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NetApp, Inc.’s (NTAP - Free Report) shares have surged 147.2% in the past six months, outperforming the Zacks Computer & Technology sector and the Zacks Computer- Storage Devices industry, which gained 28.2% and 59.2%, respectively. The S&P 500 composite is up 15.9% over the same time frame.
The company faces stiff competition from its peers such as Super Micro Computer, Inc. (SMCI - Free Report) , Hewlett Packard Enterprise Company (HPE - Free Report) and Seagate Technology Holdings plc (STX - Free Report) . SMCI, HPE and STX have climbed 93.6%, 191.9% and 61.5%, respectively, in the past six months.
Image Source: Zacks Investment Research
Let us take a closer look at NTAP’s fundamentals, key growth drivers, competitive strengths and potential risks to determine whether the stock remains an attractive investment.
Strong Demand and Broad-Based Business Momentum
NetApp is benefiting from robust demand for intelligent data infrastructure, supported by increasing investments in AI, cloud adoption and enterprise modernization. The company's unified data platform, which combines high-performance storage, data management and cyber resilience capabilities, is strengthening its competitive position across diverse industries. NetApp reported revenues of $2.03 billion in the first quarter of fiscal 2027, representing 30% year-over-year growth, or 26% excluding the additional week.
The company witnessed strong demand across customer segments, geographies and workloads, supported by new customer additions, expansion within existing accounts and technology refresh activities. Increasing adoption of its solutions for mission-critical workloads, along with multiyear customer agreements, is expected to sustain growth momentum. Reflecting this strength, NetApp raised its fiscal 2027 revenue guidance to $7.96-$8.26 billion, indicating confidence in its business prospects.
Image Source: Zacks Investment Research
Growing Adoption of All-Flash and Hybrid Storage Solutions
NetApp is benefiting from increasing demand for its all-flash array portfolio as enterprises prioritize storage infrastructure capable of supporting high-performance applications and AI-intensive workloads. In the first quarter of fiscal 2027, all-flash array revenues surged 47% year over year to $1.31 billion, driven by the growing adoption of low-latency, scalable and cyber-resilient storage solutions. The company is witnessing increased traction for its unified storage architecture as customers seek to consolidate workloads, improve operational efficiency and optimize infrastructure spending.
Demand for hybrid-flash solutions is also strengthening, particularly among customers looking to balance performance requirements with cost-effective capacity expansion. NetApp's ability to address diverse customer needs through its broad storage portfolio is supporting competitive wins and expanding its presence in enterprise infrastructure.
AI-Led Modernization Expands Growth Opportunities
The accelerating adoption of AI is creating significant opportunities for NetApp as enterprises modernize their data infrastructure to support advanced analytics, AI inference and GPU-intensive applications. The company's platform enables customers to access and process data in place, reducing data movement while maintaining security, governance and operational control. In the first quarter of fiscal 2027, NetApp secured approximately 350 AI and data lake modernization deals, with deal sizes increasing as customers transitioned from pilot projects to production environments. Notable customer wins included Samsung Electronics, a public-sector organization deploying NetApp AFX with NVIDIA SuperPOD, and an Asian neocloud provider developing AI inference services.
The acquisition of DataPelago further strengthens NetApp's AI capabilities by enabling high-performance, in-place data processing. Recently, the company partnered with Diskover Data to extend metadata discovery and governance capabilities across ONTAP and StorageGRID environments. The collaboration is expected to enhance data visibility and management for enterprises handling large volumes of unstructured data, further strengthening NetApp's position in AI-ready infrastructure.
Public Cloud Expansion and Strategic Partnerships
NetApp's public cloud business continues to benefit from enterprise cloud migrations and growing demand for scalable, secure and efficient storage services. Public Cloud revenues increased 28% year over year to $206 million in the first quarter of fiscal 2027, reflecting strong adoption of first-party and marketplace storage offerings. Excluding the additional week, revenues grew 19%. Solutions such as Amazon FSx for NetApp ONTAP and Azure NetApp Files are gaining traction as organizations migrate VMware workloads and modernize applications. The acquisition of JetStream further enhances NetApp's cloud capabilities by strengthening disaster recovery and migration solutions for VMware environments.
Recently, NetApp announced an expanded collaboration with Oracle to bring native ONTAP data management capabilities to Oracle Cloud Infrastructure through a fully managed storage service. The company also unveiled plans to deepen its partnership with SAP to support secure and resilient cloud storage. Additionally, its collaboration with Supermicro aims to deliver integrated AI infrastructure solutions that reduce data bottlenecks and improve GPU utilization. These initiatives are expected to expand NetApp's reach across hybrid-cloud and AI infrastructure markets.
Keystone Momentum and Product Innovation
NetApp is witnessing growing adoption of its Keystone storage-as-a-service offering as enterprises increasingly favor flexible consumption models over traditional infrastructure purchases. Keystone revenues increased approximately 65% in fiscal 2026, highlighting sustained customer demand for cloud-like storage consumption. In the first quarter of fiscal 2027, Professional Services revenues increased 15% year over year to $112 million, primarily benefiting from continued Keystone expansion. The company is focusing on attracting new customers and enhancing the offering's capabilities to support broader adoption.
Recently, NetApp introduced Keystone Sovereign, targeting qualified customers in Germany and France with additional regional, operational and data-handling controls designed to address data sovereignty requirements. At its INSIGHT 2026 event, NetApp unveiled Novus, a high-performance file system designed to support GPU-intensive workloads. These developments are expected to strengthen the company's competitive position in regulated industries, AI infrastructure and flexible storage services.
Improving Profitability and Financial Flexibility
NetApp's disciplined operating model and expanding revenue base are supporting profitability and cash flow generation. In the first quarter of fiscal 2027, non-GAAP gross profit increased 29% year over year to $1.43 billion, while operating income surged 61% to $645 million. Non-GAAP operating margin expanded 610 basis points (bps) to 31.9%, reflecting strong operating leverage and effective expense management. Non-GAAP earnings per share increased 66% year over year to $2.58, outpacing revenue growth. The company generated $503 million in operating cash flow and $401 million in free cash flow during the quarter.
NetApp also returned $302 million to shareholders through dividends and share repurchases. Its solid liquidity position, supported by $3.6 billion in cash and short-term investments against $2.5 billion in gross debt, provides financial flexibility to pursue strategic investments and growth initiatives. Backed by encouraging business momentum, NetApp raised its fiscal 2027 non-GAAP earnings guidance to $9.73-$10.03 per share, reinforcing its focus on profitable growth and shareholder returns.
Margin Pressures and Rising Component Costs Remain Concerns
Despite strong business momentum, NetApp faces challenges from rising component costs, an evolving revenue mix and potential fluctuations in customer purchasing patterns. In the first quarter of fiscal 2027, non-GAAP gross margin contracted 50 bps year over year to 70.6%, primarily due to a higher contribution from lower-margin product revenues. Product gross margin declined 150 bps sequentially to 54.6%, reflecting increased component costs, partially offset by favorable pricing. Management expects gross margin to decline sequentially to 67-68% in the second quarter, mainly due to a greater product revenue mix.
Elevated component prices could continue to pressure profitability, despite the company's pricing initiatives and supply management efforts. Moreover, some customers are postponing lower-priority projects or shifting toward hybrid-flash solutions to manage infrastructure spending. The acceleration of certain purchases into the first quarter could also create variability in future demand patterns, while higher inventory levels and continued investments in AI solutions may add to operating complexities. These factors could weigh on NetApp's near-term margin performance despite the favorable long-term demand environment.
NTAP’s Valuation
NTAP trades at a forward 12-month price-to-earnings (P/E) of 27.23X, above the industry’s 10.11X. SMCI, HPE and STX trade at a forward 12-month P/E of 10.11X, 17.09X and 19.32X, respectively.
Image Source: Zacks Investment Research
The premium valuation is justified to an extent by the company’s strong growth trajectory, improving profitability, robust demand for its cloud and AI solutions, and favorable long-term growth prospects.
NTAP’s Estimates Revised Upward
The Zacks Consensus Estimate for NTAP’s earnings for fiscal 2026 has been revised upward over the past 30 days.
Image Source: Zacks Investment Research
The upward estimate revision reflects improving analyst sentiment and indicates growing confidence in NetApp’s earnings prospects.
What Should You Do With NTAP Stock Now?
NetApp’s AI-driven demand, strong all-flash storage growth, expanding cloud business and robust cash generation strengthen its long-term growth prospects. However, its premium valuation and margin pressures warrant some caution.
Existing investors may stay invested to benefit from the company’s growth prospects, while new investors can consider buying the stock given its strong fundamentals and favorable earnings outlook.
View the Zacks #1 Rank List
Image: Bigstock
NetApp Up 147% in the Past 6 Months: Time to Buy the Stock?
Key Takeaways
NetApp, Inc.’s (NTAP - Free Report) shares have surged 147.2% in the past six months, outperforming the Zacks Computer & Technology sector and the Zacks Computer- Storage Devices industry, which gained 28.2% and 59.2%, respectively. The S&P 500 composite is up 15.9% over the same time frame.
The company faces stiff competition from its peers such as Super Micro Computer, Inc. (SMCI - Free Report) , Hewlett Packard Enterprise Company (HPE - Free Report) and Seagate Technology Holdings plc (STX - Free Report) . SMCI, HPE and STX have climbed 93.6%, 191.9% and 61.5%, respectively, in the past six months.
Image Source: Zacks Investment Research
Let us take a closer look at NTAP’s fundamentals, key growth drivers, competitive strengths and potential risks to determine whether the stock remains an attractive investment.
Strong Demand and Broad-Based Business Momentum
NetApp is benefiting from robust demand for intelligent data infrastructure, supported by increasing investments in AI, cloud adoption and enterprise modernization. The company's unified data platform, which combines high-performance storage, data management and cyber resilience capabilities, is strengthening its competitive position across diverse industries. NetApp reported revenues of $2.03 billion in the first quarter of fiscal 2027, representing 30% year-over-year growth, or 26% excluding the additional week.
The company witnessed strong demand across customer segments, geographies and workloads, supported by new customer additions, expansion within existing accounts and technology refresh activities. Increasing adoption of its solutions for mission-critical workloads, along with multiyear customer agreements, is expected to sustain growth momentum. Reflecting this strength, NetApp raised its fiscal 2027 revenue guidance to $7.96-$8.26 billion, indicating confidence in its business prospects.
Image Source: Zacks Investment Research
Growing Adoption of All-Flash and Hybrid Storage Solutions
NetApp is benefiting from increasing demand for its all-flash array portfolio as enterprises prioritize storage infrastructure capable of supporting high-performance applications and AI-intensive workloads. In the first quarter of fiscal 2027, all-flash array revenues surged 47% year over year to $1.31 billion, driven by the growing adoption of low-latency, scalable and cyber-resilient storage solutions. The company is witnessing increased traction for its unified storage architecture as customers seek to consolidate workloads, improve operational efficiency and optimize infrastructure spending.
Demand for hybrid-flash solutions is also strengthening, particularly among customers looking to balance performance requirements with cost-effective capacity expansion. NetApp's ability to address diverse customer needs through its broad storage portfolio is supporting competitive wins and expanding its presence in enterprise infrastructure.
AI-Led Modernization Expands Growth Opportunities
The accelerating adoption of AI is creating significant opportunities for NetApp as enterprises modernize their data infrastructure to support advanced analytics, AI inference and GPU-intensive applications. The company's platform enables customers to access and process data in place, reducing data movement while maintaining security, governance and operational control. In the first quarter of fiscal 2027, NetApp secured approximately 350 AI and data lake modernization deals, with deal sizes increasing as customers transitioned from pilot projects to production environments. Notable customer wins included Samsung Electronics, a public-sector organization deploying NetApp AFX with NVIDIA SuperPOD, and an Asian neocloud provider developing AI inference services.
The acquisition of DataPelago further strengthens NetApp's AI capabilities by enabling high-performance, in-place data processing. Recently, the company partnered with Diskover Data to extend metadata discovery and governance capabilities across ONTAP and StorageGRID environments. The collaboration is expected to enhance data visibility and management for enterprises handling large volumes of unstructured data, further strengthening NetApp's position in AI-ready infrastructure.
Public Cloud Expansion and Strategic Partnerships
NetApp's public cloud business continues to benefit from enterprise cloud migrations and growing demand for scalable, secure and efficient storage services. Public Cloud revenues increased 28% year over year to $206 million in the first quarter of fiscal 2027, reflecting strong adoption of first-party and marketplace storage offerings. Excluding the additional week, revenues grew 19%. Solutions such as Amazon FSx for NetApp ONTAP and Azure NetApp Files are gaining traction as organizations migrate VMware workloads and modernize applications. The acquisition of JetStream further enhances NetApp's cloud capabilities by strengthening disaster recovery and migration solutions for VMware environments.
Recently, NetApp announced an expanded collaboration with Oracle to bring native ONTAP data management capabilities to Oracle Cloud Infrastructure through a fully managed storage service. The company also unveiled plans to deepen its partnership with SAP to support secure and resilient cloud storage. Additionally, its collaboration with Supermicro aims to deliver integrated AI infrastructure solutions that reduce data bottlenecks and improve GPU utilization. These initiatives are expected to expand NetApp's reach across hybrid-cloud and AI infrastructure markets.
Keystone Momentum and Product Innovation
NetApp is witnessing growing adoption of its Keystone storage-as-a-service offering as enterprises increasingly favor flexible consumption models over traditional infrastructure purchases. Keystone revenues increased approximately 65% in fiscal 2026, highlighting sustained customer demand for cloud-like storage consumption. In the first quarter of fiscal 2027, Professional Services revenues increased 15% year over year to $112 million, primarily benefiting from continued Keystone expansion. The company is focusing on attracting new customers and enhancing the offering's capabilities to support broader adoption.
Recently, NetApp introduced Keystone Sovereign, targeting qualified customers in Germany and France with additional regional, operational and data-handling controls designed to address data sovereignty requirements. At its INSIGHT 2026 event, NetApp unveiled Novus, a high-performance file system designed to support GPU-intensive workloads. These developments are expected to strengthen the company's competitive position in regulated industries, AI infrastructure and flexible storage services.
Improving Profitability and Financial Flexibility
NetApp's disciplined operating model and expanding revenue base are supporting profitability and cash flow generation. In the first quarter of fiscal 2027, non-GAAP gross profit increased 29% year over year to $1.43 billion, while operating income surged 61% to $645 million. Non-GAAP operating margin expanded 610 basis points (bps) to 31.9%, reflecting strong operating leverage and effective expense management. Non-GAAP earnings per share increased 66% year over year to $2.58, outpacing revenue growth. The company generated $503 million in operating cash flow and $401 million in free cash flow during the quarter.
NetApp also returned $302 million to shareholders through dividends and share repurchases. Its solid liquidity position, supported by $3.6 billion in cash and short-term investments against $2.5 billion in gross debt, provides financial flexibility to pursue strategic investments and growth initiatives. Backed by encouraging business momentum, NetApp raised its fiscal 2027 non-GAAP earnings guidance to $9.73-$10.03 per share, reinforcing its focus on profitable growth and shareholder returns.
Margin Pressures and Rising Component Costs Remain Concerns
Despite strong business momentum, NetApp faces challenges from rising component costs, an evolving revenue mix and potential fluctuations in customer purchasing patterns. In the first quarter of fiscal 2027, non-GAAP gross margin contracted 50 bps year over year to 70.6%, primarily due to a higher contribution from lower-margin product revenues. Product gross margin declined 150 bps sequentially to 54.6%, reflecting increased component costs, partially offset by favorable pricing. Management expects gross margin to decline sequentially to 67-68% in the second quarter, mainly due to a greater product revenue mix.
Elevated component prices could continue to pressure profitability, despite the company's pricing initiatives and supply management efforts. Moreover, some customers are postponing lower-priority projects or shifting toward hybrid-flash solutions to manage infrastructure spending. The acceleration of certain purchases into the first quarter could also create variability in future demand patterns, while higher inventory levels and continued investments in AI solutions may add to operating complexities. These factors could weigh on NetApp's near-term margin performance despite the favorable long-term demand environment.
NTAP’s Valuation
NTAP trades at a forward 12-month price-to-earnings (P/E) of 27.23X, above the industry’s 10.11X. SMCI, HPE and STX trade at a forward 12-month P/E of 10.11X, 17.09X and 19.32X, respectively.
Image Source: Zacks Investment Research
The premium valuation is justified to an extent by the company’s strong growth trajectory, improving profitability, robust demand for its cloud and AI solutions, and favorable long-term growth prospects.
NTAP’s Estimates Revised Upward
The Zacks Consensus Estimate for NTAP’s earnings for fiscal 2026 has been revised upward over the past 30 days.
Image Source: Zacks Investment Research
The upward estimate revision reflects improving analyst sentiment and indicates growing confidence in NetApp’s earnings prospects.
What Should You Do With NTAP Stock Now?
NetApp’s AI-driven demand, strong all-flash storage growth, expanding cloud business and robust cash generation strengthen its long-term growth prospects. However, its premium valuation and margin pressures warrant some caution.
Existing investors may stay invested to benefit from the company’s growth prospects, while new investors can consider buying the stock given its strong fundamentals and favorable earnings outlook.
Currently, NetApp sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.