It has been about a month since the last earnings report for NetApp (NTAP Quick QuoteNTAP - Free Report) . Shares have added about 16% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is NetApp due for a pullback? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for NetApp, Inc. before we dive into how investors and analysts have reacted as of late.

NetApp Q1 Earnings Beat Estimates

NetApp delivered a record first quarter of fiscal 2027, with non-GAAP earnings of $2.58 per share, up 66.5% year over year. The figure beat the Zacks Consensus Estimate of $2.13 by 21.1%.

Net revenues rose 29.9% to $2,025 million and surpassed the $1,843 million consensus mark by 9.9%. Strong AI and modernization spending, accelerated purchases and pricing benefits supported growth. Billings increased 36.1% to $2,057 million.

Hybrid Cloud Business Leads Growth

Hybrid Cloud revenues advanced 30.1% year over year to $1,819 million. Product revenues climbed 50.9% to $987 million, while support revenues increased 11.3% to $720 million. Professional and Other Services revenues rose 15.5% to $112 million, mainly on continued Keystone growth.

The quarter included an additional week, which contributed approximately $65 million to revenues, mainly from support and Public Cloud. Excluding that benefit, total revenues increased 26% year over year. Management also cited a healthier demand environment as customers invested in AI and infrastructure modernization.

Flash and Public Cloud Momentum Accelerates

All-flash array revenues reached a record $1,309 million, up 46.6% from the prior-year quarter. Hybrid-flash and other revenues were $510 million versus $505 million a year ago. Together, all-flash and Public Cloud represented 75% of quarterly net revenues.

Public Cloud revenues grew 28% to a record $206 million, reflecting strong first-party and marketplace storage demand. Adjusted for the extra week, Public Cloud growth was 19%. NetApp won approximately 350 AI and data lake modernization deals, with management noting larger deal sizes as customers moved from pilots to production. The company also acquired DataPelago to expand its AI data infrastructure capabilities.

Margin Details

Non-GAAP gross margin was 70.6%, down 50 basis points year over year. The decline reflected a larger product mix, with product revenues accounting for 49% of sales versus 42% a year earlier. Product gross margin was 54.6%, pressured sequentially by higher component costs but partly offset by better pricing.

Hybrid Cloud gross margin was 68.8%, while Public Cloud gross margin reached 86.4%. Support gross margin totaled 93.2%, and Professional Services gross margin was 36.6%. Year-over-year margin expansion across product, support, Professional Services and Public Cloud partly offset the product-mix headwind.

Non-GAAP operating expenses rose 10.9% year over year to $784 million, driven primarily by variable compensation and the additional week, which added approximately $22 million. Even so, non-GAAP operating income increased 60.8% to $645 million.

The non-GAAP operating margin expanded to 31.9% from 25.7%. Non-GAAP net income increased 64% to $515 million. On a GAAP basis, net income rose 60.9% to $375 million, while earnings increased 63.5% to $1.88 per share.

Cash Flow Details

Cash from operations fell 25.3% year over year to $503 million, while free cash flow declined 35.3% to $401 million. Free cash flow margin was 19.8% compared with 39.8% a year ago. Capital expenditures increased to $102 million from $53 million.

NTAP ended the quarter with $3.58 billion in cash, cash equivalents and investments and $2.49 billion in gross debt, leaving net cash of $1.09 billion. Inventory increased to $375 million from $198 million at fiscal year-end as the company managed supply levels to support growing demand. NetApp returned $302 million through $200 million of repurchases and $102 million of dividends.

Fiscal 2027 Outlook

For the second quarter of fiscal 2027, NetApp expects revenues of $2.025-$2.175 billion. Non-GAAP gross margin is projected at 67-68%, operating margin at 30.9-31.9% and earnings at $2.54-$2.64 per share. Management expects the sequential gross-margin decline mainly from a higher product revenue mix.

For fiscal 2027, revenues are now forecast at $7.975-$8.225 billion, with the $8.10 billion midpoint representing 17% growth and a $650 million increase from prior guidance. Non-GAAP gross margin is expected at 68.1-69.1%, operating margin at 30.3-31.3% and earnings at $9.73-$10.03 per share. The $9.88 earnings midpoint represents 22% year-over-year growth.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates revision.

The consensus estimate has shifted 21.27% due to these changes.

VGM Scores

Currently, NetApp has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a score of F on the value side, putting it in the bottom 20% quintile for value investors.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise NetApp has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.