NetApp CEO: “The demands of AI are complex and unrelenting”

‘Our fiscal year 2025 results demonstrate how the alignment of our solutions with key IT priorities, our focus, and the strength of our business model enable us to deliver strong performance in an uncertain environment. Additionally, the unfolding enterprise AI market is driving urgency amongst customers to modernize their data infrastructure, drive cloud transformations, and increase cyber resiliency. We are currently negotiating sizable AI and data infrastructure modernization deals with multiple large enterprises, which we expect to close later in the year,’ says NetApp CEO George Kurian.

Growth in cloud storage and all-flash storage along with significant pull from enterprise AI adoption helped NetApp enjoy growth during the company’s fiscal 2025 fourth quarter and full year despite macroeconomic issues, including uncertainties caused by the Trump administration tariffs.

NetApp CEO George Kurian told financial analysts during the company’s quarterly analyst call that strong growth and significant market share gains in all-flash storage, along with accelerating growth in first-party and marketplace storage services, led to all-time highs for gross profit, operating profit, operating margin, and earnings per share in fiscal year 2025.

“[It was] a clear indication of our ability to navigate a dynamic environment,” Kurian (pictured) said during his prepared remarks. “By relentlessly prioritizing our four growth opportunities and leveraging AI for increased efficiencies, we are able to invest in growth and expand our profitability metrics.”

As opposed to five years ago, when all-flash storage and public cloud services accounted for less than half of NetApp’s total revenue, today they represent over two-thirds, Kurian said.

“Looking ahead, we expect these growth drivers, along with our laser focus, prioritized investments, and robust execution, to deliver more company records in fiscal year 2026 and beyond,” he said.

AI adoption and its hunger for data means enterprises and government organizations are looking at NetApp to help deliver competitive advantage and operational efficiencies, Kurian said.

“The demands of AI are complex and unrelenting, with massive volumes of data scattered across multiple silos,” he said. “This fragmentation leads to difficult integrations, inefficiencies, and challenges in governance, security, and data protection. GenAI transformation has made it clear that legacy architectures are inadequate to serve these complex workloads. NetApp’s unified data architecture, spanning any data type anywhere, enables customers to build an intelligent data infrastructure, delivering the required flexibility needed to overcome these barriers.”

NetApp continues to expand its installed base and reaching new customers with its AI-ready intelligent data infrastructure, which Kurian said reduces cost and complexity by seamlessly bridging on-premises and cloud storage with unified control.

For instance, he said, NetApp’s all-flash array annualized revenue run rate grew 14 percent during the fourth quarter over the same period last year to a record US$4.1 billion, and all-flash made up about two-thirds of the company’s hybrid cloud segment revenue. About 44 percent of NetApp’s installed base under active support contracts are all-flash, he said.

“The rich data services of our all-flash unified data storage systems create a secure foundation for consolidating organizational data and accelerating AI-powered insights,” he said. “As organizations seek to build future-proof, AI-ready infrastructure, they increasingly choose our solutions, driving our faster-than-market growth.”

NetApp is also in the early stages of its entry into the dedicated block storage market and is seeing accelerating growth from its block-optimized ASA systems, Kurian said.

NetApp in fiscal 2025 focused its public cloud services to emphasize highly differentiated first-party and marketplace cloud storage services, which Kurian said in the fourth quarter resulted in first-party and marketplace cloud storage services growth of 44 percent year-over-year.

Hybrid cloud growth has let NetApp help customers accelerate AI deployments and achieve faster time to value, Kurian said.

“As the market for enterprise AI evolves, customers are moving from proof-of-concepts to real-world deployments, driving the need to unify their data for business impact,” he said. “Our secure, cloud-integrated, silo-free infrastructure positions us as a leader in this transformation. We power AI pipelines from data preparation to model training to production deployments on-premises and in the cloud. In the fourth quarter, our AI business grew five-fold year over year, again performing ahead of plan.”

During the year, NetApp expanded its AI ecosystem with such partners as Nvidia, Domino, Dremio, the Open Platform for Enterprise AI open-source project, and hyperscaler AI providers, Kurian said.

This included the development of new AI reference architectures with partners including Nvidia for AIDP, Cisco for FlexPod, Lenovo for AIPod, and, most recently, Intel for AIPod Mini, Kurian said. The fourth quarter saw NetApp’s high-performance Ontap all-flash storage certified for Nvidia DGX SuperPOD, Nvidia cloud partners, and Nvidia-certified systems.

“Building on our large installed base of unstructured data, we enable customers to gain intelligence from their data in place, making it ready and useful for production AI use cases without the need for migrations or changes to data operations,” he said. “We are helping customers deploy AI inferencing in production today and expect fiscal year 2026 to be a pivotal year for enterprise AI storage, with the opportunity outstripping that of model training.”

The AI impact

When asked by an analyst for details on AI’s impact on NetApp, Kurian said the company is seeing an ongoing unfolding of the enterprise AI market.

“Inferencing and the use of AI tools to drive business advantage is the core of the opportunity in the enterprise and 80 percent of the overall storage opportunity, and we have done very well in that,” he said. “We think that fiscal year ‘26 will continue to accelerate and expand that opportunity for us.

Kurian, in his prepared remarks, also said enterprise AI customers are using his company’s cloud footprints, whether it is to do AI in the cloud or start their AI proofs of concept in the cloud.

When it comes to the global macroeconomic outlook, NetApp sees mixed signals with a general slowdown in growth, lingering inflation concerns, and a significantly higher level of uncertainty, and expects some increased spending caution as well as on-going friction in U.S. public sector and EMEA, Kurian said.

“Our fiscal year 2025 results demonstrate how the alignment of our solutions with key IT priorities, our focus, and the strength of our business model enable us to deliver strong performance in an uncertain environment,” he said. “Additionally, the unfolding enterprise AI market is driving urgency amongst customers to modernize their data infrastructure, drive cloud transformations, and increase cyber resiliency. We are currently negotiating sizable AI and data infrastructure modernization deals with multiple large enterprises, which we expect to close later in the year. This gives us confidence in our full-year outlook.”

When asked by an analyst for details about macroeconomic impacts to NetApp, Kurian said the majority of sales that didn’t close in the third quarter did close in the fourth quarter, and that sequential growth in the fourth quarter was above the company’s typical trend. NetApp is also seeing evidence of overall political instability, he said.

“Some of the GDP growth rates have come down, and [there’s a] degree of caution in customers waiting for clarity on trade policy and other macroeconomic policies, particularly in Europe, and, of course, in the US public sector,” he said.

When asked about how the Trump administration tariffs are impacting NetApp, Kurian said his company has a diverse supply chain.

“We have no exposure to China,” he said. “Final assembly of our products, which confers country of origin, is in Singapore, Hungary, Mexico, and the U.S. So it allows us to have a very small impact [from] tariffs. And also, the semiconductor exemption allows us to have a pretty small contribution of costs from tariffs. We see the primary impact of tariffs, or really the uncertainty introduced by tariffs, [to be] causing enterprises to kind of slow down, particularly in the manufacturing segment in Europe.”

“We feel really good about that,” he said. “Overall, the cloud business is performing very well, both due to strong technology differentiation and good execution. And as we have shared, we are expanding the range of not only enterprise application use cases, but analytics and AI use cases, and so I feel really pleased with the focus and the execution we had in that part of our business this year.”

NetApp by the numbers

For its fiscal 2025 fourth quarter, ended April 25, NetApp reported total revenue of US$1.73 billion, up 3.6 percent over the US$1.67 billion the company reported for its fiscal 2024 fourth quarter.

This included product revenue of US$845 million, up from US$806 million; support revenue of US$625 million, nearly unchanged from US$623 million; professional and other services revenue of US$98 million, up from US$88 million; and public cloud revenue of US$164 million, up from US$152 million.

Total revenue beat analysts’ expectations by US$10 million, according to Seeking Alpha.

Americas commercial business accounted for 42 percent of NetApp’s revenue, while the US public sector accounted for 8 percent. About 78 percent of revenue came via indirect sales channels.

NetApp also reported GAAP net income of US$340 million or US$1.65 per share for the quarter, up from last year’s US$291 million or US$1.37 per share. On a non-GAAP basis, NetApp reported net income of US$397 million or US$1.93 per share, up from last year’s US$382 million or US$1.80 per share.

Non-GAAP net income beat analysts’ expectations by 3 cents per share.

For all of fiscal 2025, NetApp reported total revenue of US$6.57 billion, up 4.8 percent from last year’s revenue of $6.27 billion.

This included product revenue of US$3.04 billion, up from US$2.85 billion; support revenue of US$2.51 billion, up from US$2.49 billion; professional and other services revenue of US$355 million, up from US$320 million; and public cloud revenue of US$665 million, up from US$611 million.

Americas commercial business accounted for 40 percent of NetApp’s revenue, while the U.S. public sector accounted for 11 percent. About 78 percent of revenue came via indirect sales channels.

NetApp also reported full-year GAAP net income of US$1.12 billion or US$5.67 per share, up from last year’s US$986 million or US$4.63 per share. On a non-GAAP basis, NetApp reported net income of US$1.52 billion or US$7.25 per share, up from last year’s US$1.38 billion or US$6.46 per share.

Looking ahead, NetApp expects that because of macroeconomic uncertainty fiscal 2026 total revenue will be in the range of US$6.625 billion to US$6.875 billion dollars, which at the US$6.75 billion midpoint reflects 3 percent growth year over year. If its divested Spot business was excluded, total revenue growth would be about 4 percent year over year.

Fiscal year 2026 consolidated gross margin is expected to be in the range of 71 percent to 72 percent, while operating margin is expected to be about 28.8 percent to 29.8 percent. NetApp is also expecting non-GAAP per-share earnings of US$7.60 to US$7.90, for a midpoint of US$7.75.

For its fiscal 2026 first quarter, NetApp expects revenue to range from US$1.455 billion to US$1.605 billion, which at the US$1.53 billion midpoint suggests a 1 percent year-over-year decline. Excluding Spot, the revenue guidance would be a year-over-year growth of 1 percent.

NetApp also expects first quarter consolidated gross margin in the range of 71 percent to 72 percent and operating margin in the range of 25 percent to 26 percent. Earnings are expected to be in the range of US$1.48 and US$1.58 per share with a midpoint of US$1.53.