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01/11 16:20
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a generally positive outlook with strong performance in key areas like AI and public cloud, despite some caution in Q1 due to external uncertainties. Revenue and EPS guidance for FY 2025 shows growth, and shareholder returns are strong. While there are concerns about political instability and macroeconomic factors, the overall sentiment is boosted by strategic growth areas and solid financial metrics. The Q&A section indicates confidence in future performance, with gradual improvements expected in margins and execution of deals. Thus, a positive stock price movement of 2% to 8% is anticipated.
Total Revenue Q4 FY 2025 $1,730,000,000, up 4% year over year.
Billings Q4 FY 2025 $2,030,000,000, up 12% year over year.
Hybrid Cloud Revenue Q4 FY 2025 $1,570,000,000, up 3% year over year.
Product Revenue Q4 FY 2025 $845,000,000, up 5% year over year.
Support Revenue Q4 FY 2025 $625,000,000, flat year over year.
Professional Services Revenue Q4 FY 2025 $98,000,000, up 13% year over year, mainly driven by Keystone.
Public Cloud Revenue Q4 FY 2025 $164,000,000, up 8% year over year; excluding divested SPOT business, grew 22% year over year.
Deferred Revenue FY 2025 $4,540,000,000, up 7% year over year.
Remaining Performance Obligations Q4 FY 2025 $4,970,000,000, up approximately $500,000,000 from Q1.
Unbilled Remaining Performance Obligations Q4 FY 2025 $430,000,000, up 23% quarter over quarter.
Gross Margin Q4 FY 2025 69.5%.
Hybrid Cloud Gross Margin Q4 FY 2025 68.4%.
Product Gross Margin Q4 FY 2025 55.4%.
Support Gross Margin Q4 FY 2025 92.3%.
Public Cloud Gross Margin Q4 FY 2025 79.3%, up 290 basis points sequentially and 11 percentage points year over year.
Operating Expenses Q4 FY 2025 $700,000,000, down 2% year over year.
Operating Margin Q4 FY 2025 28.6%, up 50 basis points year over year.
EPS Q4 FY 2025 $1.93, up 7% year over year.
Cash Flow from Operations Q4 FY 2025 $675,000,000.
Free Cash Flow Q4 FY 2025 $640,000,000.
Shareholder Returns Q4 FY 2025 $355,000,000 through $250,000,000 in share repurchases and $105,000,000 in cash dividends.
Diluted Share Count Q4 FY 2025 206,000,000, down 3% year over year.
Total Revenue FY 2025 $6,570,000,000, up 5% year over year.
Billings FY 2025 $6,780,000,000, up 8% year over year.
Operating Margin FY 2025 28.3%, up 150 basis points year over year.
EPS FY 2025 up 12% year over year.
Operating Cash Flow FY 2025 $1,510,000,000, down low double digits percentage points year over year.
Free Cash Flow FY 2025 $1,340,000,000, down low double digits percentage points year over year.
Cash and Short Term Investments FY 2025 $3,850,000,000.
Total Debt FY 2025 $3,240,000,000.
Net Cash Position FY 2025 approximately $610,000,000.
Inventory Turns Q4 FY 2025 increased to 12.
All Flash Array Revenue: All flash array annualized revenue run rate grew 14% from Q4 a year ago to a record $4,100,000,000.
Public Cloud Revenue Growth: Public cloud revenue grew 22% year over year in Q4, excluding the recently divested SPOT business.
Keystone Sales Growth: TCV sales of Keystone for fiscal year ’25 reached $224,000,000, up 54% year on year.
AI Business Growth: AI business grew five fold year over year, with approximately 150 AI infrastructure and data lake modernization deals closed.
Market Share Gains: In calendar 2024, NetApp gained almost 300 basis points of all flash market share, more than any other vendor as reported by IDC.
Public Cloud Segment Revenue: Public cloud segment revenue grew 22% from Q4 a year ago, excluding the recently divested SPOT business.
Gross Margin: Q4 consolidated gross margin was 69.5%, with public cloud gross margin at 79.3%.
Operating Margin: Operating margin of 28.6% was the highest for Q4 in the history of NetApp.
Cash Flow: Q4 cash flow from operations was $675,000,000 and free cash flow was $640,000,000.
Focus on AI and Cloud Services: NetApp is focusing on AI and cloud services, expecting significant growth in enterprise AI storage.
Investment in R&D and Sales Capacity: Plans to make prudent investments in R&D and sales capacity to drive ongoing innovation and capture additional market share.
Macroeconomic Uncertainty: The global macroeconomic outlook is mixed, with a general slowdown in growth, lingering inflation concerns, and increased uncertainty. This may lead to increased spending caution among customers.
Public Sector Caution: There is ongoing friction in the US public sector and EMEA, particularly in large countries where public sector uncertainty exists, impacting revenue visibility.
Tariff Impact: Tariffs are expected to have a minor impact of about 40 to 60 basis points on gross margin, but the uncertainty surrounding tariffs is causing enterprises to slow down, particularly in the manufacturing segment in Europe.
Supply Chain Challenges: The company has experienced changes in working capital, including higher variable compensation payments and tax-related outflows, which have affected cash flow metrics.
Competitive Pressures: The company faces competitive pressures in the all flash and block storage markets, with a need to maintain market share amidst evolving customer demands and technological advancements.
Regulatory Issues: There is uncertainty regarding trade policies and other macroeconomic policies, particularly in Europe and the US public sector, which could impact customer spending.
AI Market Dynamics: The evolving enterprise AI market is driving urgency among customers to modernize their data infrastructure, but the pace of adoption and the impact on revenue growth remains uncertain.
Growth Opportunities: NetApp is prioritizing four growth opportunities and leveraging AI for increased efficiencies to invest in growth and expand profitability metrics.
AI Market Positioning: NetApp has positioned itself to lead in the enterprise AI market, with a unified data architecture that enables customers to build intelligent data infrastructures.
Keystone Growth: Keystone, NetApp's storage as a service offering, saw TCV sales grow 54% year over year, indicating strong momentum.
AI Infrastructure Deals: NetApp is negotiating sizable AI and data infrastructure modernization deals with multiple large enterprises, expected to close later in the year.
Public Cloud Services Growth: First party and marketplace cloud storage services grew 44% year over year in Q4, indicating a strategic focus yielding positive results.
FY 2026 Revenue Guidance: Total revenue is expected to be in the range of $6,625,000,000 to $6,875,000,000, reflecting 3% growth year over year at the midpoint.
Q1 FY 2026 Revenue Guidance: Revenue is expected to range from $1,455,000,000 to $1,605,000,000, implying a decline of 1% year over year.
Gross Margin Guidance: FY 2026 consolidated gross margin is expected to be in the range of 71% to 72%.
Operating Margin Guidance: Operating margin is expected to be approximately 28.8% to 29.8% for FY 2026.
EPS Guidance: EPS is expected to be in the range of $7.60 to $7.90 for FY 2026.
Cash Dividends: $105,000,000 in cash dividends were returned to shareholders in Q4.
Share Repurchases: $250,000,000 in share repurchases were executed in Q4.
Share Repurchase Authorization: An increase in share repurchase authorization by $1,100,000,000 was announced.
Remaining Share Repurchase Authorization: Approximately $350,000,000 left on the current share repurchase authorization at the end of FY 2025.
Future Shareholder Returns: In FY 2026, up to 100% of free cash flow will be returned to shareholders through cash dividends and share buybacks.
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