NetApp Q3 FY26 slides: beats guidance, margins hit record high

NetApp Inc. (NASDAQ:NTAP), a leading data infrastructure company, announced its third-quarter fiscal 2026 earnings results on February 26, 2026, reporting financial performance that exceeded company guidance across all key metrics with record operating margins, driven by strong growth in AI and cloud services. The company reported revenue of $1.71 billion and non-GAAP earnings per share of $2.12, both surpassing Wall Street expectations, with shares rising 3.06% in after-hours trading to $105 following the announcement. This quarter marked a significant milestone for NetApp as the company delivered record operating margins while accelerating revenue growth, positioning fiscal 2026 as what management described as 'our strongest year yet.' NetApp's financial performance demonstrated substantial growth across all major metrics, with revenue increasing 4.4% year-over-year and non-GAAP EPS growing 11% compared to the prior year. The company's operating margin reached a record 31.1%, up 110 basis points year-over-year, while billings grew 10.1% to $1.89 billion, indicating strong customer demand and contract momentum. The remaining performance obligations climbed 14.3% to $5.11 billion, providing enhanced visibility into future revenue streams. This performance reflects NetApp's successful transition toward higher-growth segments, with All Flash Arrays and Public Cloud services now comprising 71% of total revenue. The All Flash Array segment achieved a significant milestone, delivering record quarterly revenue of $1.0 billion with 11% year-over-year growth, while Public Cloud services emerged as a standout performer, growing 27% year-over-year despite the divestiture of the Spot business. NetApp highlighted significant momentum in artificial intelligence workloads, reporting approximately 300 customer wins for data preparation and foundational storage for AI applications during the quarter. The company emphasized growing customer interest in two new AI-focused solutions: AFX and AI Data Engine, which are positioned to capitalize on the expanding AI infrastructure market. NetApp's profitability metrics reached new highs in the third quarter, with operating income expanding to $533 million and free cash flow generation remaining robust at $270 million, representing a 15.8% margin. The company returned $303 million to shareholders during the quarter through share repurchases and dividends, maintaining its commitment to capital allocation discipline. For the fourth quarter of fiscal 2026, NetApp expects revenue between $1.795 billion and $1.945 billion, with non-GAAP earnings per share of $2.21 to $2.31. For the full fiscal year 2026, the company updated its outlook to revenue guidance of $6.772 billion to $6.922 billion and non-GAAP EPS guidance of $7.92 to $8.02.