‘Customers choose NetApp to support them at every phase of the AI lifecycle due to our high-performance, all-flash storage complemented by comprehensive data management capabilities that support requirements from data preparation, model training and tuning, retrieval augmented generation (RAG), and inferencing, as well as requirements for responsible AI including model and data versioning, data governance, and privacy,’ says NetApp CEO George Kurian.

NetApp Thursday reported solid revenue and income growth for its fiscal 2024 fourth quarter thanks to a growth in its cloud and flash storage businesses.

However, NetApp is looking to AI as a key driver in growth going forward, CEO George Kurian told investment analysts during the company’s quarterly financial analyst conference call.

For all of fiscal 2024 NetApp maintained a high level of operational discipline leading to company records for annual gross margin, operating margin, earnings per share, operating cash flow, and free cash flow, Kurian said.

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“Customers are increasingly turning to NetApp to help them build intelligent data infrastructures and leverage the power of public and hybrid clouds for rapidly growing, data intensive workloads like AI, cloud-native, open-source, and enterprise applications, while ensuring their data remains secure and protected from ransomware attacks,” he said.

NetApp, which offers a comprehensive and integrated portfolio of unified data storage solutions based on one operating system, Ontap, reported that its hybrid cloud and public cloud revenue grew in the fourth quarter, while its all-flash array annualized revenue run rate grew to an all-time high of $3.6 billion, up 17 percent year-over-year, Kurian said.

Meanwhile, NetApp’s Keystone storage-as-a-service offering saw its full-year total contract value sales more than double those of the previous year to almost $150 million, he said. “We expect this momentum to continue and that FY25 will be another significant growth year for Keystone,” he said

AI is now a top priority for organizations seeking to accelerate innovation, revolutionize operations, drive competitive advantage, and deliver superior solutions to their customers, and data management is essential for enterprise AI, Kurian said.

“Customers choose NetApp to support them at every phase of the AI lifecycle due to our high-performance, all-flash storage complemented by comprehensive data management capabilities that support requirements from data preparation, model training and tuning, retrieval augmented generation (RAG), and inferencing, as well as requirements for responsible AI including model and data versioning, data governance, and privacy,” he said.

NetApp continues to strengthen its enterprise AI position with ways to make it easier for customers to derive value from their AI investments, Kurian said. In the fourth quarter, that included the introduction of the NetApp AIPod with C-series capacity flash systems. The company also worked with Cisco to update its FlexPod AI converged infrastructure reference architectures to support the Nvidia AI Enterprise software platform and was one of the first partners to complete the storage validation for Nvidia OVX systems and unveil a full-stack OVX system.

“We announced much of this innovation at Nvidia GTC, where we were honored to be recognized during the keynote for our role in storing a significant portion of enterprises’ unstructured data, which is the fuel for Gen AI,” he said. “Through our partnership with Nvidia, we give customers the ability to talk directly to the large amount of existing data stored on NetApp on premises and in the cloud, demonstrating the value of our installed base and the critical role we play in AI.”

On the cloud side, NetApp is well ahead of its competitors in cloud storage services, Kurian said. During the fourth quarter, the company extended its leadership position, and increased the performance of its Amazon FSx for NetApp Ontap to address a broader set of performance-intensive workloads. The company also introduced a new service level for Google Cloud NetApp Volumes to give customers more granular control to match the capacity and performance needs of their cloud workloads, he said.

NetApp By The Numbers

For its fiscal 2024 fourth quarter, ended April 26, NetApp reported total revenue of $1.67 billion, up 5.7 percent over the $1.58 billion the company reported for its fiscal 2023 fourth quarter. That beat analyst expectations by $20 million, according to Seeking Alpha.

That included product revenue of $806 million, up from $744 million; support revenue of $623 million, up from $598 million; professional and other services revenue of $87 million, down from $88 million; hybrid cloud segment revenue of $1.52 billion, up from $1.46 billion; and public cloud segment revenue of $152 million, up from $151 million.

The Americas commercial market accounted for 41 percent of NetApp’s revenue in the quarter, down from last year’s 39 percent, while the U.S. public sector accounted for 10 percent of revenue, flat with one year earlier.

Indirect channels accounted for 76 percent of NetApp’s revenue for the quarter, down from 78 percent last year.

NetApp reported GAAP net income for the quarter of $291 million or $1.37 per share, up from $245 million or $1.13 per share for the same period last year. On a non-GAAP basis, NetApp reported net income of $382 million or $1.80 per share, up from last year’s $344 million or $1.54 per share.

NetApp’s non-GAAP earnings beat analyst expectations by 1 cent per share, according to Seeking Alpha.

For its full fiscal 2024, NetApp reported total revenue of $6.27 billion, down slightly from the $6.36 billion the company reported for its fiscal 2023.

That included product revenue of $2.85 billion, down from $3.05 billion; support revenue of $2.49 billion, up from $2.42 billion; professional and other services revenue of $320 million, up from $319 million; hybrid cloud segment revenue of $5.66 billion, down from $5.79 billion; and public cloud segment revenue of $611 million, up from $575 million.

The Americas commercial market accounted for 40 percent of NetApp’s revenue for the year, flat with last year, and the U.S. public sector accounted for 11 percent of revenue, flat with last year.

Indirect channels accounted for 76 percent of NetApp’s revenue for the year, down from 78 percent last year.

For the year, NetApp reported GAAP net income of $986 million or $4.63 per share, down from $1.27 billion or $5.79 per share for the same period last year. On a non-GAAP basis, NetApp reported net income of $1.38 billion or $6.46 per share, up from last year’s $1.23 billion or $5.59 per share.

Looking Ahead

Looking ahead, NetApp expects full fiscal year 2025 revenue to be in the range of $6.45 billion to $6.65 billion, which at the midpoint reflects 4.5-percent year-over-year growth. The company also expects public cloud revenue to return to constant growth, although it did not provide specific guidance. NetApp also expects earnings of $6.80 to $7.00 per share.

For its fiscal 2025 first quarter, NetApp expects revenue to range between $1.455 billion, and $1.605 billion, which at the midpoint implies 7-percent year-over-year growth. Earnings between $1.40 and $1.50 per share are also expected.

NetApp remains cautiously optimistic on the macroenvironment, which is better now than it was at the start of fiscal 2024, Kurian said.

“NetApp is leading the evolution of the storage industry, helping our customers make their data infrastructure intelligent for the age of AI,” he said. “I am confident that this leadership, coupled with the strong momentum we’ve built through FY24, positions us for continued growth and share gains.”

NetApp closed the trading day at $116.50 per share, down $1.00 or 0.85 percent for the day. As of noon Friday NetApp shares were back up nearly 1 percent to $117.60.