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NetApp (NTAP) Q2 Earnings & Revenues Top Estimates, Stock Up
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NetApp, Inc (NTAP - Free Report) reported second-quarter fiscal 2024 non-GAAP earnings of $1.58 per share, which surpassed the Zacks Consensus Estimate by 12.9% and increased 7% year over year. Management anticipated non-GAAP earnings in the range of $1.35-$1.45.
Revenues of $1.562 billion decreased 6% (down 8% at constant currency basis) year over year. NTAP projected revenues in the $1.455-$1.605 billion band. Weak IT spending due to tough macro environment remains an overhang.
However, revenues beat the consensus mark by 2.1%.
NetApp now expects fiscal 2024 revenues to inch down 2% year over year compared with the earlier projection of a decline in mid-to-low single-digit range on a year-over-year basis. Despite soft macroeconomic conditions, management expects strength in product, and hyper-scaler first-party and marketplace services to drive revenues. Weakness in public cloud subscription services is likely to remain a headwind in the near term.
The company now forecasts fiscal 2024 non-GAAP earnings per share (EPS) to be between $6.05 and $6.25 (previous prediction: $5.65 and $5.85). The Zacks Consensus Estimate is pegged at $5.73.
For fiscal 2024, NetApp expects non-GAAP gross margin to be nearly 71% compared with 70% expected earlier. Non-GAAP operating margin is projected to be nearly 26% compared with 25% expected earlier.
Following the announcement, shares are up 11.4% in the pre-market trading on Nov 29. In the past year, shares have gained 15.5% compared with the sub-industry’s growth of 45.1%.
Image Source: Zacks Investment Research
Top-Line Details
NTAP reports revenues under two segments, namely, Hybrid Cloud and Public Cloud.
The Hybrid Cloud segment consists of revenues from the enterprise datacenter business including product, support and professional services.
The Public Cloud segment comprises revenues from products, which are delivered as-a-service and entail related support. The portfolio contains cloud automation and optimization services. Storage and cloud infrastructure monitoring services are also included.
Revenues from the Hybrid Cloud segment were down 7% year over year to $1.408 billion. The Public Cloud segment’s revenues were up 8% from the year-ago quarter’s levels to $154 million.
We projected revenues from the Hybrid Cloud and Public Cloud segments’ for the fiscal second quarter to be $1372.4 million and $156.9 million, respectively.
Within the Hybrid Cloud segment, Product revenues (50% of segmental revenues) plunged 16% year over year to $706 million.
Revenues from Support Contracts (44%) totaled $623 million, gaining 2.6% year over year. Professional and Other Services revenues (6%) were $79 million, which rose 2.6% year over year.
Software product revenues amounted to $398 million, dipping 19.6%.
Region-wise, the Americas, Europe, Middle East and Africa, and Asia Pacific contributed 50%, 34% and 16% to total revenues, respectively.
Direct and Indirect revenues added 23% and 77%, respectively, to total revenues.
Key Metrics
During the fiscal second quarter, the company’s All-Flash Array Business’ annualized net revenue run rate of $3.2 billion inched up 1% year over year. Total billings fell 9% year over year to $1.5 billion. Deferred revenues were $4 billion, down 1% on a year-over-year basis.
Public Cloud Services recorded annualized recurring revenues of $609 million, up 1% year over year.
Operating Details
Non-GAAP gross margin of 72% expanded 570 basis points (bps) from the prior-year levels.
The Hybrid Cloud segment’s gross margin was 72.7%, which extended 660 bps year over year. The Public Cloud segment witnessed gross margin of 66.2%, contracting 210 bps year over year.
Non-GAAP operating expenses were $706 million compared with $709 million in the previous-year quarter. As a percentage of net revenues, the figure was 45.2%, up 260 bps on a year-over-year basis.
Non-GAAP operating income increased 6.6% year over year to $419 million. Non-GAAP operating margin expanded 320 bps to 26.8%.
Balance Sheet & Cash Flow
NetApp exited the quarter ending Oct 27, 2023, with $2.620 billion in cash, cash equivalents and investments compared with $2.975 billion as of Jul 28. Long-term debt was $1.991 billion compared with $2.390 billion as of Jul 28.
Net cash from operations was $135 million compared with $453 million in the previous quarter.
Free cash flow was $97 million (free cash flow margin of 6.2%) compared with $418 million in the prior quarter (29.2%).
The company returned $403 million to shareholders as dividend payouts and share repurchases in the fiscal second quarter.
NTAP also announced a dividend of 50 cents payable on Jan 24, 2024, to shareholders of record as of the close of business on Jan 5, 2024.
Q3 2024 Guidance
Management projects non-GAAP EPS to be between $1.64 and $1.74. The Zacks Consensus Estimate is pegged at $1.53.
Net revenues are anticipated in the range of $1.51-$1.67 billion. The Zacks Consensus Estimate is pegged at $1.56 billion.
The Zacks Consensus Estimate for Adobe’s fiscal 2023 EPS has remained unchanged in the past 60 days at $15.93. ADBE’s long-term earnings growth rate is 13.5%.
Adobe’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.3%. Shares of ADBE have surged 85.5% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2024 EPS has remained flat in the past 30 days at $12.52. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have gained 70.4% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved 2.8% in the past 60 days to $8.00.
WTS’ earnings outpaced the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 11.8%. Shares of WTS have surged 31.4% in the past year.
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NetApp (NTAP) Q2 Earnings & Revenues Top Estimates, Stock Up
NetApp, Inc (NTAP - Free Report) reported second-quarter fiscal 2024 non-GAAP earnings of $1.58 per share, which surpassed the Zacks Consensus Estimate by 12.9% and increased 7% year over year. Management anticipated non-GAAP earnings in the range of $1.35-$1.45.
Revenues of $1.562 billion decreased 6% (down 8% at constant currency basis) year over year. NTAP projected revenues in the $1.455-$1.605 billion band. Weak IT spending due to tough macro environment remains an overhang.
However, revenues beat the consensus mark by 2.1%.
NetApp now expects fiscal 2024 revenues to inch down 2% year over year compared with the earlier projection of a decline in mid-to-low single-digit range on a year-over-year basis. Despite soft macroeconomic conditions, management expects strength in product, and hyper-scaler first-party and marketplace services to drive revenues. Weakness in public cloud subscription services is likely to remain a headwind in the near term.
NetApp, Inc. Price, Consensus and EPS Surprise
NetApp, Inc. price-consensus-eps-surprise-chart | NetApp, Inc. Quote
The company now forecasts fiscal 2024 non-GAAP earnings per share (EPS) to be between $6.05 and $6.25 (previous prediction: $5.65 and $5.85). The Zacks Consensus Estimate is pegged at $5.73.
For fiscal 2024, NetApp expects non-GAAP gross margin to be nearly 71% compared with 70% expected earlier. Non-GAAP operating margin is projected to be nearly 26% compared with 25% expected earlier.
Following the announcement, shares are up 11.4% in the pre-market trading on Nov 29. In the past year, shares have gained 15.5% compared with the sub-industry’s growth of 45.1%.
Image Source: Zacks Investment Research
Top-Line Details
NTAP reports revenues under two segments, namely, Hybrid Cloud and Public Cloud.
The Hybrid Cloud segment consists of revenues from the enterprise datacenter business including product, support and professional services.
The Public Cloud segment comprises revenues from products, which are delivered as-a-service and entail related support. The portfolio contains cloud automation and optimization services. Storage and cloud infrastructure monitoring services are also included.
Revenues from the Hybrid Cloud segment were down 7% year over year to $1.408 billion. The Public Cloud segment’s revenues were up 8% from the year-ago quarter’s levels to $154 million.
We projected revenues from the Hybrid Cloud and Public Cloud segments’ for the fiscal second quarter to be $1372.4 million and $156.9 million, respectively.
Within the Hybrid Cloud segment, Product revenues (50% of segmental revenues) plunged 16% year over year to $706 million.
Revenues from Support Contracts (44%) totaled $623 million, gaining 2.6% year over year. Professional and Other Services revenues (6%) were $79 million, which rose 2.6% year over year.
Software product revenues amounted to $398 million, dipping 19.6%.
Region-wise, the Americas, Europe, Middle East and Africa, and Asia Pacific contributed 50%, 34% and 16% to total revenues, respectively.
Direct and Indirect revenues added 23% and 77%, respectively, to total revenues.
Key Metrics
During the fiscal second quarter, the company’s All-Flash Array Business’ annualized net revenue run rate of $3.2 billion inched up 1% year over year. Total billings fell 9% year over year to $1.5 billion. Deferred revenues were $4 billion, down 1% on a year-over-year basis.
Public Cloud Services recorded annualized recurring revenues of $609 million, up 1% year over year.
Operating Details
Non-GAAP gross margin of 72% expanded 570 basis points (bps) from the prior-year levels.
The Hybrid Cloud segment’s gross margin was 72.7%, which extended 660 bps year over year. The Public Cloud segment witnessed gross margin of 66.2%, contracting 210 bps year over year.
Non-GAAP operating expenses were $706 million compared with $709 million in the previous-year quarter. As a percentage of net revenues, the figure was 45.2%, up 260 bps on a year-over-year basis.
Non-GAAP operating income increased 6.6% year over year to $419 million. Non-GAAP operating margin expanded 320 bps to 26.8%.
Balance Sheet & Cash Flow
NetApp exited the quarter ending Oct 27, 2023, with $2.620 billion in cash, cash equivalents and investments compared with $2.975 billion as of Jul 28. Long-term debt was $1.991 billion compared with $2.390 billion as of Jul 28.
Net cash from operations was $135 million compared with $453 million in the previous quarter.
Free cash flow was $97 million (free cash flow margin of 6.2%) compared with $418 million in the prior quarter (29.2%).
The company returned $403 million to shareholders as dividend payouts and share repurchases in the fiscal second quarter.
NTAP also announced a dividend of 50 cents payable on Jan 24, 2024, to shareholders of record as of the close of business on Jan 5, 2024.
Q3 2024 Guidance
Management projects non-GAAP EPS to be between $1.64 and $1.74. The Zacks Consensus Estimate is pegged at $1.53.
Net revenues are anticipated in the range of $1.51-$1.67 billion. The Zacks Consensus Estimate is pegged at $1.56 billion.
NetApp currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Adobe (ADBE - Free Report) , Synopsys (SNPS - Free Report) and Watts Water Technologies (WTS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Adobe’s fiscal 2023 EPS has remained unchanged in the past 60 days at $15.93. ADBE’s long-term earnings growth rate is 13.5%.
Adobe’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.3%. Shares of ADBE have surged 85.5% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2024 EPS has remained flat in the past 30 days at $12.52. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have gained 70.4% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved 2.8% in the past 60 days to $8.00.
WTS’ earnings outpaced the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 11.8%. Shares of WTS have surged 31.4% in the past year.