NTAP - Earnings call transcript Q4 2024

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Operator

Good day, and welcome to the NetApp Fourth Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Kris Newton, Vice President, Investor Relations. Please go ahead.

Kris Newton

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

actual with make During we without fiscal limitation, the and forward-looking year respect for including, to guidance quarter statements to our results future today's prospects, our may and strategy. These initiatives and other expectations growth which will materially. regarding and first call, future differ uncertainties, our are XXXX, outlook to revenue, various subject profitability cause and and financial our shareholder projections returns and risks statements

information, disclaim to SEC from and more obligation forward-looking our any and most projections. documents the time website our we XX-K including our to update For file please and refer on recent statements with We to XX-Q. time Form the Form

During website. measures the non-GAAP available indicated. Reconciliations will estimates GAAP unless on otherwise be are call, to non-GAAP financial of our presented all

to now over I'll the turn call George.

George Kurian

on concluded FY 'XX. and Thank building into as step you, quarter Kris. we demonstrating 'XX positive fourth We Welcome, momentum FY performance a the note, everyone. in robust high

Our reflecting FY maintained of of strong cash annual gross discipline, the earnings share, 'XX and expanded margin, revenue 'XX, per our the FY portfolio. leading operating all-flash flow Throughout growth company a of our cash high both records for for we QX midpoint and level to guidance, operational exceeded flow. margin operating free

secure yielded within proposition and approach plan the power help while our AI, and Customers data-intensive we elements results public uncertain a attacks. build 'XX, of ransomware turning remains marketplace. like of value to the and while workloads focused growing the their and At business the them our and cloud is plan environment. FY the leverage This an are ensuring business in managing public our to implemented to and source enterprise has native, increasingly macro in intelligent applications clouds protected hybrid rapidly performance enhance start data tangible from strongly for a infrastructure control more build data NetApp cloud the of to resonating storage open

of application, on-premises uniquely comprehensive on any automation, deliver type NetApp a data and all single any supporting one deployment a integrated data data growth storage simplify applications, multiple new based unified application data unify control system, unparalleled with consistent operating data In data deploy unified cloud cloud AI, APIs environments. limited protection. ONTAP, with management spanning rapidly and infrastructure solutions by and and of threats, and empower simplicity and world We the and delivers cybersecurity for IT their resources, escalating a integration plane. to of we customers rapid common and flexibility strengthen portfolio

year-over-year. the We and growth arrays with to C-Series to capacity revenue again Strong revenue billion, of delivered high up block ahead an our X% optimize Now X%. cloud of all-flash the the annualized This all-time growth quarter. of of at performance flash robust XX% modern particularly expectations. hybrid our propelled run array ASA demand revenue segment of our demand our all-flash rate flash customer for $X.X in and results was portfolio year-over-year product broad

with highly storage to with of at Keystone was Early hybrid to flexible as and for a management a a A-Series AI. products single resources aligns Service products performance products also The all-flash customers cloud business enterprise all-flash capacity changing cost from TAM new the storage we costs us new offering set coupled ranging A-Series in FY a data our needs, These effective provides workloads customers applications A-Series, highlight to our unveiled expanding quarter. the turbocharge a generation. in of storage QX and performance for enabling successful traditional that rapid requirements. C-Series, share unified ASA with response AFF to and further enterprise market. Keystone, standard increase enabling subscription 'XX, enhanced the position Gen than our in density offering multiyear Storage our contracts previous cloud-like lower new

from prior level expanding assurance almost sustainability recovery winning $XXX our sales Keystone us consistently service of with enabled than million. that storage-as-a-service contract from This FY competitors' to growth and more are ones. 'XX subscriptions We performance, customers integrated Keystone doubled value ransomware accelerate year displacing hear by to has differentiator. is availability, total the new guarantees and subscriptions, existing

Keystone leading We that expect will its the and be significant for manufacturer, needs. vehicle momentum selected as to FY 'XX consolidate this semiconductor A to another storage year Keystone. continue growth

and select storage advantage to global Data the reduce ourselves aiming displacing as storage. block allowed standard a customers. their enterprise Initially for environment. X-figure every superior the the established is operations, for essential to and to cycle. life incumbent AI we at competitive improve as environments seek to their AI another top to one both organizations single multiyear block management file, vendor customer of the choose for revolutionize and solutions This priority drive deal the for they availability complexity accelerate of AI. phase for Customers deliver innovation, them NetApp for support is a

for support and requirements high-performance privacy. and storage, AI, data preparation, generation augmented as training inferencing versioning, retrieval data data RAG as and or our requirements to model well including capabilities data complemented Due responsible from by all-flash governance tuning, management comprehensive model and that

and a In making easier from strengthen to to in customers value capacity AI, NetApp on C-Series derive it our investments. level continue AI AI pod systems, for We with we position introduced their focusing QX, enterprise sustainability. and delivering new plaque NVIDIA deploy customers to design, AI cost AI utilization the end-to-end blueprint an AI FlexPod support operate performance, efficiently to enterprise In infrastructure. software reference updated we architectures Cisco, giving platform, and of conjunction with rack-based

large the talk demonstrating keynote be amount existing directly complete and support start to systems for during one OVX AI. much were the in of of QX, the NVIDIA enterprises stack We storage at think to the full customers on is storing OVX were system, to announce Lenovo Gen to our unstructured for in our we for play portion the at we cloud, AI. Gen and for role the of partners ability stored innovation value of servers NVIDIA system data, RAG. validation and OVX a designed data for the the first of announced NVIDIA first to a the and with we significant optimized partnership the GTC, which give the honored of NetApp installed role Through where on-premises part AI with We is this base we were the recognized fuel in NAV to AI critical our NVIDIA,

high-performance AI of The cluster and all-flash world's its the company one from of model are are leading infrastructure choice language developing They We storage. oil now NetApp using building the is the large selected part rapidly with an also support center gas AI own initiatives AI of for and and have AI infrastructure, again their various new building ramping onboarding price AI NetApp this storage infrastructure up optimize resources. departmental AI leveraging AI they of to performance, their are models CCVs excellence to and companies.

priority driving services quarter investments. to storage million, our us was total AI and rapidly, These infrastructure than vendor time with services QX, on-premises cloud the year-over-year, value storage highly customers' had ARR. roadblocks the because number based cloud competitors first-party NetApp technology. of of and services X% helped and storage purchase up our for in of differentiated in ability X/X best workflows services cloud deal with a revenue closely more of remove are and their They ONTAP with increasing are good which $XXX storage our to to Public takeouts public marketplace offerings over XX% drive accelerate growing and hyperscaler AI each partners. AI from preferences their their year-over-year remain aligned we cloud server segment our of hyperscaler Cloud awarded on

innovating in performance-intensive We and ahead increased set of storage In further even our well cloud position. further of ONTAP leadership are competition workloads. QX, NetApp of we performance to extend broader Amazon are addressing an FSx the services for the we

the customers storage the of Partner and service We cloud control second Google to NetApp also capacity introduced year. new for consecutive infrastructure, needs giving performance the We a were volumes granular Technology their Clouds Golden for to Year level more receive for match of Cloud proud workloads.

'XX, want work thank to to our NetApp the for I their position. team Reflecting strengthen on FY

mother we enter AI. a stronger, robust a all-flash have complete portfolio, Without data plan solid in the approach in positioning modern and points new go-to-market a workloads types, storage giving environment spanning We unified hybrid cloud cloud new and resonating are is to the more have data of win addressing markets us fiscal wider us as our board better and year. set momentum like question, market, the across price storage, to

is backdrop are Looking cautiously ahead 'XX. the it of start on better at than macro The to the was 'XX, FY optimistic now we environment. FY

to our maintaining on leadership, We priorities, will this helping evolution AI. website focused built that raise and I'm the discipline. of their is June to Investor 'XX for coupled into strategy. with the you our about positions more growth I share Investor our FY tune Visit Day leading our top the operational the confident and data or make learn to our NetApp Relations us strong attend we've XX while infrastructure bar momentum industry, through continued the remain long-term storage for information. our customers intelligent for age more continuing of on laser gains. execution encourage

call turn now over I'll Mike. the to

Michael Berry

everyone. afternoon, Thank you, and George, good

we laser-focused managing on full This our QX focus to performance the elements and noted, are control. for deliver the George enabled P&L strong As within us year.

the the Before highlight details, quickly me getting key let into themes.

growth driven into have by as non-GAAP reminder, we revenue and all momentum discussed year unless 'XX. fiscal portfolio, delivered We a are storage QX numbers head our in strong otherwise As solid all-flash noted. which cloud

growing Keystone, strong $X.X part Service strong growth and QX. revenue year-over-year in all-flash approximately And cloud first-party double a offering now delivered over storage, and Storage XX% billion QX, quarter of run Flash our fiscal XX% quarter-over-quarter digits For year rate, achieved another of 'XX. revenue cloud marketplace largest year-on-year. hybrid our revenue. array year-over-year cloud year digits annualized and up for grew the accounts in business triple our as a with XX% a

Our record and QX operating a flow was operating was a cash record. for all-time profit an margin

year basis driven product For chain representing mix, environment. by normalizing 'XX, gross improvement around supply points year-over-year the high a of of of product SSD fiscal lower X,XXX a reached and full margins XX% costs record

recurring of to derived total share margin 'XX. revenue expect which an We continue into and from sources, fiscal increasing higher revenue have we

'XX of free $XXX flow, dividends. compared a repurchases fiscal million 'XX around billion and year free we flow shareholders XX% high. to fiscal increase fiscal cash XX% And to 'XX, share $X.XX year-over-year In of million cash of generated and returned an all-time in through $XXX we

share of diluted repurchases the by share approximately year. full Our X% count resulted a from year in reduction prior

today announcing quarterly are $X strong plan to a share an returns to today, $X.XX are Furthermore, repurchase in policy authorization from fiscal and increase $X.XX. continue by in we our shareholder an our We another to of 'XX announcing billion. increase dividend

details QX. up of X% up revenue QX X% year-over-year. year-over-year the marks midpoint to slightly and and guidance above the Cloud X% Hybrid of year-over-year year-over-year. billion billings of range Revenue billion, came in straight revenue $X.XX up $X.XX Now second growth. at were of of X% quarter-over-quarter. quarter This was our $X.XX up billings our billion

a $X.XX Product grew year-over-year with QX. revenue revenue up X% million year-over-year composed and QX in QX Public billion with $XXX and $XXX XX.X%. margin up of in was from Support QX. X% X% to year-over-year. revenue million and X% million exited increased decrease the X% ARR million. cloud year-over-year consolidated year-over-year $XX $XXX of revenue revenue, year cloud consistent was of approximately at X% $XXX the 'XX up exited We Public in decrease gross deferred total year-over-year. fiscal million

was Product our basis cloud margin mix hybrid gross prior by products. guidance XXX of ahead continued XX%. and C-Series was growth Total points driven gross XX%, our better margin in

quarter's margin last business highly for margin gross the and with XX%. year-over-year the be again QX operating of only XX%, points, support margin the cloud gross to model XX%. Public both operating of of recurring XXX to continues highest quarter-over-quarter in highlighted and and history QX increased our discipline our Our business XX% second operational margin. basis of to profitable strength NetApp with the

ahead EPS driven of $X.XX, $X.XX of gross of was by guidance $X.XX predominantly better margins.

onetime contemplated which in improvement QX, our rate flow a cash in million, reminder, that QX cash a was from In operations supply above customer range towards had $XXX we our usual $XXX flow expectations QX XX% lower higher tax million. due chain was free These in payments. in normalized metrics and our in prior collections, came QX, low was in payments cash to guidance. flow and tax As lower our

in million X% authorization approximately And and was current an our $XXX down We end today, paid authorization in $XXX on year-over-year. dividends. as million another $XXX share are stock we by of we QX, diluted share in out that the billion. QX left had During repurchased of 'XX. $XXX million million $X of count increase announcing fiscal repurchase

to guidance, Disciplined EPS. 'XX. down and was year for fiscal operating down review year $X.XX the fiscal full $X.XX year-over-year. X% operational billion moving highs for margin management billings Before billion let's the Revenue results were all-time and of X% yielded of year-over-year

For fiscal slightly growth. up 'XX, points year-over-year predominantly offset decline small operating year-over-year by margins, driven margin basis points the operating expense improvement XXX year-over-year by and was XXX XX%, revenue basis targeted in of gross

$X.XX cash both flow billion, all-time fiscal billion, company operating For 'XX, $X.XX flow cash free was highs. was and

billion $X.XX debt. with balance $X.X cash sheet very in healthy. investments billion and in total Our remains short-term closed against the year We

Now to with 'XX. fiscal guidance, starting

in strategy data strength indicators such analytics, AI, a confidence and the better today business addressing our our are key Macro underscore and application ago. priorities, of cloud transitions, me our customer than in as Let modernization. position security year

expect However, 'XX while been million of has in at total remains to be some revenue billion, improvement result, as reflects midpoint the we the fiscal year-over-year which $X.XX macro $X.XX our X.X% unsettled. range growth. environment the view, in And a to there

our fiscal year-over-year quarter 'XX. each is revenue revenue in guidance Implied in growth of fiscal 'XX

While not revenue expect we providing guidance, to fiscal growth to revenue return consistent we in cloud public are cloud 'XX. specific do

coming consistent from XX% 'XX costs. gross with NAND to fiscal despite rising pressure consolidated to margin margins component expect the be We 'XX fiscal gross XX%, roughly

expect We help growth Implied in cloud gross in in this maintain overall margins. guidance is our dollars, profit year-over-year gross growth to profit our is supporting gross which focus.

fiscal our at forecasted We of higher have demand 'XX SSD majority for secured a than large prices fiscal albeit 'XX.

'XX of are in the public We use 'XX of $X. to remain half margins make utilize EPS prebuy and long-term higher fiscal expect our as Given the of fiscal to and of this $X.XX We target target. margins towards be XX% gross confident XX% to XX% 'XX. fiscal gross the levels supply, second half margin our forecasted inventory cloud in of inventory our existing operating product of in our and XX% to we anticipate to expected to first progress compared

For expect the range the of to in year, tax XX% the rate we XX%.

will incentive based line when We compensation will with capital, income, expect pay be although annual especially variance working some will operating in quarterly plans. net flow QX we there cash move on in our

Our of generation strong anticipated to healthy enables us cash our continue return capital to shareholders.

flow we and intend cash up of shareholders return In buybacks fiscal to 'XX, to XXX% share free dividends. and to

of cash Our cash share to 'XX to quarterly increase driving the per conviction $X.XX remainder the and in in dividend future fiscal our flow generation free going buybacks. with share flow is

X% We by reduce to in expect to count fiscal approximately 'XX. share X%

guidance. QX Now on to

We the expect QX revenue X% at of $X.XXX between growth to $X.XXX year-over-year. billion range and which implies midpoint

range between to margin the in EPS gross XX%. be consolidated be and roughly operating $X.XX QX expect be margin approximately XX% and should to We $X.XX.

echo and appreciation uncertain in team focus execution of the to want I this and their closing, NetApp continued In environment. George's

forward opportunities our 'XX, capture growing ability look confident I into set increased profitability. our to and and in As our am I of fiscal strategy

I'll now the to Q&A. for turn over Kris call

Kris Newton

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

Operator

[Operator Instructions] UBS. question David comes first from Vogt Our with

David Vogt

the to C-Series. Great. A-Series of quarter maybe spent Can the sort competitive you that Maybe, what strength had the both talking successes the expand some and you're you seeing George, to the upon and time in the about that you macro? in relative start, of

in IT you quarter. macro but mean of to it in factor doesn't appear And market, I big for a for general lot a headwinds. not with just then this the there's for discussion be And host of upon you the whole pricing talked regards the Can with expand factors were consideration? important was of maybe offering. you performance about to the displacements more what of mentioned some some factors? because Keystone, You storage,

these average really helpful. Any it of suite success? the the about can really sort X- solutions, talk you Or length is offerings agreements? of the color drives would maybe of a these to of there Keystone X-year suite are And be agreements that

George Kurian

are Thank you the cautiously Listen, for question. the we macro. on optimistic

good the prior applications still from data with analytics, VMware, of good and we those They AI, the changes really you there's noted, success uncertainty their had customer of all dealing it's spending. are a like started but year, caution for and prioritizing in modernizing their environment disruptions we than better have As and amount like unifying across landscapes.

that Keystone, our had to see in We've verticals. wins across platform multiple had a that strong, the really QX. multiple and customers' And our other and a of the the and we landscape. from across elements strong every year to strong opportunity has their displacing to really optimize quarter brag data AI on year, of success of lakes training with case We've been customers offering, VMware really, VxRail which model had strong had strong data has installed hyperconverged look we

we of idea same to for in a experience, data center the their uniquely in we and all data the the and clouds. colocation able like cloud-like experience environment of in What offer market what data are seeing is are integrated a the platform your all a customers unified as public leading in is

allowing and flexibility the And and we value the of so that is operational all deals. to these the consistency us simplicity what's win offer

it making. long-term are on These commitments And there. multiyear are customers are architectural that price. I'll And they're not they leave agreements.

Operator

next The with from comes question Sheerin Stifel. Matt

Matthew Sheerin

you -- business? your another We budgets? big software. week. that seeing seeing -- you just this a that which as pushouts George, macro X.X% companies vendors reflects regarding 'XX, Are concerning growth, We're is to you just leading all for on heard another focusing projects, are continued say, of hardware Or from concerns. AI your hearing fiscal investments, including cautiousness is both which outlook other just in of are growth number and as that reason for of well signs

George Kurian

more generally think latter, strong. regard of scrutiny the of are I entering spending year. the finished We there's outlook, with our very think we really I continued to just confident

has in flash of our A-Series got flash products. stronger the even portfolio refresh Our QX with

we product, records and of course, So with a which TAM feel the business. which quarter, a ASA performance A-Series, up-to-date our has good had expanding really strong in for really setting C-Series, really been

really feel we So good.

installed them and parameter world's had at we set, the success excellence. one those about AI environment but unstructured example, with building are world's to we supercomputing accelerate lakes. allows where, listen, AI that, companies we built and oil together backbone largest customers and where unify helping in on of drug incumbent the discovery talked sets, saw data their the of we trillion gas for large model, language their data we've world's also think of companies NVIDIA, center the a we all largest data are that I at their supercomputer for X side, We largest genomics for of then are the the only we built not reg one for the

I tap as our traditional So good AI enterprise applications. to shown leadership into opportunity ability feel continue in about really the well the as we've

Operator

from question Marshall comes next Stanley. Morgan The Meta with

Meta Marshall

Great. Just customers question, just any who who cloud with those an those customers? there you're marketplace strength. storage customer, where of that type somebody any customer? and is trends NetApp first-party that strength? the of new trends Maybe seeing that are the Is existing largely Is first on are the you're seeing

some in launch year, of last maybe is seasonally Just about the maybe starting Mike. then weak. seasonality It how just launch? to year. as least question seem that of A-Series at QX comparison a A-Series would strong, which the And seasonally with that Is impacts how think second for was

George Kurian

question, I'll take first the Meta.

side. storage the On cloud

deploying expanding good a footprints our a had were on Google, customers our first-party existing not new strong competitive as have on party our throughout In well a have to in which now Cloud marketplace balance platform service. cloud Google of where mix focus, new continue we the service NetApp like displacements, QX, are a and first workloads the might competitor as see migrating to of that including to customers and who first-party expansions cloud customer bringing are in to storage NetApp year. The really services, had results

strong across So sets outlook coming board good cloud a up balance Mike? to year. us continued for this stores the have

Michael Berry

Thank you, the George. Meta. Thanks question, for

QX we So strong. yes, do expect be to seasonally

QX mentioned, you As weak. of year last seasonally was

'XX. That the start We reference move started, that we're I'll is it of impact easier to have on is though trajectory excited driving compares, as just big one in gotten won't the a though, expect for the super it. about say, we QX. year. A-Series something to some so fiscal do of nice So that's it through

Operator

question comes JPMorgan. with Next Samik Chatterjee from

Samik Chatterjee

the bit revenue, and that customers talked if the guess, their deployments give support wins I of through can more go they curious your I infrastructure George, AI the was you us as have. and you're sort sense providing you about a just you in ramping year? how about of that fiscal to then much that your translate in into of guide about about those I how to and out particularly terms revenue think here, is of how when that think 'XX sort deployments incorporated

And me Mike. That a with for you what tailwinds. just margin takes and terms the headwinds QX gross variance in QX. Mike, between and and of in puts will can the help helpful terms quick follow-up be of if

George Kurian

broadly existing the of strong year. next in I model into are growth talked created of speaking, time for well data about had tell will as but stage, be a we AI XX their We storage But elements doing the over foundations over lot using to would the all at and AI our about, us QX market, Datalynx much ramp across in the that seeing will and inferencing what clients stacks this because continue geographies. be data unified there's computing to the the guidance and we are for think factored new more ahead as than all they're time, in that that like AI in models. is you I so across both expect proof concept. data AI of AI wins there of is a servers feed all landscape building we more Listen, of and on opportunity

Michael Berry

margins gross from QX some on to follow-up, your QX. On

talked did product in about come prepared on points we higher -- guided around largely So XX%. mix. on about to better basis the XXX had margins. due was in That remarks, we We as

expect As -- we that we come it that's our was largely did QX, do happened. because to had QX from we and down talked what just about,

margin importantly, continue that margins, and we the expect gross see year. to consistent in gross support to very and we We in nice cloud a next started increase our

So pretty consistent gross QX and performance to QX our margin line.

Operator

The Hosseini comes with from next SIG. question Mehdi

Mehdi Hosseini

I going the when QX it margin of XX% went at last Mike, to fiscal margin, operating you're in FY given seems margin 'XX year? Yes. look your through 'XX Does operating the exit XX% like that operating that actually to year, guide context OpEx in exiting exact. the includes FY high the XX% you all be resizing leverage

Michael Berry

Yes.

XX% operating percentage to So year given operating lies margin just we lower guided in a a seasonality. QX, the on full yes, little margin. bit And XX%

to, So do restructuring last Mehdi, we I is you're think year referring what the did QX. in

a X% I'm do about enter of have full guide the to OpEx about to grow, in leverage basis we We fiscal on As 'XX. continuing OpEx. say, some expect going We revenue for year do X.X%.

are sales revenue grow at targeted the engineering me. growth, always and our less drive to that, in initiatives. a We product the in than key of as business we've have said, Outside rate operating and always in to goal leverage hiring is drive OpEx excuse doing

Mehdi Hosseini

run rate. at XX% But exceed given a in shouldn't you January lower able did or to footprint? your margin meet revenue operating operating reduced be Why XX% margin

Michael Berry

Yes.

those was year. 'XX as of that in -- talked we coming down saw many gross coming we mind, go the that then and starting the have And higher in numbers. keep about we So in margin through highest fiscal the XX%, our

we through pre-buys As for have the we go that SSD.

XX% on where lot to depends gross back by love gross get the line it we'd number So that influenced is that goes. A this margin at point. to the of significantly margin

Operator

Fox is Steven question next The Advisors. from with Fox

Steven Fox

that point Mike, lines, second and follow can months us do sense give up prebuys, the the half of you terms you further just et you better strategy on in just more prebuys, headwinds you your of into those get market to cost? months sort NAND a as X from maybe would depending is margin view the out, XX on continue Or how it outline on cetera? the higher out, can gross for this to you along

Michael Berry

Sure.

fiscal So active did, talked we very prebuys as in we 'XX. for we were about,

prepared albeit about remarks, you have when we As of forecasted our go. look at the the And the at our really, we expect, large talked prices that, are think to as in we XX% Steve. look going majority prices and we we look would we SSDs higher in 'XX, demand at market obviously locked at a where for than where is,

through of line hey, gross then, it. the pricing. storage while market cost being The 'XX. growth variables this in full increases an think are part And the driving very active do disciplined market. point, want product I in or in on pricing supply we -- are plays At fiscal rest further we team with that range year. we has XX% EPS the and The are and focused our chain of to margins. year additional the it's been decreases we for top And into this reiterate, talked potential important dollars course, margin our of driving protecting comfortable XX% to still the in about margins gross

We certainly at revenue continue look profitable at end But percentages. gross the focus to driving margin will product growth on and margin the dollars. day, of we

million full half down go the first [ higher $XX million as for [ through the scaling then year, the we ] year. So to and again, ] in starting $XX

Operator

Leopold Raymond James. Simon is question next from The with

Simon Leopold

maybe what's in quantify cloud expect growth? to see you that refresh if the catch terms I that And some to with the just services a mean of want get you back in appreciate year. I'd business changing the what through comment that's if did more grow it. contributions to numbers getting I maybe public on we you us could can

George Kurian

Yes.

the that were we dimensions. sharpen to in of Those business. said focus along taking Just are our of a public cloud ago, quarters we couple action two

The first a strategy was hyperscaler first-party growth to services. continue to our storage around drive and the execution of

are that services foundation business and the pondered storage well our long-term X/X cloud said, success about and the in and storage, we now first-party is really is cloud. total of performed really, cloud for storage cloud and and the has of As majority marketplace growth

we that related actions to optimization business and subscription cloud Second, the the several health said took had we business. subscription headwinds of to our improve

integrate we and our reminder, that stop small total that to cloud some go-forward our we the of so about a subscription a no X/X a was from services plan to offerings both offerings said of part, consumption certain cloud products As work offerings migrate longer some improve the took selling customers and proposition were actions offerings client. to the subscription sharpen able our of part of and business, team to the success customer storage base cloud our features first-party our to the to of to our subscription value and and value be with products of subscription

has first forecast, decrease mitigated. this of in year second be decrease will in we of is and of over as the those subscription of part that headwinds we are getting half in that What smaller this headwinds but half revenue resulted year, large a a the the course the from feel next

in 'XX, will revenue stronger half. cloud growth in first-party We year should and storage cloud half the in which ramp marketplace continue deliver overall in growth to that cloud second expect strongly, in consistent the than fiscal first cloud,

Operator

comes question Wamsi The of with from America. Bank Mohan next

Wamsi Mohan

towards say was be that the maybe clarify could Could end that wondering, range. at that? of XX% correctly? sort somewhere end of out product margin the you XX% high and of You did lower starting that Mike, I closing range hear range I of the to gross between

Michael Berry

Yes.

as still the we it sorry, with half I out about half Wamsi, of and XX% we then What are the down full inventory of margins starting sliding said the we product prebuys. higher hopefully, second the for talked in use to the gross go correctly. range through year and XX% comfortable So, first is

Wamsi Mohan

historically, mean, the when I at Okay. in two gross pricing, change a product you you've margins, look swing given commodity had impacts. in

a First been one through sort top pass is some on swing the ability secondarily, bit has line? on your of margin little to gross And product larger. your just that of

could that revenue the not what through there. time talk NAND upside of the When you've historically, wrong past, I'm you're this in And come XXX, as maybe done around? just XXX quite second sort through from you the in prebuys could talk points, correct can is maybe thinking maybe cost if it presumably too. But increased of and why So half? wide you on pass-through just is me the basis

George Kurian

in One, side that the the on gross side. margin take Listen, revenue question on parts. I'll the second two and

the believe side, dollars we in On systems. in to continue budget revenue that customers' not

they I amounts follow based of all, our pay in completed raises of it, less And storage it, the goods go our to course Mike is should which and market have normal expect don't flat, to for have for spend prices we so into course pricing. to current on that stays will buy smaller large through commodity be we sold, industry year. If overall regard of than up. We as as which expect and outlook we providing is the customers dollars increasing rest to will that market the the prices cost accretive to forecasted provided. total -- top prices, expect have is think, while to we past, XX% our directly Customers of NAND behavior, in done based goods but NAND revenue. follow the raise of translate as current for that on if of market, the will said they that the that's With outlook percentage first we they to cost have more the budgeted said, before, is have line. we our what's the the reflected are of a as of demand of next And

Michael Berry

I asked the 'XX, with we had about issue the to premium went if could Wamsi, fiscal mind you in of the away. just that that margins. one then And deal volatility Keep in thing, add

'XX caused that's fiscal really of lot a to $XX So it was $XX million million.

So mind that you just keep please. look in at fiscal as 'XX,

Operator

Tim is from question Barclays next The with Long

Timothy Long

Difficulties] [Technical

Operator

static. You're

you think dial queue. We'll dial back into can the on, any I back into at move the you but time. queue

The Markets. question next Northland is with Capital Nehal from Chokshi

Nehal Chokshi

Yes.

Q-o-Q XX% cloud in increase a Given marketplace sounds driver. like of around first-party sustainable storage, is the this discussion the driver the

cloud And fiscal as storage that we marketplace will public to growth the so is it in fair 'XX year-over-year first-party go the year expect accelerate here? through

George Kurian

going of which through cloud particularly all we not efforts good end the Carbon quarter sequential a year nice storage, first-party comment had we this continue had I'm grow and to the really growth the to expect is are year. quarter, quarter. Cloud of our We This each to course nicely marketplace, focus about rate year. a

as cloud 'XX. in our of than the party the storage the They grow see half I cloud continue first. we that year, much 'XX second little fiscal offerings. was the the the we a targeted that and I the more bigger part in first FY in think in entering will in to half said, of rest entering first business. of it and we expect headwinds be focus offerings, marketplace have a than is And sharpen fiscal overall terms bit of our but year cloud and stronger consistently 'XX more subscription to year

Operator

from Long comes with Tim question next Barclays. The

Timothy Long

again it different with headset. try I'll a

wanted some well. touch to to get Sorry market It trying about the that. competitors I piece seems as C-Series business. of been QLC on like the that just there's into

you competition think mean So lot talk systems? remind with that if for be business of it's two-parter. upgrading Can Any business has just could been And been do your that success help a would one, the keeping what from business you that's then base little customers you. about hybrid secondly, meaning going, or been there bit new for how successful own that you Number increased very for NetApp. us, has would great. a

George Kurian

seamlessly system, for virtually same console, the our management same of same advantages question. operating the because to to flash the for customer can customers. a that do telemetry Thanks stay are C-series, hybrid upgrading the to we an Yes. existing regard there in for system, we With customer, enormous and have NetApp place

chunk expect from we've to that their of periodic a all upgrade a so And in are drive come flat, seen we steady customers will good fleet fashion. over and and XX-K environment as up Those time. upgrades continue to

where new lot displace We able NetApp footprint and/or competitive to of either net new new bring customers to deploy were our we also environment customers, a in applications. saw footprints to as NetApp

that on the different Converged several considering now seen C-Series. Keystone just one and pot using a flash-based and introduced in the optimize NetApp, Hyper and the cost capacity of for are to we we moving customer environment. their talked worth gives licenses large for unify have AI C-Series one are are time, inferencing cost-effective We about AI where landscapes a model approaches, clients And environments to with two VMware file decided over training block example that and

very, good And fact management, of alternatives data the solution really market. the the only the we and feel on year. our feel having industry's excited everybody the we're flash real that about products. have data cloud hybrid large-scale CCV. Listen, have in really into we very their record a confident getting you of next comprehensive track will So about prospects management most capabilities

Operator

is question next Ananda Loop with from The Baruah Capital.

Ananda Baruah

us like way not XX-K up last maybe the right been of to a these there biggest don't regs, kind talking been the George, go to but few there anecdotally useful most you it's loosely, Is quarters, catalyst which I just which the actually think accretive fiscal -- around through and are opportunity. few I'm And think a opportunities there. as I of saying of drive Is the opportunities force going picking sort be the to, like any year? know, were sort give believe of kind are context year. opportunity the sand ASA you stepping into I you've through about of way

George Kurian

focused of growth each storage, In have mainframe four flat AI we more we in our of sort and with We block storage storage all opportunities and are array high-performance landscapes. replacing those high-performance seen and class [indiscernible] on, flash have strong storage, modern, storage, success traditional turn. frame with cloud legacy much flat that

architectures, and well C-Series, Hybrid base both our the traditional seen as have Flash installed bases. competitor as both We upgrading replace Hyper installed Converged

AI. With which year second it of part that that market platform, cloud an and be for opportunity. NetApp part This as focus the storage NetApp. And is our their grow is is we the excited will enormous will momentum business be market. of our AFF service than it the C-Series block, at to as business, the cloud ASA in It's business, listen, seen hyperscalers. And all where are that TAM wins is is have. coming opportunity expanding finally, opportunity meaningful become cloud storage, And smaller and the I'm relative grow expanding seen over for are time. infrastructure more we the we have growth today. a to we growth a and the higher well a at big a cloud this reacceleration that the to is will a a the opportunities, providers rate are that rate much multibillion-dollar the but then we've excited the A-Series, TAM the positioned With and of It our

fuel positioned that well base for in-place on unstructured with We of do inferencing are huge installed of which focused are a data. Gen data, we the and customers AI, RAG is and helping

verdict exist. data And with place unique integrated their training foundation a customers' platforms with us provide of the inferencing customers then to and scale looking unified environment, IT AI Google services, data such AWS in cloud for our storage ideal and where model landscape a lake be architecture every from an to data landscapes. customers Second, or from systems data gives our to build hybrid public data allowing on-premises or piece as use Bedrock to able cloud

ahead. about So those are year the excited four. the We're

the We and will on our XX. about of puts Financial you opportunity Day Analyst tell takes at more June specific each

Operator

Krish next The question from is with TD Cowen. Sankar

Unknown Analyst

[indiscernible] Eddie it wonder efforts update is through seen on us adopting can density in if comes systems? territory this you for storage any at have I to requirements? per Guys, applications, of Kris. unit RAG byte you increase SSD When And

George Kurian

more the what trained and that context has to suited build many, need. highly been excited really to a C-series -- with lakes, customers aware are the file data are I use the opportunity storage adding done large-scale as we wanting about object with we already and dense well question are drives then or operating, Our where of for density large even is many last able want XX-terabyte think we have that hear of data but entirely are a already ACVs landscapes, the we we didn't model I which it large landscape amount alongside mixed see the drives both that objects for quarter. have customers customers for and in RAG with clearly, Listen, get unstructured it's to over really And that storage for clients C-Series higher

Sreekrishnan Sankarnarayanan

SSD. was My about targetabyte Yes. Okay. question

right? seems it already like today. that in of as your So that's shipping Is systems

George Kurian

than built, We XX-terabyte total a single of density into lot have we can our are system as the SSDs, are capacity the growing of quickly systems and pack many percentage a our a way they more competitors.

Operator

Today's last from comes Asiya question with Citigroup. Merchant

Asiya Merchant

guide the that this asked, I I for year. year. the can and next if and is about on has provided that think focus been how if flow should can but know if a the think was returns don't for how this apologize that cash maybe question shareholder free fiscal just I you about, for we

Michael Berry

cash the flow rating question. Thanks, Sure.

So we'll minutes. have a of more couple

guide the if As net continue in take -- I to about we cash that flow talked so up to income does you the with says on go the prepared remarks, net income year-over-year. midpoint expect track of that

A couple of things.

flow So we cash would move to with it. expect

highlight I Keep in about mind our and pay working to changes, annual want these. that Thankfully, it's in we will there'll $XXX payments During sure and incrementally number. compensation QX, a just large make the be incentive relatively year-over-year. million. and capital year, some It's

And year-over-year. to to then prebuys. as do as collections end continue increase purchase long we expect We

over year the as We out expect to that even well.

And in that So to $XXX we we did a cash 'XX. million with income. track from continue net flow to operating would perspective, expect fiscal said, all of CapEx about

with did You of from counts capital should share we a consistent something allocation, $X.XX to $X.XX 'XX. And relatively that the expect share. in then fiscal it that increase off a dividend

use, for is cash repurchases. free about flow share the year, against slated of to So it, that remainder $XXX go of will cash the million call

Kris Newton

over it pass now some to comments. for final George I'll

George Kurian

FY We 'XX services storage, for ended and us. cloud strong block momentum robust flash, AI enormous Capacity all in storage growth opportunities FY 'XX. performance Kris. and QX building entering Thanks, with positive represent

well industry, helping are leading infrastructure age AI. of make NetApp their these the storage the performing the customers intelligent for growth in We evolution of areas. and expect our continued data is

discipline you Day. maintain the our Thank We are hope your gain XX we'll you time record capitalizing to see opportunity, at June on operating and for profitability. and our that Investor today, I share has yielded

Operator

concluded. conference your The for has now participation. you Thank

You lines. may disconnect your Goodbye. now

NetApp (NTAP) 30 May 242024 Q4 Earnings call transcript