NetApp Inc at Morgan Stanley Technology, Media & Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Meta Marshall - Morgan Stanley - Analyst : All right. So maybe let's just kick off talking about the fiscal Q results and then we can jump into the longer-term story. You saw some weakness at the end of the quarter on deal slippage but also just some kind of weakness out of Europe. Can you just break down how to think about kind of the various areas where you saw weakness and how much was execution versus market?

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. All right. And so just what are some of the -- you mentioned a lot of those deals have now closed. What are some of the actions that you're taking around the execution issues? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 4:30PM, NTAP.OQ - NetApp Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Meta Marshall - Morgan Stanley - Analyst : I mean, is any of that just a result of your going through a CFO transition, or is this all just kind of execution?

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. All right. Perfect. On the fiscal Q4 guide, you had noted that many of these deals had closed, but that you were embedding some level of caution on FX or public sector. You also had the apportion just due to the divestiture of Spot. You just gave a sense of kind of fiscal Q3, but in terms of as we think about the guide, was there any execution embedded into the guide or just kind of how to think about what were the reasons for the guide maybe being a little weaker than expected?

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. I think one of the questions that investors have had is that we've seen a relatively strong server and networking data center refresh to kind of start -- that started over the past couple of quarters. Just where do you think the market is and an appetite for kind of a larger storage upgrade similar to what we've seen on the server or networking side?

Question: Meta Marshall - Morgan Stanley - Analyst : You mentioned kind of the third reason on the outlook was US Federal. Just can you remind folks of what that exposure is and just if there's any departmental kind of concentration to be mindful of?

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. Got it. Gross margins were also a little bit weaker in fiscal Q3 and into Q4 or in some of your Q4 outlook. Just largely based on kind of the volume of flash. But just how should we be thinking about the gross margins of the business kind of after this quarter?

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. Just stepping out of the quarter, just how does it make you think about kind of the achievability of the long-term targets you laid out at the

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. NetApp has seen meaningful share gains over the past year in particular. Just how has NetApp's value proposition evolved? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 4:30PM, NTAP.OQ - NetApp Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Meta Marshall - Morgan Stanley - Analyst : Got it. C-Series has been a huge success for you guys. You were ahead of the market or kind of ahead of Dell and HPE in introducing that product. Just as that competitive set starts to fill out, right now, kind of with Dell in the coming years with HPE, just how do you see that market for C-Series and your ability to continue to differentiate in that?

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. Got it. And then we've gotten 10 minutes in. We haven't talked about AI yet. So let's dive right in. How are you positioning yourselves to capitalize on enterprise AI adoption? And just, can you provide an example of kind of where -- what use cases you're starting to see customers leverage NetApp?

Question: Meta Marshall - Morgan Stanley - Analyst : I mean, given that you're really at the frontlines of seeing what customers are doing, just what are you seeing in terms of trends of customers using public cloud versus on-premise for how they're thinking about AI?

Question: Meta Marshall - Morgan Stanley - Analyst : Got it. I mean, what is the timeline? You just mentioned kind of regulated industries maybe moving first. But just what are you seeing as the timeline of AI projects moving from proof of concept to production deployments. And what does that pipeline and revenue opportunity kind of look like for NetApp?

Question: Meta Marshall - Morgan Stanley - Analyst : Are there ways do you think that you can be -- you've mentioned kind of the three buckets that you can help them, where you can kind of help them quicker go from proof of concept to deployments.

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. Your public cloud business is another differentiator for NetApp. How do you see the relationships evolving? And are there differences between what a public cloud customer for NetApp looks like versus your traditional customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 4:30PM, NTAP.OQ - NetApp Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Meta Marshall - Morgan Stanley - Analyst : Got it. You noted kind of the first place marketplace services are now 70% of the public cloud, business continuing to demonstrate strong growth, kind of what -- how should we think about what the remainder of that public cloud business? And just how should we think about those pieces as a piece of the portfolio?

Question: Meta Marshall - Morgan Stanley - Analyst : Got it. You mentioned just now kind of Google and the opportunity with sovereign clouds. Just can you maybe give a context for the different relationships you have with the different clouds, and how you see those kind of evolving?

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. Got it. Another area I wanted to ask about is just the customer adoption Keystone, or you're kind of as-a-service offerings. Just what are -- where are you seeing these kind of be adopted by customers?

Question: Meta Marshall - Morgan Stanley - Analyst : Got it. I wanted to open it up to see if there are any questions from the audience. All right. Perfect. I'll continue. A question that we sometimes get from investors is just clearly you do business with the public cloud. Is there any kind of hyperscale opportunities you see kind of on their own workloads?

Question: Meta Marshall - Morgan Stanley - Analyst : Or just on their -- within their own environment versus kind of services that they're offering to customers?

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. Great. Another question that we're just kind of asking frequently at the conference is just how are you guys using AI internally kind of within NetApp?

Question: Meta Marshall - Morgan Stanley - Analyst : Got it. Just kind of as a last question, just what are you most excited about for NetApp for the next couple of years? And just is it AI? Just kind of -- can you lay out kind of what you're most excited about going forward?

Question: Meta Marshall - Morgan Stanley - Analyst : Great. All right. Well, George, thank you so much for being here today.