SAN JOSE, California, September 3, 2026, 03:31 PDT — NetApp shares declined 7.9% after the company posted a 30% rise in revenue, but failed to meet cash conversion expectations.
- NetApp shares were at $166.55 at 06:30 EDT, falling 7.9% in premarket trading.
- Revenue for the quarter increased by 30%, while adjusted earnings per share surged 66%.
- Free cash flow dropped by 35%, with cash conversion cut in half as inventory used up $176 million.
- Midpoint guidance for fiscal 2027 revenue increased by $650 million.
Shares of NetApp, Inc. NASDAQ:NTAP dropped 7.9% to $166.55 in premarket trading on Thursday. The decline occurred after the company reported record revenue and raised its annual forecast significantly. The update was released at 06:30 EDT Nasdaq.
The discrepancy places cash conversion in focus in the earnings discussion. Free cash flow declined even as reported sales and profit rose sharply. This difference helps clarify why significant outperformance led to selling.
NetApp’s premarket valuation stands at about 16.9 times its updated adjusted earnings midpoint, compared to approximately 18.3 times on Wednesday. The ratio continues to reflect expectations of sustained demand for storage.
NetApp repricing after earnings
Selected extended-hours prints, dollars per share
Revenue for the fiscal first quarter was $2.025 billion, marking a 30% increase compared to the same period last year. Adjusted earnings climbed 66% to $2.58 per share. Both figures surpassed Wall Street expectations, according to FactSet data MT Newswires.
Revenue from all-flash arrays rose 47% to $1.3 billion, while Public Cloud revenue increased 28% to $206 million. Chief Executive George Kurian described it as a “record-setting start to the year” company release.
Growth accelerated, but cash moved the other way
Cash flow performance was softer. Free cash flow declined to $401 million compared to $620 million previously. The margin shrank to 19.8% from 39.8%, calculated on reported revenue.
Inventory drew $176 million for the quarter. Capital expenditures almost doubled, reaching $102 million. Together, these factors reduced cash flow, even as net income increased SEC filing.
The quarter in question featured an additional week. Excluding this factor, revenue was up 26%. Management additionally pointed to faster buying activity from a number of major clients earnings-call report.
NetApp increased its fiscal 2027 revenue forecast to a range of $7.975 billion to $8.225 billion, setting the midpoint at $8.10 billion—$650 million higher than its earlier outlook. The company also raised its adjusted EPS projection to between $9.73 and $10.03.
Fiscal 2027 outlook reset
Guidance for the second quarter was robust. Revenue is forecast to land at $2.10 billion at the midpoint. Adjusted operating margin is projected to range from 30.9% to 31.9%.
NetApp distributed $302 million to shareholders via buybacks and dividends. The company reported cash, equivalents, and investments totaling $3.576 billion. The number of diluted shares decreased by 1.5%, reaching 200 million.
Management will next address investors at two conferences on September 8. These upcoming appearances will provide an initial indication of second-half expectations NetApp investor relations.
Risks: Continued success for AI storage may amplify the impact of the selloff. Additional increases in inventory or slower order timing could intensify worries over cash conversion.
Related articles: Earnings
