NetApp Q3 earnings fare well, but sales light as enterprises tap spending brakes

The Federal government shutdown in the U.S. caused big customers to pare back spending, said NetApp CEO George Kurian.

NetApp's third quarter sales fell below expectations as large enterprise customers pulled back in January amid economic uncertainty.

The storage vendor reported third quarter net income of $249 million, or 98 cents a share, on revenue of $1.56 billion. Non-GAAP earnings were $1.20 a share.

Read this...

Hybrid cloud: What it is, why it matters

As organizations attempt to strike a balance between having all IT services on premises and offloading storage and compute to the cloud, a logical middle ground has emerged: the hybrid cloud.

Read More

Wall Street was looking for third quarter non-GAAP earnings of $1.15 a share on revenue of $1.6 billion.

In an interview, NetApp CEO George Kurian said he was disappointed with the sales results, but noted that the company executed well and is seeing strong demand in flash, AI workloads and hybrid cloud deployments.

The issue in the quarter was macroeconomic uncertainty due to the Federal government shutdown, said Kurian.

NetApp makes its cloud, 'data authority' pivot

"We saw a slowdown in purchases by our largest customers in January. We saw economic uncertainty. We executed well in the variables we control," he said.

Hybrid, AI, cloud and all-flash fared well, he added. Extending to public cloud with its storage software has also been a key selling points for customers, said Kurian.

As for the macroeconomy, it's too early to tell if enterprise will become less cautious. The government shutdown made enterprises more cautious. About 11 percent of NetApp's revenue came from the public sector in the third quarter, down from 14 percent in the second quarter.

On hybrid, NetApp said the business is growing in terms of number of customers and use cases for integrations with AWS. Kurian said NetApp integrations with Google Cloud Platform and Microsoft Azure will be generally available soon.

NetApp said fourth quarter sales will be between $1.59 billion and $1.69 billion with non-GAAP earnings of $1.22 a share and $1.28 a share. 

netapp-q3-2019.png