NetApp’s stock falls on revenue miss and soft guidance

Shares of the info storage firm NetApp Inc. had been trending down in after-hours buying and selling as we speak after the corporate reported income that got here in under analyst’s estimates and adopted with tender steerage for the approaching quarter.

The corporate reported fiscal third quarter earnings earlier than sure prices similar to inventory compensation of $1.37 per share, beating Wall Road’s goal of $1.31 per share. Nonetheless, its income for the interval got here to simply $1.53 billion, down 5% from a 12 months earlier and under the analyst’s consensus estimate of $1.62 billion. Internet earnings for the quarter got here to $65 million, down from a $252 million revenue it netted in the identical interval final 12 months.

The frustration of traders was compounded by NetApp’s tender steerage. For its fiscal fourth quarter, the corporate stated it’s anticipating earnings of between $1.30 to $1.40 per share, versus the analyst consensus of $1.34. By way of income, it’s eying a variety of between $1.475 billion and $1.625 billion, a way under Wall Road’s forecast of $1.67 billion.

NetApp’s inventory was down greater than 3% in prolonged buying and selling, having stayed flat in the course of the common session.

NetApp Chief Govt George Kurian (pictured) placed on a courageous face, telling traders that the corporate executed nicely on components underneath its management. Nonetheless, he stated the corporate was confronted with a weakening spending surroundings and ongoing cloud price optimization that’s impacting its gross sales. “We’re assured that we stay nicely positioned to benefit from the secular progress tendencies of data-driven digital and cloud transformations,” he added.

NetApp made a reputation for itself as a supplier of high-end enterprise storage methods, however in current instances it has been making an attempt to reinvent itself as extra of a hybrid cloud knowledge companies and knowledge administration participant. Certainly, as of late the majority of its gross sales could be attributed to the cloud. The corporate works carefully with public cloud infrastructure gamers similar to Amazon Internet Providers, Google Cloud and Microsoft Azure. As well as, it additionally sells its NetApp Ontap file storage software program as a managed service on the cloud.

Whereas NetApp’s public cloud enterprise continued to develop at a optimistic fee, Kurian admitted that NetApp failed to satisfy its inside targets. Alternatively, the mainstream storage enterprise was headed in the wrong way, with its all-flash storage line exhibiting important declines.

Steve McDowell, an analyst with NAND Analysis, advised SiliconANGLE that NetApp’s missed goal is partly on account of a spending slowdown. He famous that the entire main public cloud suppliers have forecast lowered spending for the primary half of 2023. “However there may be additionally rising competitors in public cloud storage,” he added. “This competitors goes to naturally mood NetApp’s progress within the area.”

NetApp’s issues had been made all too obvious final month, when it introduced that it could be laying off 8% of its workforce as a cost-cutting measure. The job cuts got here amid a broader wave of layoffs within the know-how business. Nonetheless, McDowell stated it’s notable that NetApp is, to this point, the one storage firm to make such a drastic transfer.

“There’s a particular slowdown in each cloud and enterprise spending that’s impacting NetApp’s income numbers,” McDowell stated. “It’s additionally going through a few of the strongest competitors it has ever confronted, and a few of the downturn is little question on account of NetApp dropping enterprise to opponents like Pure Storage. None of this can be a product downside. NetApp has the suitable portfolio. It’s simply having a tough time promoting it.”

NetApp just lately added to its portfolio with the launch of a variety of recent storage packages designed to assist clients cost-effectively future-proof their on-premises environments. On the identical time, it launched its newest QLC-flash arrays, the high-capacity NetApp AFF C-Sequence that’s designed as a brand new workhorse for company knowledge facilities, and the entry-level AFF A-Sequence that’s geared toward distributed storage deployments in assist of distant staff.

“This broadens NetApp’s addressable marketplace for flash storage and we should always begin to see some progress as that takes maintain,” McDowell stated of the brand new arrays. “Solely NetApp, IBM, and Pure Storage are competing on this area to this point, so there’s super potential to deliver flash into nearline storage.”

McDowell additionally praised NetApp for as soon as once more beating revenue estimates, noting that the corporate excels at managing its backside line. “The corporate’s operational self-discipline is a few of the greatest within the business,” he stated.

Picture: SiliconANGLE