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NetApp (NTAP) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

NetApp NTAP is scheduled to report fourth-quarter fiscal 2020 earnings on May 27.

On Mar 30, in an 8K filed with the SEC, NetApp announced the withdrawal of its guidance for fourth quarter and full fiscal year 2020, due to the impact of the global coronavirus pandemic.

The Zacks Consensus Estimate for fiscal fourth-quarter revenues is currently pegged at $1.41 billion, indicating a decline of 11.3% from the year-ago reported figure.

The consensus for earnings stands at $1.04 cents, suggesting a decline of 14.8% from the year-ago reported figure. Notably, the figure declined 4.6% in the past 30 days,

Notably, the company surpassed the Zacks Consensus Estimate in two of the trailing four quarters, missing the same twice, with the average beat being 6.3%.

NetApp, Inc. Price and EPS Surprise

NetApp, Inc. Price and EPS Surprise

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


Let’s see how things shaped up prior to this announcement.

Factors at Play for Q1 Results

Broader weakness in macroeconomic environment led by coronavirus crisis has been compelling enterprises to trim capital expenditure, which is expected to have affected NetApp’s storage business in the to-be reported quarter.

For the fiscal fourth quarter, the Zacks Consensus Estimate for Product revenues is pegged at $883 million indicating a year-over-year decline of 11.7%. However, Hardware Maintenance & Other Services revenues are pegged at $361 million, indicating year-over-year growth of 3.1%.

Nevertheless, coronavirus crisis has triggered work-from-home wave which has led to increasing adoption of cloud-based storage, which is likely to have driven adoption of NetApp’s hybrid multi-cloud offerings, cloud data services and private cloud offerings. It is expected to have positively influenced fiscal fourth-quarter top line performance.

Moreover, increased momentum of the company’s HCI (or hyper converged infrastructure) and cloud partnerships with VMware VMW, and Alphabet GOOGL owned Google’s Cloud services, are likely to have driven revenue run rate for Cloud Data and Private Cloud business in the to-be reported quarter.

Further, incremental adoption of Microsoft Azure NetApp Files is expected to have bolstered Cloud Data Services business recurring revenues in the fiscal fourth quarter. Notably, the metric came in at $83 million in the last reported quarter, up 146% on a year-over-year basis.

Moreover, improvement in NAND flash pricing owing to coronavirus-led supply chain constraints is likely to have aided revenue growth in the fiscal fourth quarter.

Further, growing expenses on product development by means of acquisitions bodes well in the long-term, amid stiff competition from fellow storage peers including Pure Storage PSTG. However, it is likely to have limited margin expansion in the fiscal fourth quarter.

Key Developments

During the quarter under review, NetApp acquired Talon Storage in a bid to centralize and consolidate IT storage infrastructure to the public clouds.

Moreover, the Zacks Rank #3 (Hold) company recently announced acquisition of CloudJumper, a cloud software company offering virtual desktop infrastructure (VDI) solutions, and remote desktop services (RDS) which aids enterprises to accelerate public cloud deployments for work from home setup, branch offices and enterprises. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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