Analyst(s): Futurum Research
Publication Date: November 26, 2025
NetApp’s Q2 FY 2026 results highlight rising traction in AI-aligned data infrastructure, first-party cloud storage services, and a continued shift to all-flash arrays. Management lifted full-year margin and EPS guidance while maintaining revenue outlook, citing durable mix improvements and strong customer engagement across AI, cloud, and cyber resilience.
What is Covered in this Article:
- NetApp’s Q2 FY 2026 financial results
- AI data platform adoption and deal flow
- All-flash mix and product margin dynamics
- First-party cloud storage growth and leverage
- Guidance and Final Thoughts
The News: NetApp (NASDAQ: NTAP) reported Q2 FY 2026 revenue of $1.7 billion, up 3% year-on-year (YoY), versus consensus of $1.7 billion. Hybrid Cloud revenue was $1.5 billion, up 3% YoY, and Public Cloud revenue was $171 million, up 2% YoY. Non-GAAP operating profit was $530 million (+12% YoY) with a non-GAAP operating margin of 31.1% (Q2 FY 2025: 28.6%). Non-GAAP net income was $415 million, up 6% YoY, with non-GAAP EPS of $2.05, up 10% YoY.
“Through strong execution and operational discipline, we delivered an outstanding second quarter with revenue growth driven by strong demand for our AI solutions, first-party and marketplace cloud storage services, and all-flash offerings,” said George Kurian, Chief Executive Officer.
NetApp Q2 FY 2026 Earnings: Mix Shift Lifts Margins, AI Momentum Builds
Analyst Take: NetApp’s setup continues to benefit from a purposeful mix shift toward higher-margin segments such as all-flash arrays (AFA), first-party cloud storage services, and Keystone Storage as a Service (STaas), alongside focused operational discipline. The company’s AI-oriented data platform moves (AFX and AI Data Engine) are aligning with enterprise data readiness and hybrid multicloud requirements, translating into healthy pipeline and deal growth. Public cloud services’ elevated gross margins and Keystone expansion add recurring leverage and visibility, as reflected in rising deferred revenue and unbilled remaining performance obligations (RPO). While U.S. public sector (USPS) demand remains sub-seasonal near term, geographic and segment breadth, plus secured component pricing through FY 2026, help sustain the margin profile.
Enterprise AI Data Platform Traction
NetApp is aligning its platform strategy with enterprise AI data pipelines, utilizing AFX (disaggregated, NVIDIA SuperPOD-certified storage) and AI Data Engine (AIDE) embedded in ONTAP for discovery, curation, policy guardrails, and vectorization. Management cited approximately 200 AI infrastructure and data lake modernization deals in Q2, up from roughly 125 last quarter, with a mix split across data prep and lake modernization (~45%), training/fine-tuning (~25–30%), and RAG/inference for the balance. Early AFX interest is strong as customers qualify systems, though meaningful revenue contribution will take several quarters. Case studies spanned a semiconductor capital equipment firm unifying AI data foundation across hybrid cloud and a financial services company modernizing Hadoop environments to StorageGRID for next-gen workloads. Zero-copy caching, native multicloud connectivity, and ecosystem integration (Domino, NVIDIA, Informatica) are resonating in complex enterprise estates. NetApp’s AI-focused enhancements increase platform relevance as customers operationalize data for production AI at scale.
All-Flash Mix and Margin Discipline
All-flash array revenue rose 9% YoY to $1.0 billion in the quarter (annualized run rate of $4.1 billion), with about 46% of installed base systems under active support now all-flash. Product gross margin reached 59.5% within Hybrid Cloud gross margin of 71.4%, supported by a favorable mix and pricing discipline; support margins stayed elevated at 92.1%. Management has secured component pricing through FY 2026 and indicated the ability to pass through commodity cost changes if needed. Operating expense control (down 2% YoY) and a focus on gross profit dollar growth are sustaining 31.1% non-GAAP operating margins. While memory pricing in FY 2027 remains a watch item, NetApp’s long-term target of mid-to-high-50% product margins appears underpinned by mix and operational levers. The net effect is stable near-term product margins with scope for overall gross margin resilience via mix.
First-Party Cloud Storage Momentum and Leverage
First-party and marketplace cloud storage services revenue grew 32% YoY in Q2, driving Public Cloud gross margin to 83% and ex-Spot Public Cloud revenue growth of 18% YoY. Feature velocity across hyperscalers is expanding the addressable base. Google Cloud NetApp Volumes have added block support, Azure NetApp Files has introduced single-file restore and flexible throughput/capacity, and Amazon FSx for NetApp ONTAP has enabled Amazon Elastic VMware Service migrations. These expansions, combined with enterprise data management and multi-protocol support, contributed to wins such as a cloud-based media production provider standardizing on FSxN for cost and performance gains. Keystone STaaS grew 76% YoY, and unbilled RPO rose 39% YoY to $456 million, signaling future recurring revenue visibility. The high-margin profile of first-party cloud services is a durable structural tailwind for consolidated margins. The cloud portfolio’s ecosystem reach and monetization depth are increasingly material to NetApp’s forward model.
Guidance and Final Thoughts
NetApp guided Q3 FY 2026 revenue to $1.62 billion–$1.77 billion and non-GAAP EPS to $2.01–$2.11, with FY 2026 revenue maintained at $6.63 billion–$6.88 billion and raised non-GAAP EPS to $7.75–$8.05 (non-GAAP gross margin 71.7%–72.7%, operating margin 29.5%–30.5%). USPS headwinds remain near-term, but management points to accelerating second-half growth ex-Spot, rising deferred revenue ($4.45 billion, up 8% YoY), RPO ($4.9 billion, up 11% YoY), and a strong Keystone pipeline. Component pricing visibility through FY 2026, along with pricing pass-through options, helps mitigate commodity risk. The AI-aligned data platform roadmap (AFX, AIDE), cyber resilience enhancements, and hyperscaler-native storage services collectively position NetApp to expand margin and share. Execution on scaling first-party services and converting AI pilots to production will be key watch items for sustained growth.
See the full press release on NetApp’s Q2 FY 2026 financial results on the company website.
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Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
Other insights from Futurum:
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NetApp Insight 2025: Will AI Unlock New Growth for the Storage Market?
Can Google Cloud Deliver on AI and EDA Storage Demands with NetApp?
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