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Factors Setting the Tone for NetApp's (NTAP) Q2 Earnings

Zacks Equity Research

NetApp NTAP is slated to report second-quarter fiscal 2020 earnings results on Nov 13.

For second-quarter fiscal 2020, NetApp anticipates net revenues in the range of $1.325-$1.475 billion. The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $1.39 billion, indicating a decline of 8.6% from the year-ago reported figure.

The company expects non-GAAP earnings for second-quarter fiscal 2020 between 91 cents and 99 cents per share. The Zacks Consensus Estimate for earnings has been steady at 94 cents in the past 30 days, suggesting a decline of 11.3% from the year-ago reported figure.

Notably, the company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed one, with the average beat being 5.77%.

Factors Likely to Influence Q2 Results

NetApp’s fiscal second-quarter top-line is likely to reflect improvement in adoption of hybrid multi-cloud offerings, Cloud Data Services and Private Cloud offerings.

Increased momentum of the company’s HCI (or hyper converged infrastructure) and new cloud partnership with VMware VMW platforms in the fiscal second quarter, are likely to have driven revenue run rate for Cloud Data and Private Cloud business.

NetApp, Inc. Price, Consensus and EPS Surprise

Moreover, NetApp entered into collaboration with Alibaba BABA and Equinix. Per the deal, NetApp Private Storage (NPS) for Cloud has been integrated with Platform Equinix and Alibaba Cloud. Notably, the integration is aimed at enabling enterprises based in Indonesia to run complex workloads and applications across the multicloud platform, simplifying data management in a secure manner. Incremental adoption of NPS is expected to have bolstered Private cloud business run rate in the fiscal second quarter. Notably, the metric came in at $250 million in the last reported quarter, up 85% on a year-over-year basis.

Furthermore, the company expanded all-flash storage portfolio with end-to-end NVMe-based NetApp EF600 storage array in the fiscal second quarter. The latest solution has been witnessing traction from Mellanox, which already utilizes NetApp’s NVMe solutions across its network controllers.

However, growing expenses on product development amid stiff competition from fellow storage peers including Pure Storage PSTG is likely to have limited margin expansion in the fiscal second quarter.

Notably, for the fiscal second quarter, the Zacks Consensus Estimate for Product revenues and Hardware Maintenance and Other Services revenues, are pegged at $770 million and $349 million, indicating a year-over-year decline of 15.7% and 5.2%, respectively.

Meanwhile, the Zacks Consensus Estimate for Software Subscriptions revenues is projected to be $261 million, suggesting an improvement of 10.6% from the year-ago reported figure.

Zacks Rank

Currently, NetApp carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Click to get this free report NetApp, Inc. (NTAP) : Free Stock Analysis Report Pure Storage, Inc. (PSTG) : Free Stock Analysis Report Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report VMware, Inc. (VMW) : Free Stock Analysis Report To read this article on click here. Zacks Investment Research