NetApp (NTAP) 13 Aug 232024 Q1 Earnings call transcript

Good day, and welcome to the NetApp First Quarter of Fiscal Year 2024 Earnings Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Kris Newton, Vice President, Investor Relations. Please go ahead.

Hi, everyone. us. joining for Thanks are George today Mike and Berry. our me Kurian; CEO, CFO, With being will live replay call webcast This is and website netapp.com. on at be our for available

with make During we without fiscal limitation, the and forward-looking year respect for including, to guidance quarter statements future today's prospects, statements cause our will and and second call, our XXXX; outlook financial projections and profitability other differ growth actual strategies. These expectations uncertainties, to and initiatives risks various may returns; regarding are and future materially. to shareholder our revenue, results which our subject and

please to most obligation projections. our forward-looking on information, our more XX-Q. Form we For and time to update our including Form refer any recent file to from disclaim and time website, SEC statements XX-K documents the with and the We

will all the indicated. our of GAAP call, During available non-GAAP measures website. Reconciliations financial on non-GAAP, otherwise are estimates to unless be presented

call I'll now George. the over turn to

us afternoon, Good everyone. Kris. Thanks, for Thank joining today. you

solid start while our in We margin the guidance, of marks challenging guidance what midpoint our delivered discipline revenue QX yielded environment. above a be to and operational operating macroeconomic a ranges. to above continues 'XX EPS FY

within we to storage have business. previous I on to Public the reinvigorating approach building our a focused and drive Cloud business; control; calls, outlined managing on: elements better As performance our our efforts are in more focused

deliver growth, and seeing indicators success. to profitability, We our from increase early positive execution, strengthen plan are for our this further long-term position sharpen

has fastest all-flash quickly our strong shipping. in in especially grew recent Similarly, full all of introductions. reception demand our the in results performance array, the product the history, AFF pleased I our of ramping C-series with AFF across all-flash at AXXX, the entry-level, first the launch the its with products am quarter high Looking quarter, family. product The to been

a world-class also help seeing future-proof ownership uptake, with Program good as we experience. driving Lifecycle customers to their commitments Our NetApp environments early Storage is longer-term

Building protection more SAN-specific and We SAN who ASA unified to storage storage we are virtual guarantees. block use data introduced all-SAN with market. the family storage announced in arrays, NetApp systems tens arrays storage of momentum, us by all-flash efficiency of the industry-leading innovation a These on expand and they Complementing thousands offerings, enable only application-granular the on this supported QX. of A-series, data machine the already share in drive today our billion $XX mechanisms. customers for gains and availability

enterprise the on to the implemented in the call, gathered pipeline market focusing we the been in our In growth to of energized have the opportunities. kickoff products to to was pandemic. our for showing our bringing introduced open expansion, the training aligned our we've we these strengths. the In including held are and model flash time since us, objectives top the up first opportunity appropriately the building for already should The go-to-market and QX agenda, TAM received, drive are we're also each addition sellers have person May, outlined cloud. meeting, team Everyone global annual by the sales we innovation dedicated on on delivering we've changes team's we on well line changes innovation second-half. Because attack help sharpen and many new in a

$X.X Hybrid year-over-year. QX was XX% revenue Cloud of segment down billion

revenue and on FY revenue. annualized continuing is of half QX product from the demand billion. from to X% decreased business unchanged array a with run headwinds The ago $X.X rate all-flash environment AFA of weigh year from Our to 'XX, an enterprise last

will Additionally, the the of year impacting fiscal first-half elevated comparisons. as 'XX Mike outline, from backlog, benefited year-over-year

touched with mind customers for top on conversation everyone. and investors Generative every quarters, intelligence. few of AI past the artificial had has In I've is

not is the this us. of innings a topic While early AI opportunity, still for in new

in rely for world. and leader NetApp's Today, pharmaceutical, companies we NVIDIA-proven a of machine storage some in of architecture, storage their introduced customers joint a AI in XXXX. been NetApp hundreds retail workloads services largest on predictive financial management the and and ONTAP have including workloads, learning infrastructure AI, since We data AI for and the

predictive Effective performance, typically premises. and market projects high data sources unstructured quality, file AI highly generative multiple from and pipeline data. data across and depend cloud The well-managed, object workflow on on involve and High and cloud storage benefit as continue to NetApp is positions advantage AI leader data in hybrid scalable as evolves. market naturally core Gen us management the this a a and us and will

language are While leveraging as on large models who in of Gen are the Cloud with data and early, capabilities engaged Volumes data interested management are together customers as with the own AI cloud the hyperscalers' public with their fine-tuning services. on-premises, well storage we already who NetApp those offerings

of continues by Accelerated data is data most the its volume rise grow company's in both A and AI, to asset. value. valuable

data protection With machine can and cloud. anomalous and the robust proactively customers or rapid that and the on-premises malicious our have spot based portfolio Our and they cyber and built-in actions. AI systems resilience security enterprise on ensure helps learning, protect secure right data in counter deliver that features recovery and

that in is industry-leading enterprise storage the in NetApp on capabilities NSA's components is list. guarantee our announced underscored confidence program QX and by by recovery demonstrated Our the vendor the ransomware the we classified fact only

to structures. partners' we get our acknowledge Now, At our year, Public actions of the not to cloud back cloud have this approach track. our we definitive start you and be want taking where been results specialists turning to them aligned go-to-market want hone assure our we hyperscaler I on to are Cloud. to and sales

Additionally, the expand review party improve and portfolio, success the sharpen services focus of on we to subscription strategic of cloud the our performance. first a are of process in

to more have details will We with you next call. our share on

XX% to segment was million, DBNRR year-over-year. Cloud Public said, of That Public revenue QX Cloud $XXX declined an XXX%. increase in

first in strength was services our consumption these subscription by marketplace party numbers, Within and masked services. in weakness

storage well revenue partnerships, ARR and cloud on Let services, this in party the growth our strategic portfolio. and continue expansion part deepening customer that first see we me as as emphasize of to is and focus

expectations Cloud the walk in Our you revenue Public through. 'XX FY are guidance for will reflected Mike

partners, branded by sold position uniquely services, biggest cloud represent our our and storage and party First opportunity. us

Our the partnerships and delivering strong are providers growth. cloud with

Our close Microsoft with relationship deliver And growth. Azure remains our expansion you continues can about the of strong. solid with partnership weeks, to coming exciting in and Google the our to Likewise, partnership. news long-standing expect hear

AWS is relationship positive with Our also results. yielding

deployments mission-critical FSx manufacturer's storage could meet is We the As to service be are global expected, NetApp large only large, SAP ONTAP. long-term chosen FSxN starting requirements. the that project This storage win the on be significant service grow SAP infrastructure Once to coming over was cloud SAP for enterprise FSxN the to driving sportswear develop will that with of a continue of deployment. completed, largest we level, were recovery a one will environments HANA the company's consumption AWS. availability, it capacity. and and for years,

the remains challenging macro, face In of muted, the cycles sales and demand remain elongated.

Although moving forward customers prioritizing and and are applications business to strategic in exhibit continue productivity drive technologies with caution, growth. they that investments initiatives,

of to Our securely modern entire management their approach estate data increase leverage projects. the and cloud reliability to across Customers hybrid, performance sustainably. to them multi-cloud infrastructure simply, data to and digital help transformational NetApp turn organizations enables and and their IT

clear. are priorities our forward, Looking

business. business, to in reinvigorate 'XX. the we elements our yielding margin better track tightly and growth Public will to Cloud results earnings back half drive expansion continue are to Early refine control, top-line within the to of continue performance on and year-over-year our year We growth indicate manage storage while drive efforts the in fiscal

be NetApp thank to the want Vegas in I call over the hope our to hosting conference Before Mike, Las team there. you user want We focus. we'll in also this I remind October. you INSIGHT see turning their continued for to person to

solid in or everyone. exceeding a challenging good We our executed and George, macro ranges. all hitting quarter you, a Thank afternoon, guidance environment,

We commitments, in our are delivering our on solid results. QX evident

walk details, you get the I themes the through for into the quarter. Before key financial me let

reminder, numbers discussed unless all noted. a are non-GAAP As otherwise

management disciplined innovation pay continues the acceptance Our our off. strong operational to and customer of

and products the execution we through improved expect margin expansion of will and drive as growth move year. the operating second-half We new

Product in consolidated XX%. came margin was expected, at gross As QX strong. margin

expectations remainder year. and the we projection confident Given margin our at will product hold remain for competitive of that product these fiscal the through our dynamics mix, in levels

was pricing cash flow as compensation high. benefited well operations incentive component Operating first from of reduction and premiums, as all-time lower from the Cash quarter payouts. a

tracking Over flow ‘XX line the We returned operating cash course of by flow non-GAAP cash fiscal count year-over-year. share income. net QX with relatively year fiscal ‘XX, cash in cash to through should repurchases, almost dividends flow of reducing XXX% normalize, free and share X% stockholders with approximately

to during we this quarter's As call, XXX% free return last we flow discussed intend year. cash of

IT decreased challenging spending. Revenue XX% billings the to of $X.X macro billion continued to environment details pressure $X.X of Now, decreased of QX The year-over-year. billion the XX% year-over-year. quarter.

However, changes priority out, fiscal will confident and go-to-market and product year are as of investments George second-half remain aligned pointed well growth drive customers' we ‘XX. innovations our in the to

revenue year-over-year Cloud of fiscal $X.X Hybrid benefited Support year-over-year. most elevated from levels down $XXX that Product XXXX XX% revenue was product backlog, comparisons. of year-over-year. first-half of impacts down million year notably $XXX was revenue, Remember XX%. of X% revenue, which billion the million revenue grew

increased Public Public of X% $XXX to QX Cloud a $XXX Cloud revenue XX% million. year-over-year ago. million year ARR grew from

by solutions marketplace services. and grew technology underperformance workloads. This as cloud and customers for NetApp party services native on subscription mission-critical offset choose was First to continue based growth in

and Cloud and we meet approach our taking Public As George did growth. quarter, are earlier, action to noted reaccelerate our the expectations for hone not

gross QX with up our high. an basis Product and in a points again XX%, in expectations. all-time margin XXX XX% line from consolidated guidance, of gross was reaching margin ago, above came company year

and decline on mitigate still continued low QX in market. discussed we the and versus NAND to strategic QX, made to lock-in future. the call, favorably prices are prices the in NAND pricing As commitments we positioned record rising we purchase

factored margin hold at through confident level increased to The ability expectations into product this and potential is gross in the year. we price for competition our our remain consistent

be cloud continues margin business from with gross XX% support recurring Public gross highly XX%. quarter. profitable improved to margin XX% last to of Our

were annual as expenses was of from expenses incentive The operating sequential reset As meeting. QX'XX. in-person related to increase our merit and kick-off increases by expected, million as sales and flat grew a year-over-year X% well $XXX compensation, of driven

of was an of highlighted of EPS with compensation, operating variable supply offset of lower model flow collections. was operational by above year-over-year, end $XXX chain driven guidance. QX, million partially QX the XX% the high Operating business again strength expectations. cash of increase lower XX%, payments and our by in margin ahead of disciplined also our and $X.XX execution

to helped XX. strong flow $XXX decreased to and CapEx. to by DSO and million, improved year-over-year QX, inventory operating increased In lower XX% turns XX Free flow cash cash

repurchased million in $XXX quarter, approximately quarter stockholders million returned During with to and the net through we cash shares $XXX ending cash. the dividends,

approximately have We $X on repurchase existing authorization. our remaining billion

of QX the slightly end $X.X Our approximately balance sheet ago. cash year the billion, a deferred $X We revenue up was quarter ended investments. healthy. remains and Total short-term with in of as from billion

Now turning to guidance.

the our full-year. We are reiterating for guidance

with on Our down updated growth total mid-single-digits revenue to projections, basis. percentage revenue come to due Cloud our weakness in and primarily softness is to a Based QX This than low year-over-year, Public Hybrid guide be results initially revenue. services. measured at on unchanged, strength expect our revenue minor we offset our expected in in expected to by lower subscription Cloud least is

We fiscal margin to be be XX%, year of to operating range approximately margin to roughly 'XX consolidated to continue $X.XX to in and expect the XX%, $X.XX. EPS gross be

end-of-July If QX FX $X.XXX points to revenue. year-over-year. FX at which of billion, the we billion tailwinds rates implies a decline revenue nearly at midpoint expect range to and between would see stay X of X% $X.XXX levels, We

out constraints, As chain supply from benefited revenue first-half which due impacts of elevated I ‘XX last to earlier, the year backlog comparisons. fiscal year-over-year year’s called levels

to $X.XX margin roughly EPS to margin operating and range be gross to be consolidated $X.XX. QX expect XX%. should of be XX%, the approximately We in

am In goals. and in employees, help commitment investors thank ability successfully to want their their investment closing, I to our confident in and our digital our cloud customers and I for customers NetApp. transformation achieve

We aligned long-term are are committed for to well value sustainable, our priority stockholders. to deliver and IT investments

the Kris to open over Kris? call Q turn A. now I’ll the to &

let’s Operator, Mike. Q&A. begin the Thanks,

session. question-and-answer Please is the Instructions] go We from Sidney first Ho ahead. question will begin Bank. with Deutsche Our [Operator now

doing for Thanks Great. the call.

seem the you businesses like do maybe quarter, different based you were level whatnot? demand you First, at context data a or conversation enterprises mean, last So some you you utilization that up, do that talked rate give has us trends just I picking guys utilization historical while with medium pick when think could about about as and do sense cautious, and small seeing this be at demand where cycle? That changed talk doesn't start have much. in spending on start what well? you’re quite are will From it up, any guys Thanks. customers, large that for obviously overexposed. your

the the half was unchanged prior spending Overall you year. question. we in quarter saw past the second thank from for environment -- Overall, this the what fiscal of

Our the same globe sector public mid-sized spending, the business than verticals noted, cautious as across large did high-tech we extent, in Within service a provider, large and, services. and to enterprise. enterprise financial better enterprise, lesser remained

they trend. infrastructure, a at speaking, spending tell it's higher but in That environments, broadly we are utilization macro common practice. their do long-term spending they typically such than strategic are criterion, what to projects meaning running regard is levels With best not typically hotter of than and them is on but

that systems for I to as think they we expect fiscal start year them them expand progress because investment run through to cannot hard. the we

we expect to for prepared in noted calls, support do substantially we year. As change not our to prior guidance and macro in the the remarks our

our the portfolio for the in we as that made reflects confidence guidance introduced. go-to-market changes in recently both as that in our year Our well we product

you. thank Okay,

The with question is next ahead. go from Mehdi SIG. Please Hosseini

be ownership would your any you that, have the help see picture big adoption? with generative any Thanks George, of will and Yes. AI topic Is revisit actually taking Is I I faster there repatriation. repatriation two my do for argument from follow-ups. -- back strengthening of feedback How your want go customers the share? enterprises there this quick you to that have to the data conversation there the question. enterprise from a better that can update? that

quick Can how year? changing you the QLC the provide And you're a a of mix procuring? do towards of you NAND a see And follow-up. that that end calendar

engaged is of patterns. three there customers, Gen I in, say of to data. already regard a a With in AI One see number mix use are which we are projects, would we unstructured cases. common

security so that version as for which AI and the track and model hot accurate. they Gen of best is are the can data keep second privacy need both consistent as The management, well topics of data lineage the is of most

from public prepackaged feature faster architecture, cloud advantages well velocity, the third much on-prem available the cloud. engage as discussions. both we on is in as cloud, then a as as seeing public the public And deployment are them models are discussions, In well

the With sensitivity the a the being restricted location. is environments, data on-prem major kept in

that a discussion of of it benefit this meaningful mix both. I to environments. and point from seeing at intend don't we So think public we're cloud a the There driver on-prem is maybe. repatriation in

And then, hey, Mehdi, it's Mike.

we we're QLC, see the percentage goes, the that. say that of go as procuring do year to continue the to a to fiscal going 'XX. see We'll we started On the through not of break-out specific we expect pickup. We but but we rest would numbers, more as are how

you. Thank Great.

with ahead. Chatterjee The go next Morgan. question is Please Samik from JP

Hey, thanks for Samik. This is the Cardoso on question. Joe for

from question one Just me.

year, it I about the to and of premium then currently expected tailwind as into progress excluding the part, are just that competition clarification through guys on quickly, Thanks. including that guide? were should You et-cetera, highlighted is related quarter we how reported improvement that benefits, competitors? you've and seeing price that in if how a quantify this you was could competition have strategic we you margin just purchases, last a strong real think and like your the from And much you actually gross the performance The curious price premium? embedded

Mike. Hey Joe, it's

about about So, last-time, super-excited on premiums about your not a have to talked and we've and we're anymore. talked them lot question, as talk we

million quarter, away, call not $XX talked to million would typically million. an We was P&L that in a largely a and bumped it have say I of $XX of call anywhere those only it but perspective, up number sometimes it, about million, all So about $XX so between, average premiums QX, from gone cash. $XX

have -- QX. we to bit QX good that. in rest got a and hold of not to then That did the accrue We

So it's XX% now And XX% quarter, last number. are out-of-the fully quarter. this premiums

why in reasons has guide. the of -- it competition. it's one customers. certain there or look-forward, So certain price as geographies hey, We always been feel you confident in the There we XX% see

our to situations, need marginally today. certainly are We nothing aggressive do call in change be we but we significantly different than be, seen that expect we more guide. it, that will certain will haven't any to -- We material in

color. the for Thanks

Yes.

Fargo. from go next is The Wells with question Aaron Rakers Please ahead.

guys. trajectory I Yes, have guys behalf know slowed Michael like billion you your ARR This what and kind If we and maybe would I Thank $X -- of in can on to wanted think how I to describe a your thank getting but step-back is here? first you out help to from pushed Aaron. I you, billion, your of to your the just ARR ask, you. a us And the growth quarter where bit. quarter go quite of target, think wanted about there sort timing? -- you just in the take about

of models essentially is first think then amount we for model; which and have certain managed has or our three Then I on the speaking. is a a quarters a of Yes, utility which and capacity our where of in serve then subscription we pays to basis. pay-as-you-go model, our customers; consumption which units business or quarter. all, renews roughly subscription customer Of two cloud -- a consumption the is term business, annual total capability or of the that about business, basis grown part model, our an

dollar-based at and review at Subscription for we'll that about our challenge, we at retention is part next norms. as get conducting as cloud of subscription perform you well. quarter's well cloud of part average, Their a storage call plans consumption small update business. an And quarterly a are the net was both the our and industry we CloudOps and storage the where to continue if performance, grew They look you rate a year-on-year. last saw businesses industry the

Okay. just help I all-flash add where changing? the me backdrop this estimate you. And Thank expectations that's understand the can it's just share to through macro you. best And And of moving there, one That's And just you your can kind what X%. trends? been I understand more. business the quarter? wondering helpful. is How can I Thank maybe kind appreciate year? if about your are if of I'm your down want but

backlog of all, that product from year. is the in I business last our shipped flash year-on-year levels think compare first benefiting for we by impacted year quarter comparable of last the elevated

backlog, and we if grew products. If growth strong flash flash quarter saw remove our year-on-year -- you you this actually that from capacity

We flash the expect through as the year. to grow portfolio percentage our course business overall of a of

The first-quarter C-Series. customers are products, still qualifying capacity our flash the

we weren't able environments move headed so way. customer our but over intended to yet, all all-flash they to are of And that

both the that we well And have. the you the as the guided in in go-to-market on growth regard share are market second-half second position Dell. based year. our picked-up gains, really what good of that to flash in should to expansion in is pipeline reflected starting the we expectation the share reflect in portfolio that so feel see have that as product With in about behind we changes And have the others

is ahead. next from Please The James. question go Raymond with Leopold Simon

is in Simon this Hi, for Leopold. Victor Chiu

pricing you next your flash year, the year margin the year. industry experiences expectations this this of for NAND commentary the media secured to guys you've the market You us latest impacts the year? expected understand think agreements next that product Can whether from for how fiscal the manufacturers noted hold for and any is beyond gross forecasts but overcorrection fiscal sharp a that help implies I and remainder

Victor, Hey, it's Yes. Mike.

'XX, through fiscal for guided that. let us you haven't walk but we hey, So,

and portion feel we between bucket, 'XX, about we hedge large to of purchases that. good a want NAND it, whole but price secured never fiscal of talked our you about not the really all we locks, As pre-buys for have

some addition, a do of it's at In fiscal 'XX, agreements those this majority flow into not point.

of what should ‘XX, we where we rolling about are have where -- into and today feel we 'XX are So as good for that some we stand really we we certainly about looking do? at

update We'll you next that, the more call. XX-days and lot on work it, the next do on a call in

market. you are something want We that, As it make it sure but looking prudent be think and a know, changing to it's very we hard through that is at.

helpful. the not the the five on of several media business, much this of very of disk over shipments see view have impacting there have I that's years. the sharp part one drives. recently, your commentary? be NetApp the how on trends, new have in side the of perspective legacy drives And spinning correlation any quarters Do legacy systems, more guess asserted competitors you pretty storage other just storage declines spinning in do won't between and know I seen has but Okay, last you there this that with you agree this Do manufacturer long-run? any historically,

we the spinning flash best think have the in I technologies and Listen, market. the best media

that's our functionality think of and into integrated reflected of flexibility increasingly operating the by I natively that system security our richness set, the feature the data offerings. our

I outlines a the about have is of think our long-time. that competitors what talked

that can't give broad you you our technology support to we'll say of so frankly When range exist price our the doesn't meet it. cannot, then in grenades throw choice And support invest competitors and technology, type a of have technologies that cannot that points. we to like customers you performance because and continue right a

-- past extreme be that five drives gone that's that's think so that in your extreme you view opinion? legacy that will in years, the that is Okay, spinning

is years as in a Five long-time learned. we've all technology

Yes.

you. Okay, okay. Thank

question The Asiya from go Merchant with next is Citigroup. ahead. Please

I think guided versus for you taking for on past, linearity you In the my some thank first-half question. Great, second-half.

to know that holds year? of So remainder subscription prior I to public-cloud things. How a the of the clarify guiding lower to wanted on should side just about think we little And linearity? expectations, still the just bit relative due weakness. back just this it's if to the for

the still have of any the think back-half looking from expecting growth about for of fiscal I in rates year-on-year the this kind we are we -- a to more at you. revenues how from as continue point? easier Are 'XX Thank are mean, into we cloud basis have we insight year? of these to get the rest accelerate expecting should something run-rates to comps the still

for question. thank the Yes, you

we the to on midpoint on last round in consistent second, the are quarter. question revenue and XX% first-half the is we assuming very XX% guidance, which still about first So, pretty of in close on the did with linearity, what based in

there. that with big QX very shown which Also, the And change that's quarter-on-quarter, our linearity guide we've consistent about no So, X% well. historically. linearity well our historical up is within as is

On originally it, look the growth cloud we're if revenue, so to forecasting as guidance. still update it's growth be and had at that you mid-teens the the well, thought going not We because cloud revenue Even there year. growth number, it, historical the in we're stays would numbers, and revenue year-over-year forecasted not it today, call if business. last at somewhere around, cloud of where that

full-year reflected at have point, goes. into the about the we But that how year where in of all baked we see guide. So number. feel number, this so we our full-year we've of good that that rest on We'll our are

you. thank Great,

you. Thank

from next The TD is Sankar with question go ahead. Krish Cowen. Please

George. for Yes, I for my thanks hi, AI have question. questions in high-level two taking

all-flash storage, understanding accurate most and Our seeing file solutions of AI solution; the benefit are of workloads you A, hybrid today? being assessment or we is object used in that is as that put HDD unified

Dell. Thank portfolio speak filing position, market-share solutions like your solutions that's benefit Pure there object, market storage to second, unified of you. can And about expected product and other it's compared PowerScale solutions Storage and from cloud to competitive other in object similar more for share from FlashBlade like and your AI, block you unified are a if and also And file? from

make to audio Listen, files on predictive whether primarily or data, today I offerings first unstructured is using that unstructured think AI priority. unstructured document images AI formats, data text generative analysis the or that of the on that it's data types would is comment AI analyze I various

definition or one have think the unified little with to is unified storage the to tried strong we unified that really file that track-record I think rather in object Second, we say and file, created of they've other. cloud. listen, and that a block, object, unified across than got new regard And systems and protocol I

a is they typically available therefore, running back look think the about time can have to and the versions high-performance third models of like topic. what workload, system. I is that the make you are talk landscape so are the data broad trade At changes different customers when store AI, trading sets And when to they and models it they typically that all-flash used it's they they models. and But at they on a for that data keep implications those go accuracy. what

give so cycle last us think cloud. start clients strong And we usually in our solutions on is teams developers cloud the lot Amazon of of a use on strong data a either workflows. and the or Sagemaker position to data disk start cloud on place is of or team And I life hybrid archival data I these science are the are that seeing beginning the a Workflows, where public science with projects. then their Vertex at make in the point would is, Google and listen, AI Public and

Thank guys. you,

from The ahead. go UBS. question is with next Please Vogt David

had some phone I Mike. Hey George. Hey, thanks. difficulties. Great,

So your of I this. know investment the an mass what like of like addressed sort some of gate. your if enterprise going out priority seeing perspective? is storage, capacity capacity On what strategy the mass traction you customers terms the you are AI sort really side of from product I looks versus strong in apologize from hearing forward from the

and think you maybe quickly, term Public how trends? your capacity Cloud high-performance think about now? on between management storage that mix then you. I for high-end, and how But And maybe about starts longer do term, fits of has real over bandwidth, impact the how When the a of you on just been mass sort you much longer an know thinking business are business this

ago think maybe this today quarter. longer-term updated for still bit ago XX a year have less a you I know be is to outlook it than opportunity a key even days little you Or But about a the or point? at it has might you're maybe same opportunity out Thanks. giving of next talking do driver the business? thought

on two Let those me points. hit

of to is that There I where a of on life models cycle of AI, cycle life sits fine-tuned the it's portions to keep more there the available. the I first think tasks. on again, the you of mentioned, life light portions regard because are are as run want with systems cycle systems. versions data high-performance capacity-oriented And then broad extremely your

and I you of a its portion cycle so then like life type of to copy at time that's any keep a of a want where has workload the workload, the look data And it of hot there's where data. there's portion

the With in. have I think array one quarter regard listen, to overall outlook, all-flash we

grow pleased than really will one products. what of long than products part see with flash quickly next already upgrades is for time. adoption market of are while Within refreshes, grow market mix. been our drive all-flash, and be is higher flash storage products attacking I of XX-K more high-performance tranche and which total the a capacity bigger of performance will our the the will because period our the is all-flash in Overall, business the capacity at products the We a have flash

they how that's break that think I So out.

that, think I to opportunity the regard With is strong. listen, cloud,

our cloud capabilities excited are of and services. customer the of adoption all the of about pace storage the We growth those of services

them, with you'll hear well Cloud new Google weeks. come the to news cases work of the our the couple exciting regard use more have in with expansion about doing to as more of offerings that in around as with We the next Google we're both

offerings well. received of now our We're approach have and storage is that The hyperscalers. X on go-to-market that in. by the think been portfolio consumption cloud parts I a has focus cloud dedicated model to And performed our quarter right well the best

work on you an subscription quarter. to update have We We'll side. give next do the

cloud Our has changed. of view not overall

Great, guys. thanks

Steven is Advisors. from question next Fox go The ahead. Fox with Please

Hi, business I of follow-up seems the you guess public -- Good But we're last I'm thanks. wanted type it being the afternoon. in. cloud. to faster just it's like subscription macro to George, on with of on subscription. comments, I especially in obviously, wondering, some grow and those consistent want down,

cloud, public in disappointing to that's stuff on refining why riding in is more guess up start to given of maybe business you as Thanks. it I So to the an subscription I'm of opposed cycle? trying here until terms business, the the understand especially all specifically, going out see other terms

subscription that see impacted. not the think world had Listen, we because optimization, that part that I a contract. When get optimized of business cloud the business you are Yes. a pay-as-you-go got are for saw company quickly the the you trends consumption generally only we software on in the

of part think time a or usually at subscription to subscription a a of expand decision subscription. gets a I the expand not the renewal or affected

we better that the part do fact That doesn't excuse in our business. subscription wanted to of the

you refine I think give update to got to work we'll call. those. we've cases on expectations, customers' you sharpen on next meet proposition, give our We'll We're portfolio, to on working pricing an do on the update the and optimize an certain in already value that. that

Great, that’s helpful. Thank you.

The next ahead. Bank Mohan America. go Wamsi with from Please is of question

from sort there's on X last at point is fair of growth? of Yes. Hybrid points for Thank help to you. XQ? the backlog-related X you to Cloud the it to that X AFA. going second-half think is headwind you It Can fiscal magnitude in sounds think your like us similar in X in through be year from comments side, to least fiscal And had acceleration a

modeling what as if upside relative overall the given you hybrid kind I'm kind is talk the guidance look is at what you're seeing your that's you public, wondering And much. implied. you offsetting estimates And Thank change? about in that of the in that's the could of that Street's is weakness didn't so --

Thanks for Hey, question. Mike. Wamsi, the it's

So numbers. go the through let's

you're the QX the of we expect X%, negative. impact. It year than you was we That that, is the to in in QX, half about 'XX still talked second-half declined impact. if about about of backlog adjust the last with benefit first has about, X% growth be on you Difficulty] slightly QX fiscal and we last the the quarter, [Technical so So So the and better or compared close this same when for same about growth pretty yes, our first-half

we we guidance, we that the that then second-half, the and we've And QX, Cloud with gave. the new in pipelines go-to-market the Based fruit expect on products, as and based especially the the to the what we're growth based on progress The still on growth not do do on to in guidance to sales we that comfortable related that those saw of have as the have Hybrid midpoint bear we as only C-Series. into expect on more that's focus go second-half, well activity. we based changes, seen in then low-single-digit also

confidence would what the go that's be the gives into of we as year. that us and yes, second-half accurate, overall, So

so Okay, you great. much. Thank

with is question ahead. Marshall Please go next The from Morgan Meta Stanley.

question, I that, you as was Great, sense essentially this starting of are just where consumption you kind of we thanks. of growth there see the expected get kind a that kind market seeing guys of has stabilized, quarter. we're about you optimization that are noted growth the the and is what if just I storage guess business piece out assumption again? of and a we're and if at the optimization Maybe of in this of growing to terms rate first bottom kind to or want bottom in -- you period? again still of that

initially have And if kind been any customer workload there's a types kind or that of than question, in second of types in Thanks. C-Series more then just terms of expected? as interested surprises

on of good which optimization On of projects basically workloads that the have was cloud done deployment the there as and think slowdown that first I means additions, Meta, what ongoing the we question, cloud. stuff. pace saw continued easy of saw customer customers We pace the are

to And more so optimize. about what they now cautious further probably are

that yet. ramped starting optimizing, early new on customers haven't they have bucket, them been projects there but of our those the to projects Within are signs technology, latter the do

within ones was So that new the we as the workloads benefit opposed customers the saw to spending. new and quarter reaccelerating optimize

in With of where of cloud regard a don't One purpose product. customers private a want application, question, to use where was capacity more flash, care be performance. selling good high-performance environment would flash capacity but into generally flavors. a Those flash cases two general second the were particular performance better were we about the

price products. then speaking, flash strength. smaller our And of other was across so AXXX strength one point saw think in had all And we than a was the also them I where lower any environments the product. we at introduced that Both product that broadly of mid-market and segment, saw

you. thank Great,

Please The next Daryanani Amit Evercore. question is ahead. go from with

here? for taking apologize led the Thanks to I taking Yes. any micro middle, it in so are then them? Or well? was understand Public is can my But just you're about what more And then questions. the specialists addressed. the specifically just I to this love to you it miss the initiatives there or the when micro talk hyperscalers? talk you around reasons if macro the are And initiatives? off about any as taking, macro initiatives more taking that incremental versus are on Just impact? you're got you Cloud, aligning Was of what impact caught the to your address

your consumption and meaningful think year business, speaking, offerings over over look traditional of at amount subscription consumption you more has if license That the roughly first-party shifted of more our last preferred I broadly one-quarter type, is mix subscription. favor as have offerings. the cloud of a customers marketplace own bring some is our and in three-quarter

consumption. that than impact pronounced we rather the quite think more Consumption was saw performed in subscription well. I

that so subscription. out one-quarter the of And it's business would the I in in point

was Then was things. second, of whether regard mix a macro to with it or micro, it

related upon the product some customers, use less they use budget and it listen, said, clearly, was was it in think to renewal, want I only of -- I constraints, where to environment, mission-critical our customer a of product being so most actions. other of the ready tools. cases, the the and we've taken monitoring In to deploy not couple for it some was it

have tailored right that right of conduct the customers already give is pricing you set those fulsome the some that up review our set share of the that products changes. we is action One we to right, up a between to, cases a update. us underway. more as use implemented said, right, and We'll value products, the is make sure We've

early. so as regard products. It's from with then We've on the some And noted, cloud hyperscalers and that can aligned implemented to how progress, NetApp more success the work organization customers a we done. customer evidence to we've, good get there's with implemented but expertise to specialist of seen dedicated use go-to-market, also be both

of That's a if was on really just view performance given cash it. I year flow, free and some much was And had strong what any or stuff? touch the clarify you pull-in what the have you expected just flow, QX, in drove bit could something you Can a I than on Got think, as I And QX maybe be helpful. if what that, I there here? cash with think, better well. Mike, free of typically fiscal

parts. come the question a than the was there for Yes, on say quite -- last Thanks Amit, seen you've we it I Awesome. two would three thought. was Yes. in bit billings There better in cash. lower was moving quarters.

came in cash not But down And It's of So drove components down supply year-over-year. flow only the reduction free was and spending. quantity our collections that what were operating chain the the that's really significantly. premiums.

And then, of course, pricing came down as well.

of of on inventory growth year. compares year, So were you of before QX last when still, as because see year the as to continue in some call that, should up not if the benefit we to bulking the the expect that expect it, I'll in the we things of rest slowed about think to that big we because down middle QX

You year-over-year, is know, less unfortunately paid in one-time benefit compensation. incentive good we bit the which a

lower well. that helped expect be we year, we as that And continue So high we cash to it to did And free as $XXX down. last say, to spent and helped well. drive million expect drive the then come hey, CapEx flow we the

on to a of we net expect guidance income, rest As year, do around you look the is track non-GAAP full-year billion. it somewhere the to pretty close basis at which $X.X

we every of quarter -- taxes. happens I year, this most do hey, keep in and want though, it's folks pay mind, the to in QX our note,

our So well. we as and we then pay tax almost U.S. taxes $XX make payment repatriation million federal in

year. So expect QX, it's in And QX down back that been be like following to typical half, every then from trends. more and the

thanks So the question. for

Thank you.

go question final Credit the today Suisse. ahead. And with Please Shannon comes from Cross

competitive set? a it AI George, from first as with switchers much. standpoint? And you then a you basically from customer that, that? are very follow-up. Or differentiation guess something this sell an Thank I product using question, drive talk to ONTAP comfortable can have competitive seeing base actually you Are NetApp's can into you ONTAP standpoint, in I you. a existing ability your is about this to Thank and my

AI We very a AI and science selling accounts. model. new in data net they -- verticalized or it's teams our sell base ONTAP are are into installed They teams, whether

analysis from clinical for So -- NVIDIA could thing. from rapid also work storage drug data with do the same together on discovery, teams we apply We with that with so really example, pharmaceuticals, data GPUs NetApp. large-scale can in high-performance they

optimizing advanced development. in twin manufacturing, selling where yield are digital example, of we manufacturing prototypes they into are For accelerating and sort

So new I of think net key new have those are budget, that sort landscape. the net areas customer we

the also X Our now conference. advantages hear best have Google the scale customers. versions public And management, couple the weeks into that and large integrated next of the in increasingly, about are of you'll and on the it's running performance, the our highly advanced science demo of more the in industry, high we toolkit leading all then data clouds, chains same at

I then you don't of AI asked standpoint. you opportunity about generative maybe, experience? thinking Thanks. AI within and know, guess And an about But customer how we've internally save utilizing I improve to productivity, are NetApp from Okay. sort increase costs

already we to to increase at the is innovation tools deliver can accelerate pace and in to customers. AI development ways. which One use more three We software

automatically The or we give advice various products second, and for rather services risks harder customers running be example, can to or integrate systems attacks proactive should things that response. ransomware than reactive AI they into and other our detect, from so than impending

that. service, being integrated. as the from support marketing have our documentation, well customer is everything AI collateral, AI version range we of And And as then capabilities is multilingual of the third across businesses, already In chatbots. the next Gen

on lots are underway of that. you, Shannon. Thank exciting there projects So

Thank you.

Let The a to despite backdrop. macro me brought in 'XX a solid customer to have the market close we comments. innovation got start, with reception choppy the substantial FY has few strong to

a our Public business, performance business. control, We are to reinvigorate more prudent focused of be our elements in within tightly efforts storage Cloud laser-focused build the FY priorities to to the better business on stewards to 'XX systems our drive our approach managing and to

on half Early track our back reception this drive indicate our differentiation on to exciting look and at delighted growth public updating the results I map. progress cloud the while our and growth focus and am to new yielding absolutely continued services expansion next of we in on I hope year. line earnings positive to margin of our road the to call. innovation and by storage growth first-party top you forward see continued Thank the products, INSIGHT quarter's are of you.

Thank The for today's now concluded. presentation. conference attending has you

disconnect. may You now