NetApp, Inc. (NTAP)
NetApp, Inc. provides unified storage and data management across on-premises and the world’s largest public clouds (AWS, Azure, Google). In FY 2025, NetApp delivered $6.57 B in revenues (+5%), 70% gross margin, and $1.19 B net income ($5.67 share), generating $1.51 B in operating cash flow. Hybri...
NetApp, Inc. (NTAP) 2025 10-K Review: A Deep Dive into Intelligent Data Infrastructure
NetApp, Inc. (NASDAQ: NTAP) helps customers make their data infrastructure more seamless, dynamic, and high-performing by providing enterprise-class software, systems, and services. Its solutions span on-premises data centers and the world’s largest public clouds—Amazon AWS, Microsoft Azure, and Google Cloud—enabling hybrid and multi-cloud deployments across file, block, and object storage. In this review, we walk through NetApp’s FY 2025 10-K, highlighting the business model, key financial metrics, segment performance, cash flow generation, risk factors, and our investment thesis, capped by an investment score.
Warren.AI 💰 7.5 / 10
Table of Contents
- 2.1 Net Revenues & Mix
- 2.2 Profitability & Margins
- 2.3 Segments: Hybrid Cloud vs. Public Cloud
- 2.4 Cash Flow & Capital Allocation
- 2.5 Balance Sheet & Liquidity
1. Business Description (Item 1)
Founded: 1992
Headquarters: San Jose, California
Segments: Hybrid Cloud, Public Cloud
NetApp’s mission is to help organizations build an intelligent data infrastructure by delivering unified storage and advanced data management across on-premises, private, and public clouds:
- Hybrid Cloud: On-premises storage arrays powered by the ONTAP operating system, including all-flash (AFF A-Series), capacity-optimized flash (AFF C-Series), SAN-optimized arrays (ASA), hybrid arrays (FAS) and high-performance E/EF series, plus StorageGRID object storage. Integrated software offers snapshot, replication, ransomware protection, compliance, and storage efficiency.
- Public Cloud: SaaS-delivered storage services—Azure NetApp Files, Amazon FSx for NetApp ONTAP, Google Cloud NetApp Volumes—plus Cloud Volumes ONTAP, and operations/control plane via NetApp BlueXP. Services include Copy & Sync, Backup & Recovery, Classification, and Ransomware Protection. Cloud monitoring is provided by Data Infrastructure Insights (formerly Cloud Insights).
- Services & Keystone: Pro, managed, strategic, and support services, including NetApp Keystone (storage-as-a-service on-premises), consulting and global support.
Customer Base & Distribution
- Global enterprise footprint across verticals: financial services, healthcare, manufacturing, technology, government.
- 78% of FY 2025 revenues sold through indirect channels: value-added resellers, distributors (notably Arrow Electronics and TD Synnex), cloud providers.
- Distributors: Arrow (21% in FY 2025), TD Synnex (24% in FY 2025).
- Seasonality: Q1 typically weaker, Q4 strongest, end-of-quarter booking concentrations.
2. Financial Performance (Items 7, 7A & 8)
2.1 Net Revenues & Mix
(In millions) FY 2025 – FY 2023
| Metric | FY 2025 | FY 2024 | Δ vs ’24 | FY 2023 | Δ vs ’23 |
|---|---|---|---|---|---|
| Net Revenues | $6,572 (+5%) | $6,268 (−1%) | +$304 M | $6,362 | −$94 M |
| – Product | 46% (↑1 pt) | 45% (↓3 pt) | +7% | 48% | −7% |
| – Services | 54% (↓1 pt) | 55% (↑3 pt) | +3% | 52% | +3% |
- Product Revenues (hybrid arrays, flash, add-on software) rose 7% in FY 2025 driven by AFF C-Series all-flash demand; FY 2024 product revenues fell 7% on soft hybrid system demand.
- Services Revenues (software/hardware support, professional services, public cloud) grew 3% in both FY 2025 and FY 2024, reflecting expansion of support contracts and public cloud offerings.
2.2 Profitability & Margins
(In millions) & % of Revenues
| Metric | FY 2025 | FY 2024 | FY 2023 |
|---|---|---|---|
| Gross Profit | $4,613 (70%) | $4,433 (71%) | $4,209 (66%) |
| Income from Operations | $1,337 (20%) | $1,214 (19%) | $1,018 (16%) |
| Net Income | $1,186 (18%) | $986 (16%) | $1,274 (20%) |
| EPS, Diluted | $5.67 | $4.63 | $5.79 |
- Gross Margins: 70% in FY 2025, down <1 point from FY 2024 due to higher hardware component costs; up 5 points vs FY 2023 as supply chain pressures eased.
- Operating Margin: 20% in FY 2025, up from 19% as opex leverage kicked in.
- Tax Rate: 14.2% in FY 2025 vs 21.9% in FY 2024, reflecting discrete tax benefits from settled IRS audits.
- Net Income: FY 2025 net profit of $1.19 billion ($5.67 EPS) vs $986 million in FY 2024.
2.3 Segments: Hybrid Cloud vs. Public Cloud
| Segment | FY 2025 Revenues | FY 2025 Gross Margin | Trend |
|---|---|---|---|
| Hybrid Cloud | 60% of total | ~70% | Product growth; stable support margins |
| Public Cloud | 40% of total | ~37% | Double-digit growth; improving gross margin |
- Hybrid Cloud: On-premises ONTAP storage & data management. Product revenues +7% in FY 2025. Support margins ~84%. Services margin ~63%.
- Public Cloud: Native SaaS storage & services for AWS, Azure, Google. Revenues +9% in FY 2025 to $665 M; gross margin improved 8 pts to 37% thanks to cost optimization.
2.4 Cash Flow & Capital Allocation
(In millions)
| Metric | FY 2025 | FY 2024 | FY 2023 |
|---|---|---|---|
| Cash from Operations | $1,506 M | $1,685 M | $1,107 M |
| Capital Expenditures | $(168 M) | $(155 M) | $(239 M) |
| Dividends Paid | $(424 M) | $(416 M) | $(432 M) |
| Shares Repurchased | $(1,150 M) | $(900 M) | $(850 M) |
| Net Financing (Senior Notes) | $1,240 M | $— | $— |
- Operating Cash Flow remains strong, $1.5 B in FY 2025, 23% conversion of revenues.
- CapEx is modest (~2.5% of revenues) for data centers and internal-use software.
- Return of Capital: $424 M dividends, 10 M shares repurchased ($1.15 B) in FY 2025. Remaining buyback authorization: $352 M.
- Liquidity: $3.8 B cash & short-term investments; $1.0 B credit facility undrawn; net debt $1.4 B.
2.5 Balance Sheet & Liquidity
- Cash & Short-term Investments: $3.85 B (April 2025) vs $3.25 B a year ago.
- Net Debt: $3.25 B in senior notes vs $2.40 B in April 2024 (included 2024 maturities).
- Working Capital: $1.2 B vs $0.8 B prior year.
- Investment Portfolio: High-grade US Treasury and government debt, CD’s, money market funds; conservative duration; $2 B debt securities fair-valued at cost.
3. Risk Factors (Item 1A)
NetApp’s risk profile includes both macro and company-specific factors. Key risks:
- Macroeconomic & Geopolitical: Slower IT spending, inflation, tariffs, trade disputes, supply chain disruptions, Russia-Ukraine, China-Taiwan tensions.
- Technological: Rapid industry shifts to cloud-native storage, GenAI pipelines, competitor innovation, consumption models.
- Competition: Incumbents (Dell EMC, HPE, Pure, Cisco), cloud (AWS, Azure, GCP), startups in flash and AI data infrastructures.
- Supply Chain: Single-source NAND, global manufacturing footprint, natural disasters, contract manufacturer capacity.
- Execution: Integration of acquisitions, new product launches, R&D execution, go-to-market reorganizations.
- Regulatory & Legal: Data privacy (GDPR, state privacy laws), cybersecurity breaches, IP litigation, OECD Pillar Two minimum taxes, U.S. export controls.
- Human Capital: Talent retention, remote work hybrid policies, visa constraints, stock-based compensation competitiveness.
4. Other Disclosures
- Acquisitions: Instaclustr (May 2022), fully integrated; no material goodwill impairment.
- Restructuring: FY 2025 charges $83 M (severance, lease), FY 2024 $44 M, FY 2023 $120 M.
- Stock Plan: 2021 Plan grants options, RSUs, PBRSUs; 11 M shares available. PBRSUs granted $67 M share-based comp in FY 2025.
- Share Repurchases: 10.2 M shares in FY 2025 at $112.55 avg; $352 M remaining authorization before Board refresh.
- Dividend: $2.08 annualized in FY 2025; Q1 ’26 dividend declared $0.52/share.
5. Investment Thesis & Score
Thesis: NetApp is a leader in hybrid-cloud data infrastructure with strong software-first storage (ONTAP), highly efficient go-to-market via partners and public clouds, stable recurring services, and disciplined capital return. The transition to cloud-native (as-a-service) and GenAI use cases positions NetApp for mid-single-digit revenue growth and high-teens operating margins over time, with $3.8 B cash generating robust free cash flow to support dividends, buybacks, and strategic investments.
Risks: Cloud incumbents’ pricing power, technology obsolescence, macro IT spend slowdown, margin pressure from capex-light models, regulatory complexities.
Investment Score: 7.5 / 10
NetApp offers a balanced risk/reward: solid growth catalysts in cloud and AI, high margins, and strong capital returns, offset by fierce competition and macro uncertainty.
Disclaimer: This blog post is for informational purposes and does not constitute investment advice. Always perform your own due diligence.