NetApp Earnings Show Margin Strength on AI Demand

NetApp Inc. (NTAP) reported strong Q2 FY2026 results on Nov. 25, 2025, raising full-year guidance as demand for AI solutions and cloud storage drove margin expansion and sustained shareholder returns.

Strong Q2 Results and Margin Expansion

NetApp said in a press release on Nov. 25, 2025, that Q2 net revenues reached $1.71 billion, up 3.0% year over year. The company posted record non-GAAP earnings per share of $2.05, a 10.0% increase from the prior year, while GAAP net income per share rose 6.0% to $1.51.

Operating profit hit new highs, with GAAP operating profit at $399 million and non-GAAP operating profit at $530 million. These translated into record GAAP and non-GAAP operating margins of 23.4% and 31.1%, respectively. Non-GAAP gross margin widened 60 basis points to 72.6%. NetApp attributed the results to tighter execution and improving profitability, which supported the decision to raise its outlook and maintain cash returns to shareholders.

AI and Cloud Revenue Mix Drive Growth

All-flash arrays generated $1.0 billion in revenue, up 9.0% year over year, reaching an annualized run rate of $4.1 billion. Public-cloud revenue rose 32.0% to $171 million. Together, these higher-margin segments accounted for about 70% of total revenue, shifting the mix toward recurring and software-adjacent offerings.

This product mix fueled operating leverage, as growth in all-flash and cloud businesses amplified margin expansion despite more muted trends in broader infrastructure revenue.

Cash Returns and Outlook

Billings increased 4.0% year over year to $1.7 billion, while cash provided by operations rose 21.0% to $127 million. Free cash flow totaled $78 million, representing a 4.6% margin. NetApp returned $353 million to shareholders through dividends and buybacks and maintained a quarterly dividend of $0.52 per share. Deferred revenue and financed unearned services grew 8.4% to $4.5 billion, with remaining performance obligations totaling $4.9 billion.

For Q3 FY2026, the company guided revenue between $1.6 billion and $1.8 billion, non-GAAP gross margin between 72.3% and 73.3%, non-GAAP operating margin between 30.5% and 31.5%, and non-GAAP earnings per share between $2.01 and $2.11. It raised full-year revenue guidance to roughly $6.6 billion to $6.9 billion, with non-GAAP gross margin of 71.7% to 72.7%, operating margin of 29.5% to 30.5%, and non-GAAP EPS of $7.75 to $8.05. The guidance assumes continued strength in cloud services and all-flash revenue, offset by temporary headwinds in the U.S. public sector.

“Revenue growth driven by strong demand for our AI solutions, first-party and marketplace cloud storage services, and all-flash offerings,” said George Kurian, NetApp’s CEO. [source:1]