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Factors Setting the Tone for NetApp's (NTAP) Q4 Earnings

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NetApp NTAP is scheduled to release fourth-quarter fiscal 2021 earnings on Jun 2.

The company anticipates non-GAAP earnings for fourth-quarter fiscal 2021 between $1.06 and $1.14 per share. The Zacks Consensus Estimate for earnings is at $1.12, suggesting a decline of 5.9% from the year-ago quarter’s reported figure.

Moreover, net revenues are anticipated to be $1.44-$1.54 billion. The consensus for fiscal fourth-quarter revenues is pegged at $1.5 billion, indicating growth of 7% from the prior-year quarter’s levels.

Notably, the company beat estimates in all the trailing four quarters. It has a trailing four-quarter earnings surprise of 37.92%, on average.

Notably, shares of NetApp have rallied 77.3% in the past year compared with the industry's return of 42.8%.

NetApp, Inc. Price and EPS Surprise

NetApp, Inc. Price and EPS Surprise
NetApp, Inc. Price and EPS Surprise

NetApp, Inc. price-eps-surprise | NetApp, Inc. Quote

Factors to Note

Continuation of work-from-home wave owing to the pandemic has resulted in increasing demand of cloud-based storage. This is likely to have driven the adoption of NetApp’s hybrid multi-cloud offerings, cloud data services and private cloud offerings as well as positively impacted fiscal fourth-quarter revenues.

Increasing clout of the company’s new solution for containerized applications — Spot by NetApp portfolio — which enables enterprises to make multi-cloud management easier and slash costs, might have aided top line performance in the quarter to be reported.

Robust uptick in adoption of Microsoft Azure NetApp Files is anticipated to have bolstered Public Cloud Services business’ annualized recurring revenues (ARR) in the fiscal fourth quarter. Cloud Services ARR was $237 million in the last reported quarter, up 186% on a year-over-year basis.

Strength in the company’s all-flash business is expected to favor the performance in the to-be-reported quarter. In the fiscal third quarter, NetApp had rolled out its latest all-flash array offering —FAS500f —which offers support for management of massive unstructured data generated from medical imaging and electronic design automation.

During the fiscal third quarter, the company’s all-flash revenues totaled $652 million, up 11% on a year-over-year basis.

Also, synergies from buyouts of Cloud Jumper and Talon are expected to have contributed to performance in the fiscal fourth quarter.

For the fiscal fourth quarter, the Zacks Consensus Estimate for Product revenues is pegged at $785 million, indicating a year-over-year decline of 1%. This is likely due to coronavirus crisis-induced macroeconomic headwinds.

For the fiscal fourth quarter, the Zacks Consensus Estimate for Hardware Maintenance & Other Services revenues stands at $369 million, suggesting year-over-year improvement of 8.2%.

The consensus mark for Software Maintenance revenues is pegged at $337 million, indicating year-over-year growth of 26.2%.

Steady momentum of the company’s HCI (or hyper converged infrastructure) and cloud collaborations with the likes of Microsoft’s MSFT Azure platform, and Alphabet’s GOOGL Google Cloud might have contributed to the to-be-reported quarter’s performance.

In the fiscal third quarter, NetApp collaborated with International Business Machines for IBM Cloud Satellite. The partnership aims to tackle problems pertaining to operations on various environments like edge, on premises and public cloud.

The company also added advanced capabilities to its NetApp ONTAP data management software to help organizations in accelerating digital transformation, optimizing costs and improving security.

Nonetheless, increasing expenditures amid stiff competition from fellow storage peers including Pure Storage PSTG might have limited margin expansion in the fiscal fourth quarter.

Currently, NetApp carries a Zacks Rank #3 (Hold).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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