NetApp leads AI innovation with partners including NVIDIA, Cisco, and Lenovo: CEO George Kurian

“Customers choose NetApp for every stage of the AI ​​lifecycle because of our high-performance all-flash storage with comprehensive data management capabilities that support data preparation, model training and tuning, search augmentation generation (RAG), and inference requirements, as well as responsible AI requirements including model and data versioning, data governance, and privacy,” said NetApp CEO George Kurian.

NetApp on Thursday reported strong revenue and profit growth in the fourth quarter of fiscal 2024, driven by growth in its cloud and flash storage businesses.

But NetApp is eyeing AI as a key driver of future growth, CEO George Kurian told investment analysts during the company's quarterly financial analyst call.

Kurian said NetApp maintained a high level of operating discipline throughout fiscal 2024 and achieved company records for annual gross margin, operating margin, earnings per share, operating cash flow and free cash flow.

[Related: AI, Hyperscaler Cloud To Drive Pure Storage Business: CEO Charles Giancarlo]

He said customers are increasingly turning to NetApp to build intelligent data infrastructure and harness the power of public and hybrid cloud for rapidly expanding data-intensive workloads, including AI, cloud-native, open source and enterprise applications, while ensuring their data is secure and protected from ransomware attacks.

NetApp, which offers a comprehensive and integrated portfolio of unified data storage solutions based on a single operating system, Ontap, reported increased hybrid cloud and public cloud revenue in the fourth quarter and annualized all-flash array revenue run rate reached a record $3.6 billion, up 17 percent year over year, Kurian said.

Meanwhile, NetApp's storage service, Keystone, saw annual contract revenue more than double year-over-year to about $150 million, he said. “We expect this momentum to continue and make FY25 a strong growth year for Keystone,” he said.

AI is now a top priority for organizations looking to accelerate innovation, reinvent operations, drive competitive advantage and deliver better solutions to their customers, and data management is essential for enterprise AI, Kurian said.

Customers are choosing NetApp to provide support at every stage of the AI ​​lifecycle because of its high-performance all-flash storage with comprehensive data management capabilities that support data preparation, model training and tuning, search augmentation generation (RAG), and inference requirements, as well as responsible AI requirements including model and data versioning, data governance, and privacy, he said.

NetApp continues to strengthen its position in enterprise AI by giving customers easier ways to extract value from their AI investments, Kurian said. In the fourth quarter, it introduced NetApp AIPod with C-Series capacity flash systems. The company also worked with Cisco to update its FlexPod AI-integrated infrastructure reference architecture to support the Nvidia AI Enterprise software platform. It also completed storage validation for Nvidia OVX systems and was one of the first partners to launch a full-stack OVX system.

“We announced many of these innovations at NVIDIA GTC, where we were honored to be recognized during the keynote for our role in storing much of the enterprise's unstructured data that powers Gen AI,” he said. “Through our partnership with NVIDIA, we're offering customers the ability to interact directly with the vast amounts of existing data stored on-premise and in the cloud at NetApp, demonstrating the value of our installed base and the critical role it plays in AI.”

When it comes to cloud, Kurian said NetApp has a big lead over competitors in cloud storage services. In the fourth quarter, the company extended its leadership position, improving the performance of Amazon FSx for NetApp Ontap to address a wider range of performance-intensive workloads. It also introduced new service tiers for Google Cloud NetApp Volumes, giving customers more granular control over the capacity and performance needs of their cloud workloads, Kurian said.

NetApp by the numbers

NetApp reported total revenue of $1.67 billion for its fiscal 2024 fourth quarter, which ended April 26. This was 5.7% higher than the $1.58 billion the company reported for the fourth quarter of fiscal 2023. This was $20 million higher than analysts expected, according to SeekingAlpha.

This included product revenue increasing from $744 million to $806 million, support revenue increasing from $598 million to $623 million, professional and other services revenue decreasing from $88 million to $87 million, hybrid cloud division revenue increasing from $1.46 billion to $1.52 billion, and public cloud division revenue increasing from $151 million to $152 million.

The Americas commercial market accounted for 41% of NetApps revenue in the quarter, down from 39% last year, while the U.S. public sector accounted for 10% of revenue, remaining flat from a year ago.

The indirect channel accounted for 76% of NetApps' quarterly revenue, down from 78% last year.

NetApp reported quarterly GAAP net income of $291 million, or $1.37 per share, up from $245 million, or $1.13 per share, in the same period last year. On a non-GAAP basis, NetApp reported net income of $382 million, or $1.80 per share, up from $344 million, or $1.54 per share, in the year-ago period.

NetApps' non-GAAP earnings beat analyst expectations by 1 cent per share, according to Seeking Alpha.

For the full fiscal year 2024, NetApp reported total revenue of $6.27 billion, down slightly from the $6.36 billion the company reported for fiscal 2023.

This included a decrease in product revenue to $2.85 billion from $3.05 billion, an increase in support revenue to $2.49 billion from $2.42 billion, an increase in professional and other services revenue to $320 million from $319 million, a decrease in hybrid cloud division revenue to $5.66 billion from $5.79 billion, and an increase in public cloud division revenue to $611 million from $575 million.

The Americas commercial market represented 40% of NetApp's full-year revenue, remaining flat from the prior year, while the U.S. public sector represented 11% of revenue, remaining flat from the prior year.

The indirect channel accounted for 76% of NetApp's revenue this year, down from 78% last year.

NetApp reported GAAP net income of $986 million, or $4.63 per share, for the year, down from $1.27 billion, or $5.79 per share, in the same period last year. On a non-GAAP basis, NetApp reported net income of $1.38 billion, or $6.46 per share, up from $1.23 billion, or $5.59 per share, last year.

Future outlook

Looking ahead, NetApp expects full-year fiscal 2025 revenue to be in the range of $6.45 billion to $6.65 billion, which would represent 4.5% year-over-year growth at the midpoint. The company also expects public cloud revenue to return to steady growth, but did not provide specific guidance. NetApp also expects earnings per share to be between $6.80 and $7.00.

NetApp expects first-quarter fiscal 2025 revenue to be in the range of $1.45 billion to $1.605 billion, which would imply 7 percent year-over-year growth at the midpoint. Earnings per share are also expected to be between $1.40 and $1.50.

NetApp remains cautiously optimistic about the macro environment, which it sees as better than it was at the start of fiscal 2024, Kurian said.

“NetApp is leading the evolution of the storage industry, helping customers intelligentize their data infrastructure for the AI ​​era,” he said. “This leadership, combined with the strong momentum we've built through fiscal year '24, positions us well for continued growth and share expansion.”

NetApp closed at $116.50 per share, down $1.00, or 0.85%, for the day. As of midday Friday, NetApp shares were up nearly 1%, at $117.60.

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