NetApp, Inc Citi’s 2026 Global TMT Conference
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You ready to begin? Okay. Good afternoon, everyone. Asiya Merchant. Day one of Citi's conference, just after lunch, mid-afternoon. Actually, there's been a couple of sessions after lunch, but the afternoon of day one of Citi's tech conference. Asiya Merchant here. I lead the tech sector on the hardware and tech supply chain. Really happy here to have NetApp's CFO, Wissam Jabre, as well as IR, VP of IR, Kris Newton here. We have a bunch of questions. We're going to be doing this fireside. If you have any questions at the end, we're going to leave a few minutes here for investors to ask questions. Please do raise your hand so we can bring the mic to you. All right. Well, thank you for coming. I'm going to first give it over to Kris. She has a few comments.
All right. Thanks for having us. Today's discussion may include forward-looking statements regarding NetApp's future performance, which are subject to risk and uncertainty. Actual results may differ materially from the statements made today for a variety of reasons described in our most recent 10-K and 10-Q filed with the SEC and available on our website at netapp.com. We disclaim any obligation to update information in any forward-looking statement for any reason.
All right. Well, Wissam, Kris, you guys just reported earnings. It was not even a week ago. Right? You had very strong results for fiscal 1Q coming out, and then you did raise your whole fiscal year outlook as well. Almost 2X. Right? I think one of the questions that investors here were asking, and have been asking, something I've been asking all my companies, especially on the enterprise OEM side of things. What gives you confidence that this is durable? Right? You still have three quarters to go, and it's not just customers double ordering. You guys have backlog demand outlooks. It's not just customers double ordering and trying to get a secure spot in place, given the constraints that are out there.
Thanks, Asiya. First, happy to be here. Thank you for having us. Look, we had a stellar start to the year. As you mentioned, we reported last week. When it comes to Q1, we saw some really good broad-based strength in demand driven by AI adoption and infrastructure modernization. There's also many ways that we typically monitor our business. We look at pipeline, we look at orders, we look at backlog, and we monitor it that way. So far, we haven't seen anything out of the ordinary. We do think that we do see an underlying strength in demand that basically also gave us enough confidence to increase the guidance for the fiscal year. As you noted, we basically increased the guidance for fiscal year 2027, doubling roughly the growth rate year on year relative to where the guidance was 90 days ago.
And that also goes to EPS more than doubling that. The last point I would say in terms of our business, our business goes directly to is linked to end customer demand, so there is no stocking the channel, for instance, type of dynamics that works in it.
Okay. While we are on the topic of demand, because you are pretty well exposed, you have exposure to commercial, of course, enterprise, also government. Maybe if you can talk a little bit about demand. Was it a pretty broad base that was underpinning your revenue outlook? Was it pretty broad based? You also have first-party services on cloud as well.
Yeah. Yeah. So in Q1, we experienced broad-based demand.
We saw growth across various geographic regions, and we saw growth across the various types of customers and across various types of industries. When it comes to our public cloud business, which is where really the three top hyperscalers are our customers, and they offer our software as a native storage software solution. We have also experienced some really nice growth. We reported around 28%, but then when we adjust for the extra week that we had in Q1, it was around 19%. The growth was fairly broad based.</seg <seg id="3">Okay. Given that supply, you guys have to have supply in order to underpin your demand outlook. I think at the start of the year, a lot of questions were around supply. Do the OEMs have the supply in order to underpin the demand outlook here? You guys are doubling your demand outlook. So what has changed on the supply side? Have you signed LTAs that gives you access to supply? Just help us on the supply side.
Okay. Given that supply, you guys have to have supply in order to underpin your demand outlook. I think at the start of the year, a lot of questions were around supply. Do the OEMs have the supply in order to underpin the demand outlook here? You guys are doubling your demand outlook. What has changed on the supply side? Have you signed LTAs that gives you access to supply? Just help us on the supply side.
Yeah, we've always worked very closely with our suppliers on not only understanding what their supply situation is, but also sharing with them what our outlook looks like. That sort of has been our mode of operation for quite some time. Where we are now, we basically have, at this time, we feel comfortable about the supply we have to be able to deliver the outlook we guided. We have different types of arrangements with different types of suppliers. In some cases, we have LTAs. In others, we basically have agreed upon commitments and so on. But we feel comfortable from a supply perspective at this time to be able to deliver our outlook.
Okay. Outside of supply, Wissam, are there other things? You have a range, right? When you provide the outlook as well, both for the quarter, for the year. What would it take for, outside of supply, are there other gating factors that we should think or other factors that could cause you to upside on that side? Maybe we can also talk about the risks maybe towards the lower end of your guide then.
Yeah. When you look at the guide, we basically take into account all the information we have at the time when we build our outlook on which the guidance is based. We're one quarter in the year, so we'll wait until the end of this quarter, and we'll be able to provide a better update for the rest of the year.
Okay. What about pricing? Because I know people often do the P times Q. I know I bugged Kris during the quarter to talk about this, that P times Q, when people look at the bits that you're shipping, but of course, pricing has gone up quite meaningfully for not just for yourself, for your entire OEM space. So how much is pricing factored into that outlook? If we do continue to see uptick in pricing, is that upside to your guide? Is that how we should think about it?
It is pretty normal and understandable in an inflationary environment for pricing to be a factor. But what is most important is that what is underlying the growth and the outlook is more of a strength in the business, driven by what I mentioned earlier with respect to AI adoption in the enterprise as well as infrastructure modernization.
Okay. Your growth rate, though, obviously you had pretty meaningful growth in fiscal 1Q. You are guiding for strength in fiscal 2Q. Then there was the extra week in 1Q, I get that. But then the implied guide at least was a little bit of deceleration here as we get into the back half of your fiscal year. What is underpinning that? Is it you are just being very prudent given you are just one quarter into the fiscal year? Are there other factors that we should think about, maybe supply, et cetera, that is baked into a deceleration in growth rates in the back half?
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