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Will Rising Demand for Public Cloud Services Benefit NetApp?
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Key Takeaways
NTAP's Public Cloud revenue grew 11% in Q4 fiscal 2026, led by first-party and marketplace services.
NetApp expanded AI cloud use cases, helping customers scale secure hybrid and multi-cloud deployments.
NTAP expects enterprise IT spending and AI adoption to sustain cloud storage demand in fiscal 2027.
NetApp, Inc. (NTAP - Free Report) is benefiting from rising demand for public cloud services as enterprises continue expanding their cloud environments and increasing AI adoption. The company’s Public Cloud business maintained strong momentum in fiscal 2026, supported by growing demand for hyperscaler first-party and marketplace storage services. In the fourth quarter of fiscal 2026, Public Cloud revenue increased 11% year over year to $182 million, while excluding the prior-year contribution from the divested Spot business, revenue grew 18%. Management attributed this performance to strong demand for first-party and marketplace storage services, reflecting customers’ continued adoption of NetApp’s cloud offerings.
For fiscal 2026, Public Cloud revenue reached $688 million. Management stated that first-party and marketplace cloud services grew 30% during the year, driven by increasing demand from both new and existing customers that are extending NetApp’s capabilities deeper into their cloud environments. Customers are using NetApp to simplify and scale hybrid and multi-cloud deployments through unified data management capabilities that provide operational consistency and agility.
The company also noted that its expanding cloud portfolio is creating new opportunities across AI and additional industry verticals. Examples include an insurance company connecting Azure Databricks directly to data stored in Azure NetApp Files for secure financial risk modeling and data science, and an engineering company deploying a GenAI chatbot on AWS using FSx for NetApp ONTAP to enable secure, permission-aware access to data while reducing operational overhead.
Management also emphasized the profitability of the Public Cloud business, with fourth-quarter gross margin reaching 85.7%, driven by continued margin expansion. The company believes that continued growth in Public Cloud can provide additional earnings leverage as the business becomes a larger part of the overall revenue mix.
NetApp’s fiscal 2027 outlook assumes continued momentum in enterprise IT spending alongside increasing AI activity. Management expects these trends to support cloud use cases that connect governed enterprise data with AI and analytics services while sustaining strong demand for first-party and marketplace cloud storage services.
Taking a Look at NTAP’s Competitors
Seagate Technology Holdings plc (STX - Free Report) is strengthening its position in cloud infrastructure as hyperscale customers continue expanding AI-driven data center capacity. In the March quarter, cloud demand helped data center revenue rise 55% year over year to $2.5 billion, accounting for 80% of total revenues. The company is accelerating the rollout of its Mozaic platform, with shipments reaching 75% of leading global cloud customers and full qualification expected soon. Its HAMR-based high-capacity drives provide a cost- and power-efficient solution for large-scale cloud storage, while long-term supply agreements, build-to-order contracts and sustained hyperscaler investments support strong demand and revenue visibility through 2028 and beyond.
Western Digital Corporation (WDC - Free Report) is strengthening its cloud storage business by delivering high-capacity HDD technologies that support the rapid expansion of AI and hyperscale data centers. The company is working closely with leading cloud providers, shipping 222 exabytes in the quarter, up 34% year over year, while accelerating adoption of its ePMR, UltraSMR and upcoming HAMR technologies. It has secured firm purchase orders with its top seven customers through 2026 and multi-year agreements extending into 2028. Western Digital also continues qualifying next-generation HDDs and PCIe Gen5 data center SSDs with major cloud companies, positioning it to benefit from sustained cloud infrastructure investments.
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Will Rising Demand for Public Cloud Services Benefit NetApp?
Key Takeaways
NetApp, Inc. (NTAP - Free Report) is benefiting from rising demand for public cloud services as enterprises continue expanding their cloud environments and increasing AI adoption. The company’s Public Cloud business maintained strong momentum in fiscal 2026, supported by growing demand for hyperscaler first-party and marketplace storage services. In the fourth quarter of fiscal 2026, Public Cloud revenue increased 11% year over year to $182 million, while excluding the prior-year contribution from the divested Spot business, revenue grew 18%. Management attributed this performance to strong demand for first-party and marketplace storage services, reflecting customers’ continued adoption of NetApp’s cloud offerings.
For fiscal 2026, Public Cloud revenue reached $688 million. Management stated that first-party and marketplace cloud services grew 30% during the year, driven by increasing demand from both new and existing customers that are extending NetApp’s capabilities deeper into their cloud environments. Customers are using NetApp to simplify and scale hybrid and multi-cloud deployments through unified data management capabilities that provide operational consistency and agility.
The company also noted that its expanding cloud portfolio is creating new opportunities across AI and additional industry verticals. Examples include an insurance company connecting Azure Databricks directly to data stored in Azure NetApp Files for secure financial risk modeling and data science, and an engineering company deploying a GenAI chatbot on AWS using FSx for NetApp ONTAP to enable secure, permission-aware access to data while reducing operational overhead.
Management also emphasized the profitability of the Public Cloud business, with fourth-quarter gross margin reaching 85.7%, driven by continued margin expansion. The company believes that continued growth in Public Cloud can provide additional earnings leverage as the business becomes a larger part of the overall revenue mix.
NetApp’s fiscal 2027 outlook assumes continued momentum in enterprise IT spending alongside increasing AI activity. Management expects these trends to support cloud use cases that connect governed enterprise data with AI and analytics services while sustaining strong demand for first-party and marketplace cloud storage services.
Taking a Look at NTAP’s Competitors
Seagate Technology Holdings plc (STX - Free Report) is strengthening its position in cloud infrastructure as hyperscale customers continue expanding AI-driven data center capacity. In the March quarter, cloud demand helped data center revenue rise 55% year over year to $2.5 billion, accounting for 80% of total revenues. The company is accelerating the rollout of its Mozaic platform, with shipments reaching 75% of leading global cloud customers and full qualification expected soon. Its HAMR-based high-capacity drives provide a cost- and power-efficient solution for large-scale cloud storage, while long-term supply agreements, build-to-order contracts and sustained hyperscaler investments support strong demand and revenue visibility through 2028 and beyond.
Western Digital Corporation (WDC - Free Report) is strengthening its cloud storage business by delivering high-capacity HDD technologies that support the rapid expansion of AI and hyperscale data centers. The company is working closely with leading cloud providers, shipping 222 exabytes in the quarter, up 34% year over year, while accelerating adoption of its ePMR, UltraSMR and upcoming HAMR technologies. It has secured firm purchase orders with its top seven customers through 2026 and multi-year agreements extending into 2028. Western Digital also continues qualifying next-generation HDDs and PCIe Gen5 data center SSDs with major cloud companies, positioning it to benefit from sustained cloud infrastructure investments.
NTAP Price Performance, Valuation & Estimates
Shares of NetApp have gained 3.8% in the past month against the Computer-Storage Devices industry’s decline of 36.9%.
Image Source: Zacks Investment Research
Regarding the price/book ratio, NTAP is trading at 23.77, higher than the sector’s multiple of 15.11.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NTAP’s earnings for fiscal 2027 has been revised upward over the past 60 days.
Image Source: Zacks Investment Research
NTAP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.