After cutting outlook, NetApp beats Q1 market estimates

NetApp's top and bottom line results were weak, as expected, but the storage vendor says the fundamentals of its business model are strong.

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NetApp published its first-quarter fiscal year 2020 results on Wednesday. The results beat market expectations, but they followed a warning from NetApp earlier in the month that its performance would not meet earlier estimates. 

For Q1, the company reported non-GAAP net income per share of 65 cents, compared to $1.04 a year prior. Revenue came to $1.24 billion, compared to $1.47 billion a year prior. Last year's Q1 revenue included $90 million from enterprise software license agreements which did not repeat in the first quarter of fiscal year 2020. 

Wall Street was looking for earnings of 58 cents per share on revenue of $1.23 billion. 

Shares were up in after-hours trading. 

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Two weeks ago, the storage vendor said it was lowering its first-quarter revenue guidance to between $1.22 billion and $1.24 billion.  The previous Q1 guidance from NetApp called for revenue of $1.31 billion to $1.46 billion. The company also lowered its EPS guidance, from a range of 78 cents a share to 86 cents, to a range of 55 cents a share to 60 cents.

"I am clearly disappointed with our Q1 top-line results but remain confident in our strategy and the fundamentals of our business model," CEO George Kurian said in a statement Wednesday. "The gross margin and cost structure improvements we've made provide support for our free cash flow generation and enable us to navigate the ongoing macroeconomic headwinds while making the strategic moves that position us well to return to growth."

He added that NetApp consistently receives positive feedback from customers and partners on the value of its Data Fabric strategy.

NetApp reported Cloud Data Services annualized recurring revenue of approximately $61 million for the first quarter, an increase of 189 percent year-over-year. 

The company also returned $365 million to shareholders through share repurchases and cash dividends.

For the second quarter, NetApp expects revenue in the range of $1.325 billion to $1.475 billion.