:max_bytes(150000):strip_icc()/GettyImages-2042024462-c9ed41d5464a4ba197a534622178e77e.jpg "NetApp Beat Earnings Estimates. So Why Did the Nvidia Partner’s Stock Plummet?")
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Key Takeaways
- NetApp’s quarterly sales and profit topped estimates, but shares of the data infrastructure firm slumped on Thursday.
- Although NetApp generated strong sales growth in its all-flash array memory products, it said macroeconomic uncertainties were weighing on IT spending.
- The post-earnings drop for NetApp shares marked a reversal from a strong year-to-date performance.
Data storage provider NetApp (NTAP) posted better-than-expected sales and profits for its fiscal first quarter, but its shares plunged nearly 10% on Thursday.
Heading into the earnings report, NetApp’s stock had climbed 50% in 2024, driven by lofty artificial intelligence (AI) expectations. Its latest quarterly report, however, may not have been enough to convince investors that NetApp can sustain its growth trajectory.
NetApp also expressed caution about macroeconomic uncertainties weighing on IT spending.
Quarterly Highlights
For the three months that ended on July 26, the data infrastructure firm reported revenue of $1.54 billion, up 8% year over year. GAAP net income per share of $1.17 was up from 69 cents a year ago. Both figures were ahead of consensus forecasts.
“We started fiscal year 2025 on a high note,” said George Kurian, NetApp’s chief executive officer, in a press release accompanying the quarterly figures. The CEO said the company’s performance reflected “unwavering confidence in the customer benefits of the highly differentiated NetApp intelligent data infrastructure platform.”
The company’s all-flash array products—a data storage architecture that relies exclusively on flash memory rather than spinning hard drives—contributed to its results. The all-flash array annualized net revenue run rate of $3.4 billion marked an increase of 21% from a year ago.
Macro Concerns
Despite the strong growth metrics, NetApp indicated that the uncertain macroeconomic environment remains an overhang, causing customers to restrain their IT spending. However, Chief Financial Officer Mike Berry said in prepared remarks that NetApp’s offerings are in line with clients’ investment priorities and that the company is poised for innovation-led growth this fiscal year.
Following the earnings report, Bank of America raised its price target on NetApp stock to $110 per share—still around 8% below current levels. Analysts believe that macro-related delays to spending on data storage remain a risk to the stock.
NetApp released its results on the same day as the latest earnings report from AI chip giant Nvidia (NVDA). Nvidia, a NetApp partner, also topped forecasts, but a slowing pace of growth sent its shares tumbling and raised concerns about the durability of the AI boom.