NetApp Inc Q3 2025 Earnings Call Summary

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

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Yeah. Thanks for letting me ask the question, and Mike it's been great working with you and look -- wish you the best. Real quickly, George, you had mentioned some comments in your prepared remarks around just sales execution. I'm curious if you could kind of double-click on that a little bit, what efforts you've put in place to kind of rectify those issues? And any thoughts on the duration of which those could show up maybe on the other side of those efforts? Thank you.

Question: Meta Marshall - Morgan Stanley - Analyst : Great. Maybe just kind of following up on that question. So it sounds like it was more execution based versus -- I just want to kind of clarify that customers maybe weren't kind of a little bit more uncertain kind of in that first month of the year just as we had seen kind of administration change? And then second question, just kind of any commentary around public sector? Thanks.

Question: Meta Marshall - Morgan Stanley - Analyst : Great, thanks.

Question: Mehdi Hosseini - Susquehanna Financial Group LLLP - Analyst : Yes, I just want to better understand the competitive landscape. I understand that there were some execution issues. But -- where are we in terms of increasing the QLC mix that would give you better cost? And how do you see the competitive environment into the spring and later in the year? Thank you.

Question: Irvin Liu - EVERCORE ISI - Analyst : Hi this is Irvin Liu on for Amit. Thanks for the question and congratulations on your retirement, Mike. I wanted to ask about how you are thinking about product gross margins, I think the 56% you guided to for fiscal Q4, it reflects some benefit from your strategic SSD purchases. But is there any way to help us think about the direction of product gross margins beyond Q4 once you use up some of these strategic purchases? And then to what degree can you pass through some of these higher commodity costs to your customers?

Question: Irvin Liu - EVERCORE ISI - Analyst : Got it. Thank you.

Question: David Vogt - UBS Equities - Analyst : Great. Thanks, guys for taking my question and Mike congratulations on the retirement. We'll miss you. Maybe, George, can you talk about, obviously, deals closing late in the quarter or getting pushed out. Yet your all-flash array business seemed to perform reasonably well in the quarter, at least from the metrics. Can you talk into more specificity in terms of what was sort of the deciding factors that got pushed to the right? Was it the size of the deals? Was it price? Was it -- what type of technology? Just trying to get a little bit better sense for maybe where customers maybe got a little bit of a pause and why it shifted a little bit more to the road? I know you touched on it earlier just some more color around that given that all-flash ARR looks pretty good in the quarter.

Question: David Vogt - UBS Equities - Analyst : Great. Thank you. That's helpful.

Question: Jason Ader - William Blair & Company - Analyst : Could you -- I know you said $15 million in the quarter from Spot. Can you just give us a sense of like the if you could annualize the Spot impact so we can get a sense of what we need to take out of our models for FY26. And then just a quick second question. I know I'm supposed to ask one, but can you give us the US Fed exposure overall, sort of for the fiscal year? What's your US Fed exposure?

Question: Jason Ader - William Blair & Company - Analyst : And Fed?

Question: Jason Ader - William Blair & Company - Analyst : That's global public sector.

Question: Jason Ader - William Blair & Company - Analyst : US Okay. US, the total revenue, not a total US revenue, right?

Question: Jason Ader - William Blair & Company - Analyst : Okay. All right. Thanks, Kris.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Hi. Thanks for taking the questions. It's Ruplu filling in for Wamsi. Mike, great working with you. Congrats. I have a question for you. Are you taking any incremental cost actions? And how should we think about operating expenses as well as your investments going forward? And if you can also comment on free cash flow, is it lower sequentially in fiscal 4Q? And what would drive further strategic SSD purchases? And when would you do that? And what would be the criteria for that? Thank you.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Yeah, Mike. Thank you so much. Thanks for all the details.

Question: Steven Fox - Fox Advisors LLC - Analyst : Just following up on that, just from a competitive dynamic standpoint, having had Michael, a lot of experience with doing these prebuys now. Some of your competitors don't do them, some do them in different ways. Has that at all affected the competitive environment? And given your comments about NAND pricing going down. I mean, I guess it's all relative, but some of the NAND suppliers are talking about the bottom of an inventory cycle. So I'm curious if you see any risk that maybe you're being too optimistic on NAND pricing. Thanks.

Question: Steven Fox - Fox Advisors LLC - Analyst : Thank you. That's helpful.

Question: Krish Sankar - TD Cowen - Analyst : George, I just wanted to find out kind of like where are we in the AI in the enterprise cycle? And along the same path, the focus on enhancements to StorageGRID which is object storage. Is this also related to capitalizing on AI in the enterprise? And then Mike, thanks for all your help. Just a clarification is Spot completely out of the model in the April quarter. Thank you.

Question: Krish Sankar - TD Cowen - Analyst : Thanks, George. Thanks, Mike.

Question: Simon Leopold - Raymond James - Analyst : I wanted to see if you could talk about your expectations for tariffs and the risk. I know, Mike, you had mentioned some commentary on the gross margin that was really in the context of NAND pricing, I'd like to get a better understanding of what you're thinking for the risk of tariffs and if you baked anything in. And Mike, congratulations on your retirement as well.

Question: Lou Miscioscia - Daiwa Securities - Analyst : Mike, I greatly appreciate all your support and help throughout the years and best to you. So George, you've mentioned a couple of times that it's going to take a while for AI really to contribute to give you material revenue growth. Just if you give us an update on that. You did just mention a minute ago that some AI interest applications are starting to ramp. But obviously, seems like it really helped the product revenue too much in this quarter. So are we still 6 months out, 12 months out? Or anything that you could shed light on with our guidance would be helpful.

Question: Ananda Baruah - Loop Capital - Analyst : Yeah. Thanks guys. Good afternoon. Thanks for taking the question. And Mike, yeah, I have really enjoyed working with you. We'll miss working with you. Have a great time. The question -- I guess the question is could be for both of you, at the Analyst Day, guys, you talked about through 2027, an average of mid- to high single-digit digit growth. Does what is going on this quarter and next quarter, does that impact that target at all yet? And any early way to think about the full fiscal '26 since we're almost there as well would be helpful. Thanks a lot.

Question: Ananda Baruah - Loop Capital - Analyst : Thank you. Thanks, guys.

Question: Asiya Merchant - Citi - Analyst : Great. And Mike, again, congratulations on your retirement and enjoyed working with you. If I can just ask about the flash installed base. I mean how far along are we in terms of converting the installed base and net new customers. If you can tell us about the overall installed base that still has line of sight to perhaps move to the flash feet. Thank you

Question: Samik Chatterjee - JPMorgan - Analyst : Mike will miss working with you. It was a good experience working with you. Maybe, George, just on the product side. You've talked about a disaggregated solution and sort of launching that somewhere before a insights this year. Maybe if you can help me with a sort of update on the progress on doing a disaggregate solution? And how do you think about on the storage side and how you think about the incremental addressable market that, that product would allow you to address? And maybe just on the same lines, one of your peer companies has talked about a hyperscaler deal, whether it has been a hyperscale or scale with the software solution, particularly, how do you think about sort of those being in your strategic road map? Or are those sort of deals in something that you would consider given some of the puts and takes about how you think your product portfolio is sort of positioned right now? Thank you.

Question: Ari Terjanian - Cleveland Research - Analyst : Hi all. Thanks for taking the question and Mike best of luck here. Just wanted to wrap on any more updates on dynamics we're seeing with VMware and Broadcom and customers contemplating new architectures converged, hyperconverged, cloud, et cetera, and potential opportunities and challenges that, that might be presenting of the business? Thank you.