NetApp Q2 FY26 slides: record margins as AI and cloud drive 10% EPS growth

Introduction & Market Context

NetApp Inc. (NASDAQ:NTAP) delivered strong financial results for its fiscal second quarter of 2026, exceeding analyst expectations with earnings per share of $2.05 compared to forecasts of $1.89. The company’s focus on intelligent data infrastructure, particularly in AI and cloud solutions, has driven both revenue growth and margin expansion. Following the earnings announcement on November 25, 2025, NetApp’s stock rose 2.31% in after-hours trading to $109.50.

The company positions itself as "THE Intelligent Infrastructure Company," emphasizing its evolution from unifying data silos to enabling hybrid cloud environments and now focusing on AI-ready infrastructure. This strategic positioning appears to be resonating with customers, as NetApp closed approximately 200 AI infrastructure and data lake modernization deals during the quarter.

Quarterly Performance Highlights

NetApp reported Q2 FY26 revenue of $1.71 billion, representing a 2.8% year-over-year increase and slightly exceeding analyst expectations of $1.69 billion. The company achieved record quarterly operating margin of 31.1%, a substantial improvement of 250 basis points from the same period last year.

As shown in the following summary of financial results, NetApp exceeded its guidance across all key metrics:

Earnings per share reached $2.05, a 10% increase year-over-year and significantly above the company’s guidance range of $1.84-$1.94. Gross margin expanded to 72.6%, up 60 basis points from the prior year, while billings grew 3.8% to $1.65 billion.

The company’s year-to-date performance shows consistent improvement in key metrics:

Detailed Financial Analysis

NetApp’s revenue mix continues to shift toward higher-growth segments, with All Flash and Public Cloud solutions now comprising 70% of total revenue. This strategic focus is driving both top-line growth and margin expansion.

The following chart illustrates the growing contribution of these key segments:

The Public Cloud segment showed particularly impressive margin improvement, reaching 83.0% in Q2 FY26, a significant increase from 73.8% in the same quarter last year:

All Flash Array annualized revenue run rate reached $4.1 billion, representing 9% year-over-year growth:

Operating profit reached $530 million in Q2 FY26, a substantial increase from $475 million in the same quarter last year, driving the record operating margin of 31.1%:

The company’s earnings per share performance demonstrates consistent growth over recent quarters, culminating in the $2.05 achieved in Q2 FY26:

Strategic Initiatives

NetApp’s presentation emphasized its strategic evolution toward intelligent data infrastructure. The company highlighted several key initiatives driving its current performance:

1. Advancing the NetApp Data Platform with enhanced AI capabilities

2. Focusing on AI infrastructure and data lake modernization, with approximately 200 deals closed in the quarter

3. Growing first-party and marketplace cloud storage services revenue by approximately 32% year-over-year

4. Strengthening market position, as evidenced by recognition as a Leader in the 2025 Gartner Magic Quadrant for Enterprise Storage Platforms

These initiatives reflect NetApp’s broader strategy of unifying data services across fragmented environments and building intelligence directly into its infrastructure offerings. The company emphasized that "intelligence must be built-in, not bolted on" for a future shaped by AI.

Forward-Looking Statements

Based on its strong performance, NetApp provided optimistic guidance for the upcoming quarter and raised its full-year outlook. For Q3 FY26, the company expects:

For the full fiscal year 2026, NetApp raised its guidance:

The updated full-year EPS guidance of $7.75-$8.05 reflects increased confidence in the company’s ability to maintain its momentum and continue expanding margins.

During the earnings call, CEO George Kurian emphasized the company’s leadership in unified data management, stating, "In the age of data and intelligence, customers are choosing NetApp for our unified data platform that delivers exceptional value and operational efficiencies." CFO Wissam Jabre added, "We are poised to seize the expanding opportunities in all-flash, cloud, and AI."

While NetApp’s outlook is positive, the company acknowledges potential challenges including supply chain disruptions, market saturation in traditional storage solutions, macroeconomic pressures, intense competition in AI and cloud sectors, and potential regulatory changes in key markets.

Overall, NetApp’s Q2 FY26 results demonstrate the company’s successful execution of its strategy to capitalize on growing demand for intelligent data infrastructure, particularly in AI and cloud environments. With record margins, strong EPS growth, and raised guidance, NetApp appears well-positioned to continue its positive trajectory in the coming quarters.

Full presentation:

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