NetApp’s latest quarterly revenues have fallen, in line with HPE and Pure Storage.
Revenues in NetApp’s Q4 of its fiscal 2023 ended April 28, 2023, were $1.58 billion, down 6 percent year-on-year, and profit declined 5.4 percent to $245 million. Full fy2023 revenues came in at $6.36 billion, a mere 0.6 percent more than fy2022 but with profits up 35.5 percent to $1.27 billion.
George Kurian, NetApp’s CEO, said: “Our sharpened focus and disciplined execution yielded solid Q4 results in a dynamic environment. … We are entering FY24 with substantial new innovations and a more focused operating model to better address the areas of priority spending.”
Hybrid cloud revenues in Q4 were 8 percent lower at $1.43 billion but public cloud revenues grew 25.8 percent to $151 million; too small an amount to make much difference to the revenues as a whole. Public cloud ARR (annual run rate) rise 23 percent to $620 million. The all-flash array run rate went down 4 percent to $3.1 billion.
Financial Summary:
- Free cash flow: $196 million vs $343 million last year
- Operating cash flow: $235 million vs $411 million a year ago
- Cash, equivalents & investments: $3.1 billion
- EPS: $1.13 vs $1.14 a year ago
Kurian’s prepared remarks mentioned “ongoing macroeconomic challenges,” a “slow demand environment,” and “headwinds from large enterprises weighed on our product and AFA revenue.” He said NetApp beat its guidance for the quarter and is confident about future growth opportunities, just not for the rest of the year though, judging by its outlook.
Things get worse. The next quarter’s outlook is for c$1.4 billion, a 12 percent drop on a year ago. The full fy2024 guidance is for a low-to-mid single digit revenue decline, say 2 to 5 percent lower.
NetApp has introduced new products recently: the all-flash ASA A-Series SAN array and the QLC SSD-based C-Series, lower cost than its other all-flash ONTAP arrays. The outlook doesn’t suggest these will lift next quarter’s revenue though.
The company is stuck in a short-term no-growth situation, with its public cloud operations not contributing significantly to its fortunes, and sales of its on-premises arrays and data fabric-based hybrid private-public cloud bridges just not expanding . It is managing its business tightly, keeping costs under control and delivering profits.
It’s not seeing, for example, any significant boost from the current generative AI hype which has driven Nvidia’s stock price and market prospects sky high. This is despite Kurian claiming: “In Q4, we demonstrated industry-leading performance in the GPU Direct benchmark, proof of our ability to enable customers to use the full power of GPU technology for AI.”
Kurian sees the public cloud as the key market, saying: “We believe that our first party storage services, branded and sold by our cloud partners represent our biggest opportunity.”
The sales force has been aligned to this, he added: “We have not wavered in our conviction that Public Cloud services has the potential to be a multibillion-dollar ARR business for us. While the shift to cloud is experiencing an industry-wide slowdown, the long-term trend in favor of cloud is unchanged.”
But the outlook is the outlook, and the outlook is for no growth. Contrast this with Pure’s 5 percent growth guidance for its next quarter. HPE’s next quarter storage revenue guidance is flat – no growth and no decline.
