Profits from the cloud: NetApp is the name of the secret favorite – Microsoft, Amazon and Google are already customers

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by Klaus Schachinger, Euro on Sunday

EA positive signal in difficult times: In the fiscal year that has just started, the tech group NetApp has more confidence than analysts had expected – despite the well-known bottlenecks in components. The Silicon Valley company is the world’s largest publicly listed independent provider of technologies for storing and processing data in the data centers of companies and cloud service providers. Most recently, annual sales were a good 6.3 billion dollars.

For the fiscal year ending in April 2023, the analysts listed on the US stock exchange service Bloomberg expect earnings per share of $5.43 on average. That’s on the low end of NetApp’s guidance range of $5.40 to $5.60 per share. NetApp’s sales forecast of six to eight percent plus is in line with the experts’ estimates.

Company boss George Kurian, together with the Spaniard Csar Cernuda, whom NetApp brought from Microsoft two years ago, made the cloud the core of the business model. “We have the most extensive partnerships with the largest cloud providers, the so-called hyperscalers: Microsoft’s Azure, Amazon’s AWS and Alphabet’s Google use our software. The alliances bring us more customers, increase our competence and contribute significantly to growth,” said NetApp President Cernuda in conversation with uro on Sunday.

Big goals

With 23 years of experience at the world’s second largest cloud provider, Microsoft, Cernuda is now driving NetApp’s transformation into a cloud-based company. The expansion of the software share of sales from currently 70 percent is already paying off for NetApp in the current environment. “We are less affected than many of our competitors by inflation-related price increases for components,” says Cernuda.

NetApp’s highly profitable core business is OnTap, an operating system for data storage. By the end of fiscal year 2025, the Californians are aiming for sales of $7.9 to $8.4 billion. Growth of 25 to a good 33 percent is planned for the next three years. In order to achieve this ambitious goal, the group is expanding its expertise with technologies for the automation and cost optimization of data storage and processing. They are summarized in the so-called spot portfolio. Cernuda reports that many companies that have not previously been registered in their core business also use these technologies to evaluate their data via the cloud.

The portfolio has therefore been expanded through acquisitions for two years – most recently in March with Fylamynt, a developer of automation software for the cloud. With spot technologies, NetApp is increasingly establishing itself in the cloud business. Amazon’s AWS is the first major customer to use the Californian’s new automated file management system. The purchases are financed from the free inflow of funds. For the current fiscal year, NetApp’s free cash flow is estimated at $1.1 billion. In addition, the group has over $4.1 billion in cash reserves.

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