Earnings Recap — Q1 FY2027
CY Q3 2026 · Reported September 2, 2026 · Beat 6 of last 6 quarters
NetApp, Inc. reported Q1 FY2027 revenue of $2.02B, a beat of 10.2% against consensus, and EPS of $2.58, a beat of 21.7%.
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NetApp's record quarter, with all-flash revenue up 47% YoY and AI/data lake deal wins up significantly, underscores the accelerating demand for storage infrastructure to support AI workloads. The company's raised full-year guidance and commentary on broad-based modernization signal continued strength in the AI infrastructure buildout, particularly for on-prem and hybrid environments. The acquisitions of DataPelago and JetStream expand NetApp's role in AI data processing and VMware cloud migration, potentially deepening its position in the AI data infrastructure stack.
NetApp delivered a record Q1 FY2027 with revenue of $2.03 billion, up 30% YoY, and EPS of $2.58, up 66% YoY, exceeding guidance on all metrics. Growth was broad-based across segments, geographies, and customer types, with all-flash revenue up 47% YoY and public cloud revenue up 28% YoY (19% ex-extra week). The company won approximately 350 AI and data lake modernization deals, up significantly YoY, and completed two acquisitions: DataPelago (AI data infrastructure) and JetStream (cloud-native DR for VMware). Gross margin was 70.6%, down 50 bps YoY due to product mix, and operating margin reached 31.9%, up 6.1 points YoY. Cash flow from operations was $503 million and free cash flow was $401 million.
Management raised full-year FY2027 revenue guidance by $650 million to a range of $7.975 billion to $8.225 billion (17% YoY growth at the midpoint) and raised EPS guidance to $9.73–$10.03 (22% YoY growth at the midpoint). They also raised operating margin guidance to 30.3%–31.3%. For Q2, they guide revenue of $2.1 billion ± $75 million (23% YoY growth at the midpoint), gross margin of 67%–68%, and EPS of $2.54–$2.64. The tone was confident, citing broad-based demand strength, structural improvement in the demand environment, and continued momentum in AI and modernization, though they acknowledged some accelerated purchases and pricing benefits in Q1. They expect product gross margin to be slightly better than previously guided for the rest of the year, with pricing actions flowing through faster than in past cycles.
“We delivered a stellar start to the year, exceeding our Q1 guidance on every metric and delivering a record-setting first quarter.”
on Q1 performance
“AI is no longer a future aspiration. It's a business imperative.”
on AI demand
“We are materially raising our outlook for the year.”
on Guidance raise
Can you walk us through the key drivers distinguishing accelerated purchase decisions and pricing benefits from structural improvement in underlying demand? And what drives confidence in the durable demand part?
George noted broad-based strength across customer types, geographies, and workloads. He distinguished three buckets: accelerated purchases in a small percentage of large customers, pricing benefits from commodity cost increases, and a clear structural improvement in demand. He cited strength across all product lines and customer segments as evidence of durability.
What is driving the deceleration in growth from Q1 to the back half of the year, and is the back-half exit rate the right way to think about long-term growth? Also, what metrics give you confidence this is structural versus prebuying?
George said they are one quarter into the year and have raised guidance materially, including the second half. He cited broad-based outperformance across product lines, customer segments, and routes to market as confidence in structural demand. He did not characterize the back-half growth rate as a long-term run rate.
Given the strong demand commentary, why couldn't you beat second-half expectations by 10-20%? Is there anything offsetting normal seasonality?
Wissam explained that adjusting for the extra week, the second half is roughly 50-50 with the first half, based on current visibility. George reiterated confidence in the business and said they would provide more updates as the year progresses.