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NetApp: NetApp's Q3 Earnings: A Strong Performance Driven by AI and Cloud Growth

NetApp reported a revenue of $1.71 billion for Q3, representing a 4% year-over-year increase, with a non-GAAP earnings per share of $2.12, up 11% from the same period last year. Excluding the divested Spot business, total revenue was up 6%. The company achieved record highs in operating income and EPS, driven by its strong performance in AI and cloud-related businesses. The adjusted gross margin was 71.2%, up 50 basis points year-over-year, indicating a healthy profitability. As noted by CEO George Kurian, the company's data platform optimized for AI has helped enterprises solve data challenges, securing significant wins with its AFX disaggregated storage system.

NTAP

USD 99.03

-0.11%

A-Score: 5.5/10

Publication date: February 26, 2026

Full Report

Author: Analystock.ai

📋 Highlights
  • Revenue & Non-GAAP EPS Growth: NetApp reported Q3 revenue of $1.71 billion (+4% YoY) and non-GAAP EPS of $2.12 (+11% YoY), with 6% growth excluding the divested Spot business.
  • Keystone Growth: Storage-as-a-Service (Keystone) revenue surged 65% YoY, while Public Cloud Services revenue rose 17%.
  • Q4 Guidance: Anticipated revenue of $1.87 billion (±$75 million) and EPS of $2.21–$2.31, reflecting 8% YoY growth.
  • AI Business Momentum: 300 customer wins in AI, with 40% of AI business in production/training, driven by AFX storage and AI Data Engine solutions.
  • Margin Stability: Adjusted gross margin reached 71.2% (+50 bps YoY), with operating income and EPS hitting record highs.

Segment Performance

The company's Keystone storage-as-a-service offering grew approximately 65% year-over-year, while Public Cloud Services revenue grew 17%, driven by first-party and marketplace services. The strong growth in these segments was a key driver of NetApp's overall performance. Operating expenses were $686 million, down 3% sequentially, indicating disciplined cost management.

Guidance and Outlook

For Q4, NetApp expects revenue of $1.87 billion, plus or minus $75 million, representing an 8% year-over-year growth. EPS is expected to be between $2.21 and $2.31. For the full year 2026, the company expects revenue to be between $6.772 billion and $6.922 billion, with a growth of 4% year-over-year. EPS is expected to be in the range of $7.92 to $8.02. Analysts estimate next year's revenue growth at 5.1%, indicating a positive outlook for the company's future performance.

Valuation Metrics

NetApp's current valuation metrics indicate a premium valuation. The stock has a P/E Ratio of 16.18, P/B Ratio of 16.93, and P/S Ratio of 2.95. The EV/EBITDA ratio is 12.02, and the Dividend Yield is 2.1%. The actual EPS of $2.12 beat estimates of $2.07, indicating a positive surprise. These metrics suggest that the market has high expectations for NetApp's future growth, driven by its strong position in the AI and cloud storage markets.

AI and Cloud Strategy

NetApp's focus on AI and cloud storage is driving its growth, with 300 customer wins in AI business, and 40% of its AI business in production, training, or production inferencing use cases. The company's AFX disaggregated storage system is purpose-built for AI, and its Keystone and Public Cloud Services offerings are also gaining traction. The company's investment in innovation, particularly in AI, is expected to drive long-term value for customers and shareholders.

NetApp's A-Score