News Stay informed about the latest enterprise technology news and product updates.

NetApp revenue keeps growing, but not as much

NetApp beat its guidance and analysts’ expectations for last quarter’s revenue and income, and also exceeded expectations for technology buzzwords used during its earnings call.

“Our opportunity is framed by the data-driven digital transformation of business and defined by major technology transitions, led by cloud, IoT and artificial intelligence,” CEO George Kurian said during NetApp’s earnings call Wednesday. “The adoption of hybrid multi-cloud environments is changing how modern IT infrastructures are built and consumed, and NetApp is at the heart of these transitions.”

Kurian hit almost all the technology hot areas, but that was the point. Extending the vendor’s message from last month’s NetApp Insight, Kurian positioned the NetApp Data Fabric as a bridge from on-premises flash to edge and cloud storage. He said NetApp made strides in all areas, although all-flash growth slowed and its hyper-converged private cloud product does not yet have enough revenue to break out.

NetApp revenue of $1.52 billion grew 7% year-over-year and its product revenue of $913 million increased 11% over last year. The vendor’s financial health is sound. NetApp’s income of $241 million increased from $174 million in the same quarter last year, and it finished the quarter with $4.3 billion in cash. NetApp revenue has grown at least 7% for five straight quarters, and the vendor has shown a profit in four of those quarters.

Yet NetApp’s guidance indicates a slowdown in growth coming this quarter. The midway point of its revenue forecast of $1.55 billion and $1.65 billion implies only a four percent year-over-year increase. NetApp CFO Ron Pasek pointed to several “headwinds” impacting that guidance, including currency rates, interest rates, and trade disputes with China.

“We’re just generally cautious trying to maintain our track record of providing clear guidance and meeting or beating it,” Kurian said. “I don’t think there is anything that you should read into it that shows less confidence.”

Here is where NetApp stands in its main product areas of flash, cloud and hyper-convergence:

All-flash storage

NetApp reported 29% revenue growth from all-flash systems, including its flagship All-Flash FAS arrays as well as its E Series and SolidFire storage (including NetApp HCI). That’s down from 50% year-over-year growth in the previous quarter. Kurian said NetApp has not dropped pricing in reaction to the lower cost of NAND.

Kurian said, despite a sharp growth in all-flash systems, NetApp still sells a mix of hybrid arrays that include hard disk drives. All-flash arrays remain around 14% of NetApp’s installed base, the same total as the previous quarter.

“We still have a small percentage of our installed base on all-flash arrays, so there is plenty of headroom,” Kurian said.

Kurian said customers are moving to NVMe drives but it’s still early for NVMe over Fabrics, which he called “the truly strategic part of the NVMe roadmap. It will take time to adopt, like any new storage protocol.”

Kurian said hybrid arrays using flash for performance in combination with high-capacity hard disk drives “will continue to be an ongoing percentage of our business for as long as I can see.”

Cloud data services

NetApp launched a bevy of cloud-related storage products at Insight. Kurian said NetApp is in the early stages of selling to hyperscale data centers but has seen early success with Cloud Volumes OnTap for application developers.

“Our unique differentiator is cloud integration,” Kurian said. “Our entire portfolio is made stronger by the Data Fabric and our ability to support a hybrid multi-cloud environment.”

NetApp claimed $27 million in revenue from monthly recurring cloud data services. That was a 35% increase from the previous quarter.

Hyper-converged infrastructure

NetApp still isn’t breaking out its HCI revenue, about a year after entering that market. But Kurian said he is happy with NetApp HCI’s success so far. He said NetApp’s HCI approach of selling storage and compute in separate nodes instead of in one chassis is working. NetApp positions HCI as a private cloud building block that connects to public clouds in a hybrid setup.

Pasek said the company runs into traditional HCI players Nutanix and VMware in most hyper-converged deals.

“I think that we are seeing more new competitors as we attack the hyper-converged market,” Kurian said. “So, we are expanding our competitive assault on hyper-converged market.”

 

Disaster Recovery
Data Backup
Data Center
Sustainability and ESG
Close