NTAP vaults to 23-year high following beat and raise report

NetApp (NTAP) released its earnings report for the third quarter of fiscal year 2024 (January 2024). The company's performance in the third quarter of fiscal year 2023 reflects its resilience in the face of ongoing budget scrutiny at the enterprise level. One of the key drivers of NetApp's success has been its ability to benefit from customers revising their data architecture. The company has highlighted multiple deployments at NVIDIA's DGX PODs, indicating strong demand for its products and services. Additionally, the GenAI mix has been trending in the right direction, which is a positive sign for the company's future growth prospects.

The news was enough to catapult it to its best level since it hit $152 during the internet bubble in 2000. 

In terms of revenue, NetApp reported a total revenue of $1.61 billion for the quarter, representing a growth of 5.2% compared to the same period last year. This figure exceeded the estimate of $1.59 billion by 0.85%. 

NetApp also demonstrated impressive growth in its product revenue, which reached $724 million, reflecting a 6.2% increase compared to the same quarter last year. The reported figure slightly surpassed the average estimate based on seven analysts. This growth in product revenue can be attributed to strong demand for NetApp's software and hardware offerings, with software revenues increasing by 5.6% to $412 million and hardware revenues rising by 14.7% to $335 million.

Furthermore, NetApp's services gross margin (non-GAAP) reached 81.5%, slightly surpassing the average estimate of 81.2% provided by six analysts. The company's ability to maintain a strong services gross margin signifies its effective cost management and operational efficiency in delivering high-quality services to its customers. 

Looking into the guidance for the upcoming quarter, NetApp provided in-line projections. For the fourth quarter, the company expects an EPS of $1.73 to $1.83, excluding non-recurring items, which aligns with the consensus of $1.73. NetApp also anticipates revenue in the range of $1.585 billion to $1.735 billion for the fourth quarter, falling slightly below the consensus of $1.65 billion. 

In terms of the full fiscal year 2024, NetApp provided an optimistic outlook. The company anticipates an EPS between $6.40 and $6.50, surpassing the consensus of $6.14. NetApp also expects revenue in the range of $6.185 billion to $6.335 billion for the fiscal year, which exceeds the consensus of $6.23 billion. 

NetApp has also announced mixed shelf securities offering, which is expected to provide the company with the necessary funds to invest in research and development, expand its global presence, and strengthen its market position.