NetApp Q2 Crushes Estimates: AI Tailwinds Push Stock Up 6%

NetApp just dropped earnings that beat expectations across the board, and the market’s rewarding it.

The headline numbers:

• EPS: $2.05 (beat consensus by 8.5%, YoY +9.6%)
• Revenue: $1.71B (+3% YoY, beat by 1.1%)
• Guidance raised: Non-GAAP EPS now $7.75-$8.05 (prev $7.60-$7.90)

Stock popped 6% in premarket. But here’s the thing—it’s only up 8.6% in the past six months, while the whole storage industry jumped 76.7%. So there’s still some gap to close.

Where’s the growth coming from?

AI is doing the heavy lifting. Management cited surging demand for AI offerings, cloud storage (both 1P and marketplace), and all-flash arrays. Speaking of all-flash: that segment grew 9% YoY to $1B revenue (now running at a $4.1B annualized pace).

Public Cloud segment is the real story though—gross margin jumped from 73.8% to 83%, suggesting the high-margin cloud business is finally scaling.

The operational picture

• Gross margin: 72.6% (+60 bps YoY)
• Operating margin: 31.1% (up from 28.6%)
• Operating income up 11.6%
• Free cash flow: $78M (4.6% margin)

The company’s being smart with capital too—returned $353M to shareholders in Q2 and announced a $0.52 dividend.

What’s next?

Q3 outlook is steady: $1.615-$1.765B revenue range, with EPS guidance of $2.01-$2.11. Full-year FY2026 revenue expected $6.625-$6.875B (+3% midpoint).

The broader storage sector is riding the AI wave hard. Western Digital (just reported) saw revenue surge 27% YoY. But NTAP’s growth is more modest—which is why the stock is underperforming the sector. Question is: can AI momentum push it into the next gear, or has the easy gains already priced in?