NetApp’s (NASDAQ:NTAP) Q1 CY2026: Strong Sales, Stock Soars

Data storage company NetApp (NASDAQ:NTAP) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 12.5% year on year to $1.95 billion. On top of that, next quarter’s revenue guidance ($1.83 billion at the midpoint) was surprisingly good and 8.5% above what analysts were expecting. Its non-GAAP profit of $2.43 per share was 7.2% above analysts’ consensus estimates.

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Company Overview

Founded in 1992 as a pioneer in networked storage technology, NetApp (NASDAQ:NTAP) provides data storage and management solutions that help organizations store, protect, and optimize their data across on-premises data centers and public clouds.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $6.93 billion in revenue over the past 12 months, NetApp is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s challenging to maintain high growth rates when you’ve already captured a large portion of the addressable market. To accelerate sales, NetApp likely needs to optimize its pricing or lean into new offerings and international expansion.

As you can see below, NetApp’s sales grew at a tepid 3.8% compounded annual growth rate over the last five years. This shows it failed to generate demand in any major way and is a rough (but perhaps misleading) starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. NetApp’s annualized revenue growth of 5.1% over the last two years is above its five-year trend, suggesting some bright spots.

This quarter, NetApp reported year-on-year revenue growth of 12.5%, and its $1.95 billion of revenue exceeded Wall Street’s estimates by 4.1%. Company management is currently guiding for a 17.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.2% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet. At least the company is tracking well in other measures of financial health.

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Adjusted Operating Margin

Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.

NetApp has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average adjusted operating margin of 26.7%.

Looking at the trend in its profitability, NetApp’s adjusted operating margin rose by 6.6 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, NetApp generated an adjusted operating margin profit margin of 32.4%, up 3.8 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

NetApp’s EPS grew at 15% compounded annual growth rate over the last five years, higher than its 3.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into NetApp’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, NetApp’s adjusted operating margin expanded by 6.6 percentage points over the last five years. On top of that, its share count shrank by 13.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For NetApp, its two-year annual EPS growth of 12.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q1, NetApp reported adjusted EPS of $2.43, up from $1.93 in the same quarter last year. This print beat analysts’ estimates by 7.2%. Over the next 12 months, Wall Street expects NetApp’s full-year EPS to grow 4.4% from $8.15 to $8.51.

Key Takeaways from NetApp’s Q1 Results

We were impressed by how significantly NetApp blew past analysts’ EPS guidance for next quarter expectations this quarter. We were also glad its revenue guidance for next quarter trumped Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 7.9% to $153.63 immediately after reporting.

NetApp had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).