NetApp Inc at UBS Global Technology and AI Conference Transcript

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

Question: David Vogt - UBS Securities LLC - Analyst : Great. Thank you, Kris. George, thank you for joining us. So we've been hearing a lot -- we'll start at a high level. We've been hearing from companies around the macro. And I figured given your commentary on your last earnings call about two weeks ago now, not really seeing a tremendous impact from agro, but would love to kind of get your first-hand experience of what you've seen out there vis-a-vis your competitive positioning and maybe how would you frame sort of the macro environment going into 2025, particularly given sort of the administration change that we're expecting in a couple of months.

Question: David Vogt - UBS Securities LLC - Analyst : So maybe just as a quick follow-up. So when we -- if I turn the clock back to the summer, at your Investor Day, you laid out multiyear targets with the macro conditions at that time. And so they haven't gotten dramatically better. So to your point, if the macro does recover in '25, whether it's lower taxes or a more pro-growth environment, do you think -- not to say you should change your targets, but is that obviously clearly a tailwind to those targets? I guess maybe another way of saying it is, are those targets reflective of a relatively modest macro backdrop continuing into '25 and maybe a little bit beyond? Or do you need to see a degree of recovery in the out years?

Question: David Vogt - UBS Securities LLC - Analyst : And then just one more on sort of the macro. Obviously, Trump 1.0, we had supply chain during COVID. Anything on the margin that you are thinking about that you may or may not need to do differently with this administration? I mean the tariffs seem to be somewhat scattershot at this point, so nobody really knows. But from a supply chain perspective, like how are you thinking about where you're positioned and what you may or may not need to do going forward?

Question: David Vogt - UBS Securities LLC - Analyst : I think some of your CMs have exposure in Mexico. Is that right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 8:35PM, NTAP.OQ - NetApp Inc at UBS Global Technology and AI Conference

Question: David Vogt - UBS Securities LLC - Analyst : So Mexico --

Question: David Vogt - UBS Securities LLC - Analyst : Understood. Okay. That's helpful. Let's zoom out a second. So you mentioned you took share. All the industry data looks like you've taken share for multiple quarters. Some of it, I believe, is obviously your refreshed product portfolio, QLC driven led flash. Can you talk about what that opportunity looks like from a tech perspective and why that new C Series has been so successful over the last, call it, 12 months or so since initiation or launch? And what is the outlook? And we've talked about this before. You've been growing last year high-teens, low-20s. How should we think about that competitive position given what maybe some of your peers might be thinking about doing going forward from a new product perspective?

Question: David Vogt - UBS Securities LLC - Analyst : And to your point about QLC taking share, mass capacity or mass storage, how much of that has been driven by sort of the macro, right, where maybe your customers are not looking for the highest performative flash and it's cheap enough now that it replaced the drive market that you referenced, like how much of that is like sweet spot, meaning right place, right time for this like product transition or market migration and the market is a little bit tough. And if the economy gets better, does that slow that product transition? Or does it accelerate the product migration roadmap from the drive perspective?

Question: David Vogt - UBS Securities LLC - Analyst : Got it. And then you mentioned this Canadian customer consolidated from three vendors to one, was that different profile of flash and storage medium, so block, file, object like you've different aspects of their solution and it also consolidated under the NetApp umbrella?

Question: David Vogt - UBS Securities LLC - Analyst : Right. Block would not have been --.

Question: David Vogt - UBS Securities LLC - Analyst : Right, on NetApp. And is that -- so you talked about being sort of a disruptor in block. What was kind of the selling point to -- for that particular customer to obviously use NetApp block when you're the new entrant in that particular market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 8:35PM, NTAP.OQ - NetApp Inc at UBS Global Technology and AI Conference

Question: David Vogt - UBS Securities LLC - Analyst : So maybe just sticking on block for a second. So when you look at the block opportunity, is it a penetration of existing logos where you have another portion of customer storage budget, and you can now offer a block alongside, let's say, file? Is that kind of a go-to-market in the near-term? Or are these new logos where previously you had no traction with that particular customer and you have a far more attractive solution with the optimized blocks offering that you have today?

Question: David Vogt - UBS Securities LLC - Analyst : So when you think about what your competitors historically offered, right, it was somewhat siloed, right? So you want block, you go to one vendor, file, you go to NetApp. Do you think there is an opportunity for your competitors to kind of attack the market or approach the market, I should say, the same way that you're doing? Like is there a way for them to develop sort of incremental capabilities or technological platforms to be a best-in-breed full-suite solution offering as we sit here today over the intermediate term because Dell's portfolio is in a little bit of a messy situation right now? I'm just trying to get a sense for what the competitive landscape looks like over the intermediate term and how much of a greenfield opportunity that you have going forward.

Question: David Vogt - UBS Securities LLC - Analyst : I want to ask you about hyperscalers and your public cloud business. So let's do just straight up hyperscalers first. So obviously, you have a long-standing relationship, as you just referenced with the hyperscalers. I think you've said publicly AI goes to where the data is, correct? And so REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 8:35PM, NTAP.OQ - NetApp Inc at UBS Global Technology and AI Conference how are you viewing your portfolio in your offering today given the insatiable demand for data ingestion, emphatic data, AI training? Where are you best positioned and how are you thinking about the opportunity as we go into '25 to '26?

Question: David Vogt - UBS Securities LLC - Analyst : And how much of your model is predicated on these incremental opportunities that you just referenced over the next several years, like to hit the low end to high end? Like how much incremental uplift do you think you could see or do you need to see to hit the model?

Question: David Vogt - UBS Securities LLC - Analyst : What do companies have to do to prep the data in terms of clean the data lake? Like what are the mechanical steps from your seat to get to that point where we can actually have data that is actually usable for inference to RAG at some point, let's say, in 2026? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 8:35PM, NTAP.OQ - NetApp Inc at UBS Global Technology and AI Conference

Question: David Vogt - UBS Securities LLC - Analyst : How about your public cloud business? Some fits and starts over the last couple of years. Obviously, it sounds like it's found some solid footing as of late, should continue to grow. Kind of maybe can you give us an overview of where the portfolio sits today and some of the key drivers as you see it today versus kind of look, you've pruned that business over the last 18 or 20 months or whatever the case may be, kind of where we sit today? And how should we think of that public cloud vector being a contributor to the overall growth? It should be growing faster. You really got relatively strong gross margins as of last quarter in that business. So kind of how do we think about how that fits into the overall strategy?

Question: David Vogt - UBS Securities LLC - Analyst : We're going to hit the teens as we exit fiscal '25. Is that kind of the general run rate of the business on an organic basis as you add go-to-market capabilities? And do you need -- historically, the old model was you were looking to add capabilities through acquisition. That sounds like that's off the table, right? So this is an organic go-to-market strategy that should grow in the mid-teens. Is that the proper way to maybe characterize the opportunity?

Question: David Vogt - UBS Securities LLC - Analyst : Right. Got it. And so when you think about one final thing on sort of where the technology is, so you've got great block portfolio today that's winning share, QLC flash that's been winning share. The public cloud business has kind of rightsized and now starting to reaccelerate. Where in the portfolio today, do you think there is an opportunity or maybe that requires some more care to kind of get it going in the right direction? I mean the legacy drive business is relatively small. Less of an emphasis. Just put your strategic hat on as the CEO. Like where -- if we have this conversation a year or two from now, what else has kind of turned the corner? Or do you feel fairly confident that all of these different moving end markets and pieces and technologies are moving in the right direction over the midterm?

Question: David Vogt - UBS Securities LLC - Analyst : We didn't talk about consumption storage. I wanted to leave that for the end. So obviously, Keystone is an important part of the story, relatively small from a TCV or SaaS, however you want to view it. How do you think about consumption storage in the context of the traditional go-to-market model for storage? Are you selling it just where customers want it? You're meeting the customer where they want to buy storage. Like how do we think about how that develops over the next couple of years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 8:35PM, NTAP.OQ - NetApp Inc at UBS Global Technology and AI Conference

Question: David Vogt - UBS Securities LLC - Analyst : Sort of bits of consumption.

Question: David Vogt - UBS Securities LLC - Analyst : Not to be overly maybe negative, then does that mean that's kind of potentially a triage solution for some customers? Or it's like a temporary solution?

Question: David Vogt - UBS Securities LLC - Analyst : All right. Just maybe in the interest of time, anything we didn't cover that maybe, I think, the market -- from your perspective, the market hasn't fully appreciated about the NetApp story, the narrative of the opportunity as we move forward?

Question: David Vogt - UBS Securities LLC - Analyst : Great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 8:35PM, NTAP.OQ - NetApp Inc at UBS Global Technology and AI Conference

Question: David Vogt - UBS Securities LLC - Analyst : Thank you so much for your time. Thank you, everyone.