X than in continue expect flow cash We to full billion and in $X.X cash for flow

Now on to QX guidance.

between at net We points currency X expect billion and to billion year-over-year, including increase range implies of $X.XXX QX midpoint revenues the X% $X.XXX which, headwinds. a

expect to range We range share. operating gross we anticipate $X.XX to per consolidated share and and tax-rate XX% expect our XX%. And XX%, margin $X.XX be XX%. margin and to We to QX be between XX% approximately earnings to for per between between

XXX for want hand a is million. to in thank execution I’ll open a start. it Assumed of approximately entire Q&A. call a to net team and count Kris our to the closing, of the in to as QX, In outstanding NetApp year million guidance the QX result strong the $X Kris? interest is back share for off expense now I

Kris Newton

Mike. Operator, the Thanks begin let’s Q&A.

Operator

you. Thank

We from the ahead. Suva first will Instructions] come Citigroup. now Jim with And question-and-answer begin question session. the Please, go [Operator will

Jim Suva

visibility be. you even because seems deeper deeper, a just going team. to your kind beyond longer two, Great wondering, relationships this you to would COVID. very Thank very by distance you. two-and-a-half with it this procuring premiums and just and it aisle to shortages way. and that results. it Does has positive the opportunities? much. wow, you going to appears with seems customers. down parts, normal what I'm extra you you are a even of been like And stepped look, the customer walked And challenging expectations delivering up and now and things like set of the is, the it NetApp past question paying And way agreement congratulations have Thank in My of up years

George Kurian

Thank you, Jim.

ways had I book of to business we with continue think, broad-based trends, see healthy everything and we to demand We by on we're be can. that meet to parts procuring we to can promises in able helps many We think expectations we as first customers. us that, customer to deliver of of in the supply. doing a that as ahead demand all, QX, make

equally operations transformation. and bring think offerings, importantly, address our and our that the of capabilities customers, vast cloud both I a we of cloud storage range digital broaden particularly with now cloud we portfolio our that cloud range to

of them as capable, buyers. new of buyers, customers as new digital businesses combination our the well part is their their and the of a and so broaden meeting well us and expectations make allowing for go-forward exposure within buyers more business, relationships as day-to-day helping kind being existing deepen to transformation, lot to And cloud as net

I'm for So year ahead about excited us. what holds the

Kris Newton

Thanks, Jim.

question, Next please.

Operator

The question Please come go ahead. will with Stanley. from Morgan Marshall Meta next

Meta Marshall

Great. me. questions Thanks. couple of A for

of then of and conditions, outlook kind whether of maybe of kind from signs prices any benefit impact? in seeing Just change kind memory there's macro costs conversations, tone seeing any looking of any your you're Thanks. just of that maybe that you're that were coming you on elsewhere? you second in kind you're or the to what of, that whether saying for the down any detect would seeing higher question, observing for be sense just offset macro some componentry that And

George Kurian

Thanks afternoon, the for Meta. question. Good

industries. geographies, all, segments, of of across vertical think, book I we customer first broad business have a

us. they that And with so, teams to about our customers with going on purchase, the and want intent we to field project discussions monitor do the their

projects. So continue in investment see I clearly, healthy to transformational we the think,

cloud participate business, fortunate, migrating that work are a able the are we've them centers done truly cloud. those or projects unique in be they modernizing we to the to way, whether think in in in data given I to

see that business application for COVID during the spending create and public sector budgets. to focused start to us process transformations in continue business more and really agencies to opportunity In late sector, engage to of public participate, the were to priority with we because that defense couldn't that I of the doing agencies start customer think saw COVID, deployment security we now some continue particularly new to take trend. closed with generally we

priority balanced customers really So overall, from you to steady years book-of-business, Mike, and a good supply? across do of a COVID want rebound showing the two then engagement our projects kind on the transformational talk of about delays.

Mike Berry

Thanks, George. the Sure. thanks question. for Meta,

So expect as then do half. did we support we've and slight we headwind be and tailwind a talked in last about and moving certainly on the earnings to second the surveys the All expect the the call memory first prices to still we half quarter, that. had a in discussions

good a As of know, that did with add you bit in QX. after SSDs inventory issue we we the saw

will So by that see a little in it a a memory through all bit to is bit work become to guidance, that little the take the our prices tailwind in of half. do expect the we of P&L. way, time And second more of

Meta Marshall

so Thanks much. Great.

Kris Newton

Thanks, Meta.

question. Next

Operator

question Credit from come Suisse. ahead. Please next go with will The Cross Shannon

Shannon Cross

Has flow about continue change, through to Public to length ARR growth I much think up taking or the I'm terms was that think in think any Thank XX%, Cloud how you in how of quickly there we we my very of for the will overall. as contracts. about been trying should cloud question. the growth wondering, about

I shifts I'm when I And are right recognized? talk still we're little or have contract wondering, things I your seen cost perspective, a in of you guess. thinking you be in just in mentioned are headcount. expect length any OpEx? you a was timing then at to increasing environment now, look as you cautious, being just planning Thank cautious customers you the that Just your to mean, how you bit wondering, on more you from when you.

George Kurian

Yes.

a contracts, have cloud book-of-business. terms broad In we of

the of years first-party We then bit. of have work contracts. on broad duration, in contracts, we type around we type course, have, which range. are services, consumption a contracts are couple of usually agreements can a customers move they that with subscription They're so And the that so in of kind a cloud

for see we because the they demand cloud overall, efficiently. think our strong our offerings, use I more customers help

are And their Cloud. services, native performance less of services than Mike? directly much operations of storage portfolio our usage hyperscaler concerns optimizing for addressed of overall more course, capabilities. more can dollars customer our about Our and spending cloud Public and so the efficient on network sort you cloud compute then, cloud storage using get by

Mike Berry

keep as that expect to XX are in is recognize too, mind, ARRs Shannon, – And the well, what next we Yes. months. during

be you'll in headcount disciplined. continue closely – So, that well going hey, around on very to your we then cloud are our growth, revenue. to see We as pretty going And talked headcount. to invest ARR that areas as tie those about, of the drive question, we're sales want to to specifically some as

very We making just to prudent additions. be dollars like look and at other everybody are we a we'll else, around drive sure growth, taking that reallocate

Shannon Cross

you. Thank

Kris Newton

next you. Thank And question.

Operator

from next come go Deutsche with will question Please ahead. Ho The Bank. Sidney

Sidney Ho

on Great. that the by X% seems the And exiting resolved? upside some you're more issues taking get my in of working The this you Spot. follow year? expected, the the just question. resolved It to maybe When than to impact organically. to of expect was the the in Thanks on X% talk positive Public in business? Cloud them to like But you maybe some driven looks can Maybe like ARR Is up FX other better come in the do being up on? not QX why side. Thanks. issues have ARR for about

George Kurian

the the Listen, we're pleased to year. of start

And really our is early portfolio innings we there's Google, as said, our are strong. with opportunity the business to and and them. think Amazon I with expand of in we storage cloud plenty

organization, good portfolio, able so had disciplined strong where the a doing regard the the we've product the be and so. new field execution start the in in sales to to the the team to work leadership, are to do far. year feel which really in good With Spot had cloud about and focus pretty operations – I We we've portfolio,

on think do, in motions have I work part more that the to execution attack we that on and Cloud market success still Insights, sharpening of business. parts of the the particularly some customer the we

quarter, pleased, strength that we really we year about we're first the the for growth guidance. more for a at great the our reiterating see strong to the off at if talk point, portfolio. year, guidance. So a we're feel start full our can end cloud of the good I of about year It's full But target And start. at the we're

Sidney Ho

you. Thank

Kris Newton

Thank you, Sidney.

Next question?

Operator

from The with Please will next come ahead. go question Vogt David UBS.

David Vogt

Hey, guys. for and Thanks again Maybe is question for George Mike. question. taking this my a both

of mark are the think So we've of that we the now? seen lowest product triangulate I'm our about be it are math, trying might quarters Public might we Thanks. to three And industry the sort the kind gross there as hood chain facing, going just about challenges some else and pressure I time, margin if at in in going looks are we Cloud half of forward, something to from Hybrid we forward, expect like below quickly getting in the gross commentary well? where incremental given today supply of when from sort profitability your Cloud think at gross four we quarter versus the level should is just low-water product gross or is that some like back sequential improvement that I be should margin where the margin kind under margin quite about better? XX%. expecting we so therefore, business this And the from – the a in

Mike Berry

it's Yeah. David, Mike. Hey,

question. great So,

let's So through that. go

call the and saying, quarter, would it gross midpoint, have a lowest are on be expected. we the product talked about pretty and ago, calls expected in of we hey, of without we margins basis, we in true relatively consistent in about FX, a in – impact for guidance as QX. mind it about keep point, did call we at came QX paying, last premiums. When been the that, gave a on we QX. at quarter the much your As this million $XX To we we're talked expect couple incremental year-over-year that its to

expect the year. and We through we that continue the of better then rest to as go in get QX

do all earlier addition guidance we year In to in the better our of expect full we Meta's little prices our into number. Again, gave bit that when get memory is second question, to a half. baked

So chain all things being expect gross the know crazy We no the to we else would to or of this supply year. go things time. as on throughout that equal, happening continue at we improve don't margins

David Vogt

up, And just follow then Mike. can maybe I

and Meta down you before expenses. been of certainly flat may So controls quarter? have unique maybe, first meaningfully in marketing sales what year-over-year there asked us, be and least, It some like leveraging had tight quarter-over-quarter. operating there on fairly keep Was might looks your anything to the sort appeared cost at on end to

we better gets and lines into back incremental over quarters? chain revenue OpEx flow ramp, the dollars expect to supply next couple As to of continues should some the

Mike Berry

Yes.

for thanks the question. So

your sales incentives, marketing gave there through because benefit, $XX spend lower big commissions, program in saw -- that of just about as is the one and variables down then and reset you the that movements the marketing. marketing program major million million timing. mind were about was OpEx we mostly that That To overall, of flowed is Instaclustr. dollar R&D, -- keep marketing. means Also, marketing, we incentive typically three of addition a QX pay And well part lower So, moves X%. quarter-over-quarter. OpEx. of -- $XX us FX was about down point, company. a quarter-on-quarter have were sales QX, and There in stronger a for always David, total as in spend

one as be big hey, three growth. the cloud. looks looking are making movements. those growth hard we're will to Candidly, and we're as it at sales those marketing sure And that in of well, Meta especially in drive investing areas, asked So as

David Vogt

Perfect. Thanks, Mike. Thanks again, guys.

Kris Newton

David. All Thanks right.

Next question.

Operator

The next Please, Wells ahead. question Fargo. will come from Aaron Rakers go with

Michael Tsvetanov

timing Michael your through XXXX think I'm price I perspective? from we increases those Yes. price This what flowing of get How revenue growth Thank be a recent your you. behalf on of to can much how at is, the Thank should you. to about fiscal trying really Aaron. increases? attributed is guess, model

George Kurian

before, we've we increases. increases. disciplined able shared those value as be implemented, being price of to the two And have price capture seeing our to Listen, we sales are teams

is, budget prices. budget incremental The to because dollars, IT important note they get just customers' raise in don't vendors thing

So I revenue price the tied being that our fact is do not increases. strong see to

your customers think share get than fair you to spend your got I fair more and or share go their spend. of

base point -- and monitor we'll do I need that supply will if don't another the Right need in time. do we'll the to how so at we to continue to that. take now, we adjust see appropriate the evolves, And action, pricing

Michael Tsvetanov

you. Thank Okay.

Kris Newton

Thank Michael. you,

Next question?

Operator

The will from ahead. Goldman Please, Sachs. go Hall next with Rod come question

Rod Hall

Yes. was off the Hi. into and there were wanted little is quarter-on-quarter, Americas X% the an The revenue bit, flat the just to quarter dig little just than of to just you couple below normal question. see a April trajectory that's and What a quarter-on-quarter worse seasonally. commercial seasonality for XX%. years, of deterioration I Thanks there. bit that I last about

quarter from under the And year-over-year in as about X% So look then April then last it year-over-year was it deteriorating on XX.X% the well. quarter if line, that weak and growth XX% was at just seasonally I before.

I that going guys particular fluctuation it on? demand could think like happening Is is And else moderated there maybe there. something you it's there what you or looks So line, bit. dig in is into little if a a wondered just

Mike Berry

the Rod, question. Hey, Mike. for Thanks it's Yes.

the of quarterly back there really to we So -- big impacts how driver chain on supply is talked we'll what time, about the last go in GOs a it's basis. terms and it

great. APAC grew well. which see did in USPS, and was nice growth EMEA You as

So any change more of place basis. supply to our chain were where demand really able a versus an that quarter-on-quarter product we was issue in on

Rod Hall

And on can color follow got to up Mike, is customers, more did of guys a could these they why of allocate us particular give group supply less -- regions? there to that some other make less that any just decision you any I asked, or you than and maybe

Mike Berry

Yes.

are customers on matters. And purchasing, nuanced to what a when answer, those It no, that. linearity in, have, orders we purchase availability it's came didn't So what Rod. decide do depends we

outright that there, it the So but no in how there direction It way. hey, that lot in there's or was was no, just quarter. decision fell a goes

Rod Hall

appreciate All right. I it. lot. a Okay. Thanks

Mike Berry

Thank you.

Kris Newton

Thanks, right. All Rod.

question. Next

Operator

next go will Daryanani Evercore. come with Your question Please ahead. from Amit

Amit Daryanani

my taking $X.XX. well. I just I or you your raising ask the basis XXX so about FX have guess, top given off on? organic guide are actually performance? on understand first share gain line, by guess question. QX better and as for revenue together. be Thanks good an what have. think, like to are basis see beat then you to buckets Yes. and will just better you you're looks or two which could issues you, end-demand Is the is for points them it I'd that of And That driving secondly, trends the love Mike, by it I I'll kind it on but it organic understand. really be I

year full basis. you're QX Your numbers raising guide, think, not on X really The Street, of but EPS it's ahead your I to an X about

EPS I seeing not the what upside the that's you the in to Thank or back So guess, you letting line not seeing half half? on first you. the flow are

George Kurian

I'll take then Mike the cover will one, demand and EPS. the

First pleased in with saw QX. we're book-of-business of the we all,

customers deeply had engaged geographies. you really from are and all the strength our segments our with balanced with results, teams book-of-business geographies. the of of as across all And see a across we Our good

good the in. with I think to one are year progress. quarter ahead, the listen, regard about feel We we really

headwinds we incremental the FX correctly saw guided. our reiterating are you Yes, time guidance. We that we from note

confidence So and it's wish business course it is to having moment, say at having you continue demand. is the just by could I the And demand, right? meet supply the work. supply confidence place have supply, I that need to ask do for is get mind feel the on I that we actually through think all year. that our would We sort really we the of of but to shows me me I stabilizing, about still what's of behind we if reiterating of top guidance today, it the in

Mike Berry

actually going actually Hey, that, incremental not that albeit you're take are when as you through, a to well, you into full as there think ways when noted, is although number, that number appropriately Amit, I on the raising EPS see flow impact. as year the account much we side FX as EPS you And the revenue.

good So about year. – the we hey, we feel feel

the an about talked reiterating we've We in several as cash have the EPS as number times time. flow – operating well uncertain

about feel that good we range. So

and make how hey, both around certainly disciplined are spending and said, that the we see take cash We'll a we'll goes. our goals. hit we George As targeted rest profit the of sure year at to but look very it,

Kris Newton

All right. Amit. Thanks,

question. Next

Operator

next come with Please ahead. go Matt Sheerin question will The Stifel. from

Matt Sheerin

the to quarter. you. as from versus your up or other trends quarter, constraints slowed it all-flash Thank Yes. from far just tough comps, last like was rates as all-flash or looks up into and anything growth It last was supply XX% Thank ARR transition you. against to reasons? customers, It up X% somewhat read that

George Kurian

The to headwind combination revenue. we have an constraints of also some and supply product FX

of FX I so total our it in the in but I of comment, times flash, past, buy to affect think this of more choose configurations given would seen the our the you business, think, headwind. being all total substantial we to that certain at also business book would cases. book as early customers like it's percentage have assume too economic same

our – segment, in had hybrid most strong a to have is we So customers quarter the targeting which configuration. want really flash buy cost-effective who

yet. continue that. I in, a call And so monitor we'll to that one so It's trend quarter wouldn't

Matt Sheerin

you. Thank

Kris Newton

All right. Matt. Thanks,

Next question.

Operator

Chatterjee Samik Please will with from ahead. JPMorgan. The come next question go

Angela Zhang

about dig majority growth Zhang I'm made of contribution that for Chatterjee. to combined. over XXX% Google guessing Angela in is Cloud Azure I ARR This and just the from the comment Samik wanted just the and into you but how AWS, right traction in ANF future? you is might trending parsing given going do it through one seeing its on where now, scale you're – you and see from each the greatest comes where mind

Mike Berry

it's Angela, Hi, Mike.

in that, is three not to go different a As quarter. individually. largest them the All ANF in the of relative the of terms about, well three continues largest in of the and how be at quite go-to-market with And and part the quarter well. they we've CVS. product, trends They're the well performing portion of all hyperscalers portion of yes, performed all going ANF to into to were. did the but of products We're talked are ANF their stage

Kris Newton

right. All Thanks, Angela.

question. Next

Operator

with The next SIG. go question Please will Hosseini ahead. come from Mehdi

Mehdi Hosseini

services, cloud how four And should Yes. the to next of think storage a I follow-up. this mix how I Two quarters? mix your cloud follow-ups. would over Within And about current data have change six versus cloud op? the

George Kurian

over several that should mix is relatively cloud think next quarters. said, And XX%. In stay stable the we as storage, the we

Mehdi Hosseini

better growth I'm FY and at All-flash like Because array mentioned seems that AFA your I just take growth your was uplift will XX%, XXXX tracking if Okay. to to And provide looking is an just to AFA, guide, fiscal if data cloud teen. you the this commentary in to was low year it AFA services upgrading. accelerate installed addition understand would XXXX were trying I year base

George Kurian

as a multiple Listen, can we We other market, cloud-based solution, the challenges managed offerings. solution. as a hybrid through it right? some flash well solve saw through ways, customer unlike can it I in think, in players we solve service

what customers the range want of So and to we’re them going to give we’re our going portfolio. full do

strong. I think offerings are our flash

been shared of vast our on-premises as affected outside macro. the installed our base. the certainly growth have We But before, we by cloud majority from comes have

So new our buying AFAs, buying most customers not they're of those stuff. are

Mehdi Hosseini

Thanks Got color. for the Thank it. you.

Kris Newton

All Thanks right. Mehdi.

question? Next

Operator

Please, with will Company. next The Cowen go & ahead. question come from Krish Sankar

Krish Sankar

on two taking great ones. for Yes. my I Hi. congrats Thanks quick the and have question result.

Conversely, the lead XXXX, how would are earnings uncertain for Thank two a margins Mike. to for any then So typical XXXX? revenues FY subscriptions. you typical if much very leverage? helpful. one visibility into heading your starting you visibility do products to you're is But But George. XXXX? into storage about have number, ARR visibility you calendar that given to especially XX% think back in do you my it have some some taking I much understand about about how with be macro, reiterated, into question. months. FY one And down, hypothetically, think down three quick the is FY How for half Mike? you assume Because environment, do time the guidance First to safe have of and product color and operating on

George Kurian

accelerated we and to the engaged could could remarks With get in conversations to and are that we and These cloud target customer those. be with process in see are what transformational digital is, the business I there funded, getting application regard as right? Those in spending, And base. within all better said And all understand It enablement. data we to receive right? could are the and customers deployment. be continue -- analytics It projects be participate of migrations my listen, to of prepared customers. visibility, benefit

of accounts, than of more going have we it's we of regard just are think engagement demand. larger of which range accounts on, I certainly into visibility we to the them, and part what because see With plans, smaller business. have some the steady our total smaller maybe spending the with a

pandemic. said, of we two our recovering COVID from clients years As are of some

be two delayed as from spending. they're recovering not may years about they while So excited of next holds, still what the year

forward. And moving are projects so these

of work finish with not the customers planning we next first this on half only year, but which for continue of fiscal to also our our year. so, And comprises year, their the for

Mike Berry

last on certainly at scenarios. hey, we question, way I your that Krish, answer And is, would different the look

said a we important money, You to for than Also, we keep what in or end mentioned be. year, it where feel reduce the operating of being cloud No gross We've still of of hey, Based had very bigger XX% profit little spend reallocate cloud down. we XX% support, on majority over that continues one by about gross the at one which which And think a as good calling the that our we're saw would look we the well. on to a of our the that's note, this by mind be year. of revenue be we is if guidance that. call is the scenario of part about. generated different the will looked the would expenses, profit where and midpoint

that So provides nice a buffer.

we on that all go saw rolling the certainly would trigger So those things Hopefully… as unless different we pull the we scenarios out. year, we're looking nothing into at

Krish Sankar

Thanks George. lot, Mike. that Thank very you is super a Yes, much. Thanks helpful.

Kris Newton

All you, right. Thank Krish.

question. Next

Operator

with Leopold James. will next Please question Your come Simon go Raymond ahead. from

Victor Chiu

the that Chiu as this new this about This there Is down implies accurate Public contributions. from Victor dynamic And of quarter? quarters? ARR Public to back an Cloud expansion guys. the this we bookings continues was that if assumption? specific last quarter XXX% trend to NRR going math, it contributions forward behind the the assume there Simon. to Cloud if quarter several should so, think were for renewal NRR how is we in of drivers customer over napkin in And some has relative Hi, that If seems strong

George Kurian

that we've down retention would said come over dollar-based time. rate Listen, net

a stabilized think XXX%, good about we kind said the of It around but I we've bump will around we're really bit. book-of-business we feel adding.

our new certainly are our particular and of cohorts strong I don't routes I we set read anything into good trajectory, customers, are to the showing think especially portfolio, really we acquiring New growth with a book-of-business, expansion strong have cloud market. but right? across hyperscaler

of with there's opportunity continue additions. So net We're ahead. plenty balance going to expansion customer new to

Victor Chiu

Okay.

new into bigger Is to role? play kind So bookings baked of a it your outlook of kind right kind correct? of that -- that that think is but

George Kurian

strong, the be are will a of the very mean, business. cloud I that as new bigger installed become think the base smaller gets a to of and total part and they bigger I number, listen, amount naturally additions,

not just of customer all. additions about law -- it's -- at the don't we up we're with It's So badly large the catching feel new numbers you.

Victor Chiu

Okay.

you. Thank Okay.

Kris Newton

Victor. Thank you,

Next question.

Operator

will Nehal Chokshi Capital come next Markets. The question ahead. Northland from with go Please

Nehal Chokshi

you key Congrats guidance times, and George, first talked of results if the being believe time that AI where I management? ONTAP your workload enabling some ONTAP data a these what's double wins, raise about this and solid inherent AI click strong here. and Yes. and first is Can in one Thank data talk enables effectively you. talked the you to better about data of management portion on not customer of that into wins. the you workload about

George Kurian

Yes.

strong all, first quarters It's been talked have AI. many about over contributor of we to business the a First time now. isn't our it

we're excited three have things about. We that

analysis, files. data, all tied file-based First is great analyzing are works AI the on technology image Those natural underpinning to language processing.

smart. algorithm The second to requires is high-performance infrastructure make AI training the

storage, we the reference the really software think in the our leader work market. market done to vendors over the third And I have NVIDIA we infrastructure. combine question And last part year, raise is, last good file years build so point over high-performance and the without that are technology few of designs I'll that with their

only ahead I'm of from excited it cloud my the address opportunities about cannot as So it super on as well. in prepared part saw that the you uniquely And remarks, market. we on-prem, the address but

Nehal Chokshi

you Great. much. Thank very

Kris Newton

Nehal. Thank you,

question. Next

Operator

question ahead. Steven come next with Your will from Fox go Please Cross Research.

Steve Fox

more do mix quarter from that quick bit little It's it since hybrid from One negative sounded much product the Advisors. and of How sure you're last the up Fox NAND especially rates see me. Steve sales, happened. you well. to shift talk looks deal in I'm was that a mix think the like more? prior as DRAM? you question the they year-over-year. in with have And digit double Can Fox you happening not about just storage It a one starting loosening that like grew to Thanks.

George Kurian

use the with as hybrid and of a at those answer, performance it you obviously ability we right point the because in for just cost-effective I a enough really see offer gives don't combination broad capabilities negative. large of I of Hybrid think a cases. flash customers Listen, generate good the to strength that workloads. price is amounts flash capacity technology, range certain for caching

arrays actually not we answer And file the block, is capacity and a all-flash arrays feel like that flash do an right object. customers. hybrid flash just and but for arrays, we having So, also increasingly cloud

Steve Fox

you. Thank Okay.

Kris Newton

Thank you, Steve.

question. Next

Operator

from next question will go with Long The come Barclays. Please ahead. Tim

George Wang

Hey, on Wang again Congrats George Long of Tim on guys. behalf It's quarter. actually here. the

questions. two have I So

sort some guys strategy up of kind any the private future a about in terms kind in just valuation pick near-term? holding terms of in shift you first just come the there folding of for of in given rapidly market in maybe companies, of of is talked has the private Firstly, on the of ops kind kind half last tuck-in cloud acquisitions, time the

George Kurian

Listen, disciplined we acquirers. are

the are the already that make preponderant we just in we to well but especially that right? to should and we up to landscape. strong of trying to more That We involved be majority can do monitor to that with year. to acquisitions acquisitions have work. we're soon, that at balanced, wrapped work deeply completed, done doesn't starts. the we doing That the have the things we're have that already they advantaged, acquirers least We Instaclustr, rule be that integrate off work. the so start right, disciplined So won't also doing we've massively mean CloudCheckr done continue out sure work are don't both And

George Wang

Great.

both is, So of are if on my just de-metrics. the follow-up deferred the can kind you billings unpack and

billings, I by to FX that's decelerated when of with deferred it's but the probably X%, tough the at some guys so mentioned also you see So from seasonality, accelerated. rev actually kind year. some versus look it maybe But good last compare quarter

little any you about software you can it from of maybe update So saw kind support unpack front? a maybe talk bit, renewal

Mike Berry

Sure, George.

that. to a hey, answers So, of couple

So for about thanks asking billings.

but a So in XX% it mind quarter, XX% basis. constant that this currency on was keep

from as I revenue was apologize. very I year So in What We growth know, Most it was quarter-over-quarter. plus did support. that believe was, I of you billings last good its support change that, a accelerate missed last QX the in QX. drove in actually growth had If mostly quarter. deferred. XX% quarter it of

You the saw deferred in that results. revenue

did really, Support of was the drove Again, growth. well. billings nice. that bit was but a it cloud good it quarter, This

of reported, X.X% XX% about the So was cloud that. as

was about, you'll lot what end talked again up George because that arrangements. it CloudOps where a of So feet was our us under a big driver. that's getting And subscription around doing us

really So Again, on in FX-adjusted strong billings. an keep that is mind, billings compare quarter. to on basis,

George Wang

Okay, great. Thanks.

Mike Berry

you. Thank

Kris Newton

George. Thanks,

question. Next

Operator

will next of from question Mohan America. Wamsi come ahead. with Bank The Please, go

Wamsi Mohan

Thank you. Yes.

the accelerate Cloud parse doesn't of sort you On view? turned the go that you quick trajectory And noted was quarter, faster inorganic it that a trajectory from Public little through versus bit had on as in Is a just accelerate year. than sort you of what around the your organic the quarter? ARR, expecting really last thought you were I through margins. have the maybe expect you do still follow-up Or to can gross that and that here? And course of you you

Mike Berry

Sure.

for hey, So, thanks the Wamsi, question.

through ARR go results So the in quarter. let's the

we So million, to expected the second a growth half. still talked million. right little see $XX Instaclustr in we of about, we expected, the $XX bit came as acceleration where year, as through in That's we good around are. And

$XX organic, would as So $XX That I gets was grew except to define and to we million had Instaclustr -- I'm million million. about that $XX QX, Instaclustr going CloudCheckr by because everything half, in then $XXX million then QX you We the around call growth a between second would XX% be, to That's expect the XX%. on growth about quarter-on-quarter. to X% right it, million. XX% $XXX and and for the

growth little a maybe more, they weren't so million much. bit stick It's old a certainly at -- all. that it's of -- not an much, to So where bit little But $XXX midpoint. about near not us hockey gets the nowhere but well, and curved

good feel quarter-on-quarter about the we of basis. year a how need rest So that we on really the grow and to

Wamsi Mohan

flat positive gross gross Okay. then That's and quarter-on-quarter, margin, at the midpoint. margin sequential your but really roughly leverage color, getting on it's you fiscal Mike. guide, And helpful X% significant XQ are revenue

from You got a potentially. mix federal positive

outside offsets some what do upside to So you. you to see the gross or FX, numbers? say would the margin Thank opportunity of key of some potentially you deliver are those

Mike Berry

Yes.

in in is of That's USPS The spend the programmatic that QX. a of there for hey, question. versus that used quarter-on-quarter thanks mover now good So the more much big at bump you mind, to see really keep kind basis, big QX. had a a

We the work to And prices memory then that's relatively we of really while, before. put to help, have the half inventory balance that of second continue expect be again, to appropriately through on because we sheet we some very consistent. the expect premiums a to the year,

product, products here's big but So of gross those also matters within And the really some versus we mix of the entry that terms thing, good in higher about not number. within on level see. margin, feel ones. only a We'll

of good to lot second product see there's the it. We the So expect a increase about feel as year. Again, half we through moving margin that go we parts.

Wamsi Mohan

Thank much. you so

Kris Newton

Thank you, Wamsi.

question. Next

Operator

from Blair. go The Jason last with will Ader come William ahead. question Please

Jason Ader

impact right environment Spot right Yes, Like it's thanks. about the couple in of guess, I on of in last now whether demand any for had years. squeezing wanted for we're that you George, you Thanks yet, but in. I to in a the it it's type not seen ask pipeline. now. me lot to an it's terms of just Spot them ARR have really relative type seems in climate. this are Maybe interest? acceleration of costs of scrutinizing I customers actual like that is -- And know a It's tool cloud perfect for

George Kurian

set in of where is of Spot Clearly, perfectly as Yes. of the you're as spend for resource the this kind which portfolio, with terms cloud constraints track well with in spending helps talent of raw the automation cost up keeping both cloud and environment.

that broaden We off our are in pattern with and with widen to just start identified. good you line year to intend customer the engagement a portfolio. the We to Spot appropriately

Jason Ader

Okay.

I catch an guess you mean does the of didn't is comment. have guess, seen I some that So that in I that acceleration -- interest?

George Kurian

their begin portfolio. cloud think as understand Listen, have good help tool that with are we going them, seeing good proof-of-concept, in trials Spot to they appropriately customers the set I scrutinizing on we're spend. to a And

Jason Ader

you. Thank Okay. Great.

Kris Newton

over turn back to I'll right. George. All it

George Kurian

was Thanks, gross environment margin to Kris. priority billings, a QX dollars, has digital by macro, for cloud steady, driven setting enterprise revenue, in EPS. and operating investments start QX the remained great and records Despite the income summary, the year, In company spending transformation. uncertain

with growing these organizations relevance globally. a challenges drives with by created initiatives Our address the ability broad portfolio to our

shareholder We Thank maintain while execution top operational increasing you. our management continue deliver to will value. our driving priority, on to and disciplined focus

Operator

The Thank conference attending today's you now presentation. concluded. has for

now disconnect. may You

NetApp (NTAP) 24 Aug 222023 Q1 Earnings call transcript