NetApp Inc (NASDAQ:NTAP) reported largely in-line financial results for the fiscal second quarter 2026, with an earnings beat and margin outperformance bright spots for the data infrastructure company.
For the quarter ending October 24, the company posted net revenues of $1.71 billion, up 3% from the same period a year earlier and slightly surpassing Wall Street estimates of approximately $1.69 billion.
Adjusted earnings per share (EPS) were $2.05, exceeding analyst expectations of roughly $1.89 per share.
NetApp highlighted growth across several business segments. All-flash array revenue increased 9% year-over-year to $1 billion, representing an annualized net revenue run rate of $4.1 billion.
Public cloud revenue reached $171 million, up 32% from the prior year, driven by first-party and marketplace storage services.
Billings totaled $1.65 billion, marking the eighth consecutive quarter of year-over-year growth at 4%.
NetApp CEO George Kurian said the results reflect strong execution and operational discipline, with demand supported by AI solutions, cloud storage services, and all-flash offerings. “Our close alignment with customers' key data initiatives has positioned us to capitalize on our significant competitive advantages,” Kurian said.
Wedbush analysts repeated their ‘Neutral’ rating on NetApp following the report, but upped their price target to $115 from $110 to reflect the EPS beat and gross margin strength.
Shares of NetApp traded down 1.6% at about $109 post-earnings.
“NTAP's product gross margins lifted 550 basis points sequentially,” they highlighted. “In turn, this unexpected momentum flowed through the model, helping NTAP meaningfully exceed prior margin and EPS guidance.”
They added that management expects this improvement to hold through fiscal 2026, with modest like-for-like gross margin gains projected for the remainder of the year.
The analysts highlighted that product gross margins came in at 59.5%, above their model of 55.9% and prior quarter results of 54%, driven largely by improved product mix and all-flash array contributions.
Public cloud gross margins also increased to 83%, up from 80.1% year-over-year, though the impact on overall margins was smaller due to the segment’s smaller revenue share.
On sales, Wedbush said the quarter was “roughly in-line with prior guidance,” and revenue guidance for the full year remained steady.
They noted that while the gross margin performance was encouraging, uncertainties remain around sustainability, including potential component cost headwinds and limited near-term sales growth outside existing enterprise accounts.
“As such, we are retaining our ‘Neutral’ view, with our out year estimates only shifting minimally,” Wedbush concluded.