Q4 2025 NetApp Inc Earnings Call

Good day and welcome to the net at fourth quarter and fiscal year 2025 earnings call.

Operator: Good day and welcome to the NetApp 4th Quarter and Fiscal Year 2025 Earnings Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

All participants will be in a listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

After todays presentation, there will be an opportunity to ask questions.

Please note this event is being recorded.

Kris Newton: I would now like to turn the conference over to Kris Newton, Vice President, Investor Relations. Please go ahead.

Speaker Change: I would now like to turn the conference over to Kris Newton Vice President Investor Relations. Please go ahead.

Kris Newton: Hi, everyone. Thanks for joining us.

Hi, everyone. Thanks for joining us with me today are CEO, George Kurian N C. F O. We some genre. This call is being webcast slides will be available for replay on our website at <unk> Dot com. During today's call. We will make forward looking statements and projections with respect to our financial outlook and future prospects, including without.

Kris Newton: With me today are our CEO, George Kurian, and CFO, Wissam Jabra. This call is being webcast live and will be available for replay on our website at netapp.com.

Kris Newton: During today's call, we will make forward-looking statements and projections with respect to our financial outlook and future prospects, including, without limitation, our guidance for the first quarter and fiscal year 2026, our expectations regarding future revenue, profitability, and shareholder returns, and other growth initiatives and strategies. These statements are subject to various risks and uncertainties, which may cause our actual results to differ materially.

Limitation or guidance for the first quarter and fiscal year 2000, Twenty's Saks, our expectations regarding future revenue profitability and shareholder returns and other growth initiatives and strategies. These statements are subject to various risks and uncertainties, which may cause our actual results to differ materially for more information.

Kris Newton: For more information, please refer to the documents we file from time to time with the SEC and on our website, including our most recent Form 10-K and Form 10-Q. We disclaim any obligation to update our forward-looking statements and projections.

Speaker Change: Please refer to the documents we file from time to time with the SEC and on our website, including our most recent Form 10-K and Form 10-Q, we disclaim any obligation to update our forward looking statements and projections.

Kris Newton: During the call, all financial measures presented will be non-GAAP unless otherwise indicated. Reconciliations of GAAP to non-GAAP estimates are available on our website.

Speaker Change: During the call all financial measures presented will be non-GAAP, unless otherwise indicated reconciliations of GAAP to non-GAAP estimates are available on our website I'll now turn the call over to George.

George Kurian: I'll now turn the call over to George. Thanks, Kris. And good afternoon, everyone. Thank you for joining us. Record revenue for the fourth quarter and fiscal year 2025 was driven by strong growth and significant market share gains in all flash storage, along with accelerating growth in our first party and marketplace storage services. We achieved all-time highs for Gross Profit, Operating Profit, Operating Margin, and EPS in FY25, a clear indication of our ability to navigate a dynamic environment. By relentlessly prioritizing our four growth opportunities and leveraging AI for increased efficiencies, we are able to invest in growth and expand our profitability metrics.

George Kurian: Thanks, Chris and good afternoon, everyone. Thank you for joining us.

George Kurian: Record revenue for the fourth quarter and fiscal year, 2025 was driven by strong growth and significant market share gains in all flash storage along with accelerating growth in our first party and marketplace storage services.

George Kurian: We achieved all time highs for gross profit operating profit operating margin and EPS in FY 'twenty five.

George Kurian: Clear indication of our ability to navigate a dynamic environment.

George Kurian: By relentlessly prioritizing our four growth opportunities and leveraging AI for increased efficiencies, we are able to invest in growth and expand our profitability metrics.

George Kurian: In fiscal year 25, we refreshed our entire systems portfolio, sharpened the focus of our cloud services, and positioned ourselves to lead in the enterprise AI market. I believe that we've now reached an inflection point where the growth of all flash systems and public cloud services reinforced by the ongoing development of the AI market will drive sustained top line growth. Five years ago these areas accounted for less than half our total revenue. Today they represent over two-thirds. Looking ahead, we expect these growth drivers, along with our laser focus, prioritized investments and robust execution to deliver more company records in FY26 and beyond.

George Kurian: In fiscal year 'twenty five.

George Kurian: Refreshed our entire systems portfolio.

George Kurian: Sharpened the focus of our cloud services and positioned ourselves to lead in the enterprise market.

George Kurian: I believe that we have now reached an inflection point.

George Kurian: The growth of all flash systems and public cloud services.

George Kurian: Reinforced by the ongoing development of the AI market will drive sustained top line growth.

George Kurian: Five years ago. These areas accounted for less than half of our total revenue.

George Kurian: Today, they represent over two thirds.

George Kurian: Looking ahead, we expect these growth drivers along with our laser focus prioritize investments and robust execution to deliver more company records in FY 'twenty six and beyond.

George Kurian: Organizations are turning to NetApp to help them with data-driven strategies to deliver competitive advantage and operational efficiency. As the enterprise AI market evolves and expands, there is greater urgency to transform. The demands of AI are complex and unrelenting, with massive volumes of data scattered across multiple silos. This fragmentation leads to difficult integrations, inefficiencies, and challenges in governance, security, and data protection. Gen AI transformation has made it clear that legacy architectures are inadequate to serve these complex workloads. NetApp's unified data architecture, spanning any data type, anywhere, enables customers to build an intelligent data infrastructure. delivering the required flexibility needed to overcome these barriers.

George Kurian: Organizations are turning to net app to help them with data driven strategies to deliver competitive advantage and operational efficiencies.

George Kurian: As the enterprise AI market evolves and expands there is greater urgency to transform the.

George Kurian: The demands of the eye are complex and unrelenting with massive volumes of data scattered across multiple silos.

George Kurian: This fragmentation leads to difficult integrations inefficiencies and challenges in governance security and data protection.

Speaker Change: Jimmy I transformation has made it clear that legacy architectures are inadequate to serve these complex workloads.

Speaker Change: Net apps unified data architecture spanning any daily type anywhere enables customers to build an intelligent data infrastructure.

Speaker Change: Delivering the required flexibility needed to overcome these barriers.

George Kurian: Our modern approach to hybrid multi-cloud infrastructure and data management empowers organizations to harness the full potential of their entire data estate simply, securely, and sustainably. We are expanding our install base and reaching new customers with our AI-ready intelligent data infrastructure, which reduces cost and complexity by seamlessly bridging on-premises and cloud storage with unified control. The world's biggest cloud providers, as well as governments and leading companies, trust and rely on our technology. All FlashArray annualized revenue run rate grew 14% from Q4 a year ago to a record $4.1 billion. In the fourth quarter, All Flash made up approximately two-thirds of hybrid cloud segment revenue, and 44% of systems in our install base under active support contracts are All Flash.

Speaker Change: A modern approach to hybrid multi cloud infrastructure and data management.

Speaker Change: Power's organizations to harness the full potential of their entire data estate simply securely and sustainably.

Speaker Change: We are expanding our installed base and reaching new customers with our AI ready intelligent data infrastructure.

Speaker Change: Which reduces cost and complexity by seamlessly bridging on premises and cloud storage with unified control.

Speaker Change: The world's biggest cloud providers as well as governments and leading companies trust and rely on our technology.

Speaker Change: All flash array annualized revenue run rate grew 14% from Q4, a year ago to a record $4.1 billion in the fourth quarter. All flash made up approximately two thirds of hybrid cloud segment revenue and 44% of CIS.

Speaker Change: And our installed base Underactive support contracts are all flash.

George Kurian: The rich data services of our all flash unified data storage systems create a secure foundation for consolidating organizational data and accelerating AI powered insights. We are in the early stages of our entry into the dedicated block storage market with plenty of headroom for continued growth. The breadth of our advanced data management helps organizations lower operational risk and enhance business continuity by keeping data available, protected, and secure. We are seeing accelerating growth from our block-optimized ASA systems as we displace competitors' legacy installations with our simple, powerful, scale-out, all-flash block storage. Our momentum outpaced the market and resulted in almost 100 basis points of share gain in calendar 2024 per IDC.

Speaker Change: The rich data services of our all flash unified data storage systems create a secure foundation for consolidating organizational data and accelerating AI powered insights.

Speaker Change: As organizations seek to build future proof AI ready infrastructure, they increasingly choose our solutions driving a faster than market growth.

Speaker Change: In calendar 'twenty 'twenty four regained almost 300 basis points of all flash market share more than any other vendor as reported by IDC.

Speaker Change: We are in the early stages of our entry into the dedicated block storage market.

Speaker Change: With plenty of headroom for continued growth.

Speaker Change: The breadth of our advanced data management helps organizations lower operational risk and enhanced business continuity by keeping data available protected and secure.

Speaker Change: We are seeing accelerating growth from our block optimized ASC systems, as we displace competitor's legacy installations with our simple.

Speaker Change: Our full scale out all flash block storage.

Speaker Change: Our momentum outpaced the market and resulted in almost 100 basis points of share gain in calendar 'twenty 'twenty four for IDC.

George Kurian: Demonstrating the power of our comprehensive all-flash portfolio, we signed a deal in the fourth quarter with a leading life sciences company to replace a competitor's nearly 10-petabyte footprint. With NetApp, they can now meet diverse multi-protocol and price performance requirements under a single operating environment, streamlining their data operations. To keep pace in an AI driven world, companies must unlock the scale and agility of the public cloud. Only NetApp can help them achieve the required cost efficiency, cybersecurity and AI readiness, with services co-engineered with the major cloud providers. We continue to expand the workloads we address in the cloud and enhance our alignment with our hyperscaler partners' go-to-market motions, broadening our opportunity and accelerating growth.

Speaker Change: Demonstrating the power of our comprehensive all flash portfolio, we signed a deal in the fourth quarter with a leading life Sciences company to replace a competitors nearly 10 petabyte footprint.

Speaker Change: With net App. They can now meet diverse multi protocol and price performance requirements under a single operating environment streamlining their data operations.

Speaker Change: To keep pace in an AI driven world companies must unlock the skill and the agility of the public cloud.

Speaker Change: Only netapp can help them achieve the required cost efficiency cyber security and AI readiness, which services co engineered with the major cloud providers, we continue to expand the workloads be addressed in the cloud and enhance our alignment with our Hyperscale partners go to market.

Speaker Change: <unk> broadening our opportunity and accelerating growth.

George Kurian: Over the course of fiscal year 25, we focused our public cloud services to emphasize our highly differentiated first party and marketplace cloud storage services, closely complemented by intelligent data, operational and workload services. This strategic focus continues to yield positive results. First-party and marketplace cloud storage services grew 44% year-over-year in the fourth quarter. These services compose roughly 75% of public cloud segment revenue, which grew 22% from Q4 a year ago, excluding the recently divested SPARC by NetApp services. A SAS provider needed high-performance, multi-protocol storage to meet their cost optimization and resiliency requirements. In Q4, this new-to-NetApp customer chose to migrate to AWS FSx for NetApp OnTap.

Speaker Change: Over the course of fiscal year 'twenty five we focused our public cloud services to emphasize our highly differentiated first party and marketplace cloud storage services.

Speaker Change: Closely complimented by intelligent data operational and workload services.

Speaker Change: This strategic focus continues to yield positive results.

Speaker Change: First party and marketplace cloud storage services grew 44% year over year in the fourth quarter. These services compose roughly 75% of public cloud segment revenue, which grew 22% from Q4, a year ago, excluding the reverse.

Speaker Change: Recently divested sparked by net App services.

Speaker Change: SaaS provider needed high performance multi protocol storage to meet their cost optimization and resiliency requirements.

Speaker Change: In Q4, this new to Netapp customer chose to migrate to AWS FSX for net up on tap.

George Kurian: FSxN helped the customer achieve a high-performance, unified file-in-block environment with improved availability and resiliency for efficient and secure operations with a more cost-effective solution than alternatives. Just as we have helped enterprises harness the power of hybrid cloud environments, we are now enabling them to accelerate their AI deployments and achieve faster time to value. As the market for enterprise AI evolves, customers are moving from proof of concepts to real world deployments, driving the need to unify their data for business impact. Our secure, cloud-integrated, silo-free infrastructure positions us as a leader in this transformation. We power AI pipelines from data preparation to model training to production deployments on-premises and in the cloud.

Speaker Change: The sex and help the customer achieve a high performance unified file and block environment with improved availability and resiliency for efficient and secure operations with a more cost effective solution than alternatives.

Speaker Change: Just as we have helped enterprises harnessed the power of hybrid cloud environments. We are now enabling them to accelerate their AI deployments and achieve faster time to value.

Speaker Change: As the market for enterprise AI evolves customers are moving from proof of concepts to real world deployments driving the need to unify their data for business impact.

Speaker Change: Our secure cloud integrated silo free infrastructure positions us as a leader in this transformation.

Speaker Change: We power AI pipelines from data preparation to model training to production deployments on premises and in the cloud.

George Kurian: In the fourth quarter, our AI business grew fivefold year over year, again performing ahead of plan. We closed approximately 150 AI infrastructure and data lake modernization deals, spanning multiple geographies, industries, and use cases. Over the course of FY25, we dramatically expanded our AI ecosystem, delivering innovations with NVIDIA, Domino, Dremio, the open platform for enterprise AI open source projects, and leading hyperscaler AI toolkits. We also introduced AI reference architectures with NVIDIA for AIDP, Cisco for FlexPod, Lenovo for AIPod, and most recently Intel for AIPod mini. In Q4, our high-performance ONTAP all-flash storage was certified for NVIDIA DGX SuperPOD, NVIDIA Cloud Partners, and NVIDIA Certified Systems. Building on our large install base of unstructured data, we enable customers to gain intelligence from their data in place, making it ready and useful for production AI use cases without the need for migrations or changes to data operations.

Speaker Change: In the fourth quarter, our AI business grew five fold year over year again performing ahead of plan. We closed approximately 150, AI infrastructure and data lake modernization deals spanning multiple geographies industries.

Speaker Change: Trees and use cases.

Speaker Change: Over the course of FY 'twenty five we dramatically expanded our AI ecosystem delivering innovations with Nvidia Domino Gremio. The open platform for enterprise AI open source projects.

Speaker Change: And leading hyper scaler AIG toolkits.

Speaker Change: We also introduced AI reference architectures with Nvidia for E. I D. P. Cisco for flex pod Lenovo for AI Bot and most recently Intel for AI bought many.

Speaker Change: In Q4, our high performance on cap all flash storage was certified for Nvidia D. G X Super pod, Nvidia cloud partners and Nvidia certified systems build.

Speaker Change: Building on our large installed base of unstructured data, we enable customers to gain intelligence from their data in place, making it ready and useful for production AI use cases without the need for migrations or changes to data operations.

George Kurian: We are helping customers deploy AI inferencing in production today and expect FY26 to be a pivotal year for enterprise AI storage with the opportunity outstripping that of model training. In the quarter, a large Asian telco service provider selected NetApp as the foundation for its AI workload. The company needed to quickly stand up a cloud-based model training environment and at the same time build a larger model training cluster to support its plan to deliver Gen AI as a service. By leveraging NetApp solutions both on-premises and in their cloud, the customer optimized performance, cost, and scalability for both environments.

Speaker Change: We are helping customers deploy AI inferencing in production today, and expect FY 'twenty six to be a pivotal year for enterprise AI storage with the opportunity outstripping that of model training.

Speaker Change: In the quarter, a large Asian telco service provider selected net app as the foundation for its AI workloads.

Speaker Change: The company needed to quickly stand up a cloud based model training environment and at the same time build a larger model training cluster to support its plan to deliver Gen AI as a service.

Speaker Change: By leveraging Netapp solutions, both on premises and in their cloud the customer optimize performance cost and scalability for both environments.

George Kurian: This ensured seamless integration with their training pipelines, supporting current and future AI projects.

Speaker Change: This ensured seamless integration with their training pipelines supporting current.

Speaker Change: And future AI projects.

Speaker Change: Before turning to the details of the quarter I wanted to share some observations about the environment as we enter fiscal year 'twenty six the global macroeconomic outlook faces mixed signals with a general slowdown in growth lingering inflation concerns and a significantly higher level of uncertainty.

George Kurian: Before turning to the details of the quarter, I want to share some observations about the environment as we enter fiscal year 26. The global macroeconomic outlook faces mixed signals with a general slowdown in growth, lingering inflation concerns, and a significantly higher level of uncertainty. Looking ahead, we expect some increased spending caution, as well as ongoing friction in the US public sector and EMEA. We are incorporating an appropriate level of caution in our outlook due to these factors. Our fiscal year 25 results demonstrate how the alignment of our solutions with key IT priorities, our focus, and the strength of our business model enables us to deliver strong performance in an uncertain environment.

Speaker Change: <unk>.

Speaker Change: Looking ahead, we expect some increased spending caution as well as ongoing friction in U S public sector and EMEA.

Speaker Change: We are incorporating an appropriate level of caution in our outlook due to these factors.

Speaker Change: Our fiscal year 'twenty five results demonstrate how the alignment of our solutions with key priorities, our focus and the strength of our business model enables us to deliver strong performance in an uncertain environment.

George Kurian: Additionally, the unfolding enterprise AI market is driving urgency amongst customers to modernize their data infrastructure, drive cloud transformations, and increase cyber resiliency. We are currently negotiating sizable AI and data infrastructure modernization deals with multiple large enterprises, which we expect to close later in the year. This gives us confidence in our full year outlook. We are starting FY 26, following a year of market share gains, armed with the strongest portfolio in the company's history, and a value proposition that addresses customers top priority. We plan to make prudent investments in R&D and sales capacity to drive ongoing innovation and capture additional market share.

Speaker Change: Additionally, the unfolding enterprise AI market is driving urgency amongst customers to modernize their data infrastructure drive cloud transformations and increased cyber resiliency.

Speaker Change: We are currently negotiating sizable AI and data infrastructure modernization deals with multiple large enterprises, which we expect to close later in the year.

Speaker Change: This gives us confidence in our full year outlook.

Speaker Change: We are starting FY 'twenty six following a year of market share gains armed with the strongest portfolio in the company's history.

Speaker Change: And a value proposition that addresses customers' top priorities.

Speaker Change: We plan to make prudent investments in R&D and sales capacity to drive ongoing innovation and capture additional market share.

George Kurian: Looking ahead, I am confident in our ability to capitalize on this significant opportunity and deliver more record results.

Speaker Change: Looking ahead I am confident in our ability to capitalize on this significant opportunity and deliver more record results.

George Kurian: Finally, I am happy to introduce Visam Jabre, our new CFO. I am excited to have Visam with his deep knowledge of our market and strong track record of value creation on the team. He has quickly integrated into NetApp and will be a key partner to me and the leadership team as we continue to execute on our visionary approach for our data-driven future.

Speaker Change: Finally, I am happy to introduce with some job <unk>, our new CFO.

Speaker Change: I'm excited to have the song with his deep knowledge of our market and strong track record of value creation on the team.

Speaker Change: He has quickly integrating internet app and will be a key partner to me and the leadership team as we continue to execute on our visionary approach for our data driven future with some welcome.

Wissam Jabra: Wissam, welcome. Thank you, George, for the warm welcome. And good afternoon, everyone. Let me start by expressing my appreciation to George and the entire board for giving me this opportunity and to Mike for his help and transition during my onboarding. I am extremely excited about joining NetApp and look forward to partnering with George and the rest of the talented team as we continue to drive innovation at NetApp. As George noted, we achieved all-time highs across a variety of financial metrics in fiscal year 2025. We refreshed our entire systems portfolio, honed our focus in cloud, and expect to see even more enterprise AI growth in fiscal year 2026.

Speaker Change: Thank you George for the warm welcome and good afternoon, everyone let.

Speaker Change: Let me start by expressing my appreciation to George and the entire board for giving me this opportunity and to Mike for his help and transition during my Onboarding.

Speaker Change: I am extremely excited about joining net app and look forward to partnering with George and the rest of the talented team as we continue to drive innovation and better.

Speaker Change: As George noted, we achieved all time highs across a variety of financial metrics in fiscal year 2025.

Speaker Change: We refreshed our entire systems portfolio honed our focus in cloud and expect to see even more enterprise AI growth in fiscal year 'twenty 'twenty six.

Wissam Jabra: As a reminder, all numbers discussed are non-GAAP unless otherwise noted. Total revenue for Q4 came in slightly above the midpoint of our guidance range at $1.73 billion, up 4% year over year, and up 6% sequentially. Q4 billings of $2.03 billion were up 12% year over year. This marks our sixth consecutive quarter of year-over-year revenue and biddings growth. Q4 hybrid cloud revenue of $1.57 billion was up 3% year over year. Product revenue of $845 million was up 5% year over year. Support revenue of $625 million was flat year over year. Professional services revenue of $98 million was up 13% year over year, mainly driven by Keystone, our storage as a service offering.

Speaker Change: As a reminder, all numbers discussed are non-GAAP unless otherwise noted.

Speaker Change: Total revenue for Q4 came in slightly above the midpoint of our guidance range at $1 $73 billion up 4% year over year and up 6% sequentially.

Speaker Change: Q4 billings of $2.03 billion were up 12% year over year.

Speaker Change: This marks our sixth consecutive quarter of year over year revenue and billings growth.

Speaker Change: Q4 hybrid cloud revenue of $1 $57 billion was up 3% year over year.

Speaker Change: Product revenue of $845 million was up 5% year over year.

Speaker Change: Support revenue of $625 million was flat year over year.

Speaker Change: Professional services revenue of $98 million was up 13% year over year, mainly driven by Keystone, our storage as a service offering.

Speaker Change: Public cloud revenue of $164 million was up 8% year over year.

Wissam Jabra: Public cloud revenue of $164 million was up 8% year over year. Excluding the recently divested spot business, public cloud revenue grew 22% year over year, which is a better representation of the underlying growth rate of the segment. We exited fiscal year 2025 with $4.54 billion in deferred revenue, an increase of 7% year over year and 5% year over year in constant currency. Q4 remaining performance obligations were $4.97 billion, up approximately $500 million from Q1. Unbilled remaining performance obligations, which is a key indicator of future Keystone revenue growth, was approximately $430 million, up 23% quarter over quarter.

Speaker Change: Excluding the recently divested spot business public cloud revenue grew 22% year over year, which is a better representation of the underlying growth rate of the segment.

Speaker Change: We exited fiscal year 2025, with $4 $54 billion in differed revenue, an increase of 7% year over year and 5% year over year in constant currency.

Speaker Change: Q4 remaining performance obligations were $4 $97 billion up approximately $500 million from Q1.

Speaker Change: Unbilled remaining performance obligations, which is a key indicator of future Keystone revenue growth was approximately $430 million.

Speaker Change: Up 23% quarter over quarter.

Speaker Change: Q4 consolidated gross margin was 69, 5%.

Wissam Jabra: Q4 Consolidated Gross Margin was 69.5% Total hybrid cloud gross margin was 68.4%. product gross margin was 55.4%. Our recurring support business continues to be highly profitable with gross margin of 92.3%. Public cloud gross margin was 79.3%, up 290 basis points sequentially, and 11 percentage points year over year. Our public cloud business now operates towards the high end of the 75 to 80% long term target range. And we remain confident in future tailwinds that can improve upon Q4's record margin. Operating expenses of $707 million were down 2% year over year and up 6% sequentially. Q4 highlighted the strength of our business model and disciplined execution with operating margin of 28.6%, up 50 basis points year over year, and representing the highest for a Q4 in the history of NetApp.

Speaker Change: Total hybrid cloud gross margin was 68, 4%.

Speaker Change: Product gross margin was 55, 4%.

Speaker Change: Our recurring support business continues to be highly profitable with gross margin of 92, 3%.

Speaker Change: Public cloud gross margin was 79, 3% up 290 basis points sequentially, and 11 percentage points year over year.

Speaker Change: Our public cloud business now operates towards the high end of the 75% to 80% long term target range and we remain confident in future tail winds that can improve upon Q4s record margin.

Speaker Change: Operating expenses of $707 million were down 2% year over year and up 6% sequentially.

Speaker Change: Q4 highlighted the strength of our business model and disciplined execution with operating margin of 28, 6%.

Speaker Change: Up 50 basis points year over year, and representing the highest for a Q4 in the history of net app.

Speaker Change: EPS of $1.93 was four cents ahead of the midpoint of the guidance range and up 7% year over year predominantly driven by lower operating expenses and effective tax rate.

Wissam Jabra: EPS of $1.93 was $0.04 ahead of the midpoint of the guidance range and up 7% year-over-year, predominantly driven by lower operating expenses and effective tax rates. In Q4, cash flow from operations was $675 million and free cash flow was $640 million. These cash flow metrics were driven by higher collections and lower supply chain payments year over year. During the fourth quarter, we returned $355 million to shareholders through $250 million in share repurchases and $105 million in cash dividends. Q4 diluted share count of 206 million was down 6 million shares or 3% year over year. We had approximately $350 million left on our current share repurchase authorization at the end of fiscal year 2025.

Speaker Change: In Q4 cash flow from operations was $675 million and free cash flow was $640 million.

Speaker Change: These cash flow metrics were driven by higher collections and lower supply chain payments year over year.

Speaker Change: During the fourth quarter, we returned $355 million to shareholders through $250 million in share repurchases and $105 million in cash dividends.

Speaker Change: Q4 diluted share count of $206 million.

Speaker Change: It was down 6 million shares or 3% year over year.

Speaker Change: We had approximately $350 million left on our current share repurchase authorization at the end of fiscal year 2025.

Wissam Jabra: And today, we're announcing an increase in that authorization by $1.1 billion.

Speaker Change: And today, we're announcing an increase in that authorization by $1.1 billion.

Speaker Change: Before moving to guidance, let's review the results for the full fiscal year 2025.

Wissam Jabra: Before moving to guidance, let's review the results for the full fiscal year 2025. Revenue of $6.57 billion was up 5% year-over-year and billings of $6.78 billion was up 8% year-over-year, both all-time company highs. Disciplined operational management also yielded all-time fiscal year highs for operating margin and EPS, demonstrating the effect of high operating leverage in our business model. For fiscal year 2025, operating margin was 28.3%, up 150 basis points year over year, driven predominantly by flat operating expenses against the backdrop of 5% revenue growth. EPS grew 12% year over year over twice the rate of revenue growth.

Speaker Change: Revenue of $6 $57 billion was up 5% year over year and billings of $6 $78 billion was up 8% year over year, both all time company highs.

Speaker Change: Disciplined operational management also yielded all time fiscal year highs for operating margin and EPS demonstrating the effect of high operating leverage in our business model.

Speaker Change: For fiscal year 2025, operating margin was 28, 3% up 150 basis points year over year, driven predominantly by flat operating expenses against the backdrop of 5% revenue growth.

Speaker Change: P. S grew 12% year over year over twice the rate of revenue growth.

Speaker Change: Operating cash flow was $1 $51 billion and free cash flow was $1 $34 billion, both metrics were down low double digits percentage points year over year, due primarily to changes in working capital, including higher variable compensation payments and tax related outflows.

Wissam Jabra: Operating cash flow was $1.51 billion and free cash flow was $1.34 billion. Both metrics were down low double digits percentage points year over year, due primarily to changes in working capital, including higher variable compensation payments and tax related outflows. Our balance sheet remains very healthy. We close the year with $3.85 billion in cash and short-term investments against $3.24 billion in total debt for a net cash position of approximately $610 million. We intend to use $750 million of our cash to redeem the notes maturing in June. Inventory decreased in the quarter and inventory turns increased to 12.

Speaker Change: Our balance sheet remains very healthy.

Speaker Change: We closed the year with $3 $85 billion in cash and short term investments against $324 billion in total debt for a net cash position of approximately $610 million.

Speaker Change: We intend to use $750 million of our cash to redeem the notes maturing in June.

Speaker Change: Inventory decreased in the quarter and inventory turns increased to 12 now turning to guidance starting with fiscal year 'twenty 'twenty six.

Wissam Jabra: Now turning to guidance starting with fiscal year 2026. Let me underscore our confidence in our strategy and the strength of our position in addressing key customer priorities such as data infrastructure modernization, cloud transformation, AI innovation, and cyber resilience. However, as George noted, the macro environment remains uncertain with both cost and demand related variables that could lower IT spending and make it challenging to forecast through the remainder of the year. As a result, we expect fiscal year 2026 total revenue to be in the range of $6.625 to $6.875 billion, which at the $6.75 billion midpoint reflects 3% growth year over year.

Speaker Change: Let me underscore our confidence in our strategy and the strength of our position and addressing key customer priorities such as the data infrastructure modernization cloud transformation AI innovation and cyber resilience.

George Kurian: As George noted the macro environment remains uncertain with both cost and demand related variables that could lower it spending and make it challenging to forecast through the remainder of the year.

Speaker Change: As a result, we expect fiscal year 2026 total revenue to be in the range of $6 six to $5 billion to $6.875 billion.

Speaker Change: Which at the six point $75 billion midpoint reflects 3% growth year over year.

Speaker Change: Excluding the divested spot business from the compare our total revenue guidance implies 4% growth year over year.

Wissam Jabra: Excluding the divested spot business from the compare, our total revenue guidance implies 4% growth year over year. Spot generated around $95 million in revenue annually and accounted for a low teens percentage of public cloud segment revenue. As a reminder, we expect the divestiture to impact reported public cloud and total revenue growth for fiscal year 2026. We expect fiscal year 2026 consolidated gross margin to be in the range of 71 to 72%. We expect operating margin of approximately 28.8% to 29.8%. We anticipate other income and expenses to be approximately negative $10 million. For the year, we expect the tax rate in the range of 20 to 21%.

Speaker Change: Spud generated around $95 million in revenue annually and accounted for a low teens percentage of public cloud segment revenue.

Speaker Change: As a reminder, we expect the divestiture to impact reported public cloud and total revenue growth for fiscal year 2026.

Speaker Change: We expect fiscal year 2026, consolidated gross margin to be in the range of 71% to 72%.

Speaker Change: We expect operating margin of approximately 28, 8% to 29, 8%.

Speaker Change: We anticipate other income and expenses to be approximately negative $10 million.

Speaker Change: For the year, we expect the tax rate in the range of 20% to 21%.

Wissam Jabra: We expect EPS in the range of $7.60 to $7.90 for a midpoint of $7.75. We expect operating cash flow will move in line with net income as it has done historically. In fiscal year 2026, we intend to return up to 100% of free cash flow to shareholders in cash dividends and share buybacks. We also expect to reduce share count by low single digit percentage points year over year.

Speaker Change: We expect EPS in the range of $7 60 to $7.90 for.

Speaker Change: For a midpoint of $7.75.

Speaker Change: We expect operating cash flow will move in line with net income as it has done historically.

Speaker Change: In fiscal year 2026, we intend to return up to 100% of free cash flow to shareholders in cash dividends and share buybacks.

Speaker Change: We also expect to reduce share count by low single digit percentage points year over year.

Speaker Change: Okay.

Speaker Change: Now turning to Q1 guidance.

Wissam Jabra: Now turning to Q1 guidance. We expect revenue to range from $1.455 billion to $1.605 billion, which at the $1.53 billion midpoint implies a decline of 1% year over year. Excluding the divested spot business from the year ago comparison. Our revenue guidance implies a 1% growth year over year. We expect Q1 Consolidated Gross Margin to be in the range of 71-72% and Operating Margin to be in the range of 25-26%. EPS is expected to be in the range of $1.48 and $1.58 with a midpoint of $1.53.

Speaker Change: We expect revenue to range from $1.455 billion to $1.605 billion, which had a $1 $53 billion midpoint.

Speaker Change: Implies a decline of 1% year over year.

Speaker Change: Excluding the divested spot business from the year ago comparison.

Speaker Change: Our revenue guidance implies a 1% growth year over year.

Speaker Change: We expect Q1 consolidated gross margin to be in the range of 71% to 72%.

Speaker Change: And operating margin to be in the range of 25% to 26%.

Speaker Change: EPS is expected to be in the range of $1.48 and $1.58 with a midpoint of $1.53.

Wissam Jabra: In closing, as I look forward to fiscal year 2026, I am confident in our strategy and execution capabilities as we are well positioned to capture our expanding opportunities, increase profitability and free cash flow, and deliver sustainable long-term value to our shareholders.

Speaker Change: In closing as I look forward to fiscal year 2026, I am confident in our strategy and execution capabilities as we are well positioned to capture our expanding opportunities increased profitability and free cash flow and deliver sustainable long term value to our shareholders.

Kris Newton: I'll now turn the call over to Kris for Q&A. Thanks, Wissam. Operator, let's begin the Q&A. We will now begin the question and answer session. To ask a question, you may press star and 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Chris: Now I'll turn the call over to Chris for Q&A.

Chris: Thanks, Lisa operator, let's begin the Q&A.

Chris: We will now begin the question and answer session.

Speaker Change: You asked the question in the press Star and one on you touched on film.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question today comes from Tim Long with Barclays. Please go ahead.

Tim Long: The first question today comes from Tim Long with Barclays. Please go ahead. Thank you. Yeah, two quick ones if I could.

Speaker Change: Thank you yet two quick ones, if I could first.

Wissam Jabra: First, I was hoping you could just touch on the guidance, maybe Wisom, for you. Looks like, you know, the Q1 is a little bit light of where folks were, but the full year is still kind of intact. So, George, you mentioned some big deals in the pipeline. Just curious how we're going to see kind of acceleration of revenues and EPS growth through the year. What's kind of the level of visibility into that?

Speaker Change: Was hoping you could just touch on the guidance maybe with some for you it looks like the Q1 is.

Speaker Change: A little bit lighter, where folks were but the full year is still kind of intact. So.

Speaker Change: George You mentioned some big deals in the pipeline just curious how we're going to see kind of acceleration of revenues and <unk>.

Speaker Change: EPS growth through the year, what's kind of the level of visibility into that and then second I was hoping you could just touch on product gross margins are kind of what kind of outlook, there with with NAND prices moving around in macro and competition, what's kind of the outlook for product gross margins. Thank you.

Wissam Jabra: And then second, I was hoping you could just touch on product gross margins, kind of what kind of outlook there with NAM prices moving around and, you know, macro and competition. What's kind of the outlook for product gross margins? Thank you.

Speaker Change: Maybe I can start and then with some kind of cover.

George Kurian: Maybe I can start and then Wisam can cover the second part of the question. Listen, we are coming into the year with a ton of momentum. We have been the fastest growing all-flash player in the market. We have outgrown our competition, including this quarter, in the all-flash market. We have gained share in the block storage market. And our cloud business, as you saw, has accelerated through the course of the year. So the setup for the year is very good. We have a degree of caution in Q1 related to certain parts of Europe, Middle East and Africa, especially some large countries where there's still public sector uncertainty, as well as some impact from the uncertainty on tariffs and in manufacturing-centered economies.

Speaker Change: The second part of your question listen we are coming into the year with a ton of momentum we have been the fastest growing all flash player in the market, we have outgrown our competition, including this quarter.

Speaker Change: In the all flash market, we have gained share in the block storage market and our cloud business. As you saw has accelerated through the course of the year. So the setup for the year is very good.

Speaker Change: Have a degree of caution in Q1 related to certain parts of Europe Middle East in Africa.

Speaker Change: Specially some large countries, where theres still public sector uncertainty.

Speaker Change: Well as some impact from the uncertainty on tariffs and in manufacturing center in economy.

George Kurian: And then U.S. public sector. We feel that the growth through the year is driven by both some large deals that we're working on for modern AI-powered infrastructure, the addition of sales capacity that we added towards the end of Q4 and are adding through the course of the first half of the year, as well as continued strength in cloud and our all-flash portfolio. So when you look at the guidance for the year, The margins obviously are guided towards where we would want to be in the long term, but we're very comfortable with the transition. The few elements that will drive us get there are obviously mix should be.

Speaker Change: And then U S public sector, we feel that the growth through the year, it's driven by.

Speaker Change: Some large deals that we're working on for modern AI power infrastructure. The addition of sales capacity that we added towards the end of Q4 and are adding through the course of the first half of the year.

Speaker Change: As well as continued strength in cloud and our all flash portfolio.

Speaker Change: Yes, so when you look at the guidance for the year.

Speaker Change: Margins, obviously are guided towards where we wouldn't want to be in the long term, but we're very comfortable with the transition.

Speaker Change: A few elements that will drive us to get there are obviously.

Speaker Change: Mix should be.

George Kurian: Benefiting from the growth in cloud and would continue to also grow in flash, which typically has better margins. The other thing I would say on margins, so that we anticipate maybe the one of the questions that I'm sure will come up is when we think of product margin, we did say previously in last quarter that earnings call that Q4 would be the bottom. We're seeing Q1 to be more or less in line with Q4, but we anticipate improvement from there, gradual improvement into the rest of the fiscal year on a quarterly basis. Okay, thank you.

Speaker Change: Benefiting from the growth in cloud and who would continue to also.

Speaker Change: Grow.

Speaker Change: In flash, which typically has better.

Speaker Change: <unk>.

Speaker Change: The other thing I would say our margins so that we anticipate maybe the.

Speaker Change: So one of the questions that I'm sure will come up.

Speaker Change: Yes.

Speaker Change: When we think of our product margin what did you say previously in last quarter that our earnings call that.

Speaker Change: Q4 would be the bottom, we're seeing Q1 to be more or less in line with Q4, but we anticipate improvement from their gradual improvement and to the rest of the fiscal year on a quarterly basis.

Speaker Change: Okay. Thank you very helpful.

Tim Long: Very helpful. Thank you, Tim.

Speaker Change: Thank you Tim next question Thanks, Tim.

Samik Chatterjee: Next question. The next question comes from Samik Chatterjee with J.P. Morgan. Please go ahead. Hi, thank you for taking my question. Maybe George, on the last earnings call, you had referred to some of the execution or sort of timing of deals that had slipped. And just curious if that continued to sort of what you see, is that something you're continuing to see? And is that really informing sort of the caution relative to the macro? Or are you just sort of overall looking at the macro backdrop and the economic indicators? Are you taking a more proactive approach relative to what you're seeing?

Speaker Change: The next question comes from Amit <unk> with Jpmorgan. Please go ahead.

Amit: Hi, Thank you for taking my question maybe.

Speaker Change: Maybe George on the last earnings call you had referred to some of the execution or sort of timing of deals that had slipped and I'm. Just curious if that's continuing to sort of what you see is that something you'll continue to see and is that really informing sort of caution relative to the macro or are you just sort of overall look.

Speaker Change: At the macro backdrop and the indicate economic indicators are you taking a more proactive approach relative to what you're seeing and just wanted to understand sort of the thought process, there and what youre seeing with your customers. Another follow up thank you.

Samik Chatterjee: I just wanted to understand sort of the thought process there and what you're seeing with your customers and have a follow up.

Speaker Change: I think it's more of the latter stomach.

George Kurian: I think it's more of the latter, Samik. We saw a strong Q4, where the majority of the deals that slipped out of Q3, we were able to close. And if you look at our Q3 to Q4 sequential number, it was above our typical trend, driven by the strength of our execution. And overall, second half of the year, we had a strong growth rate relative to the first half of fiscal year 25. We are seeing some evidence, as you mentioned, about just overall political instability. Some of the GDP growth rates have come down, and just a degree of caution in customers waiting for clarity on trade policy and other macroeconomic policies, particularly in Europe, and of course, in the US public sector.

Speaker Change: We saw a strong Q4, where the majority of the deals that slipped out of Q3, we were able to close that if you look at our Q3 to Q4 sequential number it was above our typical trend driven by the strength of our execution and overall second half of the year.

Speaker Change: We had a strong growth rate relative to the first half of fiscal year 'twenty five.

Speaker Change: <unk> seen some evidence that you mentioned about just overall politico.

Speaker Change: Instability of some of the GDP growth rates have come down and just a degree of caution and customers waiting for clarity on trade policy and other you know macroeconomic policy, particularly in Europe.

Speaker Change: And of course in the U S public sector.

Speaker Change: Got it got it got it.

Samik Chatterjee: And for my follow-up, just in terms of public cloud revenues, if you can just share what was the Q4 performance X spot, what was the underlying growth rate, and you did mention sort of the acceleration of the improvement in growth rates through the year. Any color in terms of what to expect as you go through fiscal 26 in terms of growth rates and where you probably exit fiscal 26, on an underlying basis, understanding that spot would not be in the numbers. Thank you. Yeah, public cloud in Q4 x spot was up 22% year on year.

Speaker Change: For my follow up just in terms of public cloud revenues.

Speaker Change: You can just shared what was the Q4 performance ex spot what was the underlying growth rate and you did mention sort of the acceleration of improvement in growth rates through the year or any color in terms of what to expect as equal through fiscal 'twenty six in terms of growth rates, and where you're probably exit fiscal 'twenty six on an underlying basis.

Speaker Change: Understanding that part will not be in the numbers. Thank you.

Speaker Change: Yeah, the public cloud in Q4 ex spot was up 22% year on year and if you look at the full year. It was up 16% year on year. So we saw acceleration through the year as you can see our first party.

George Kurian: And if you look at the full year, it was up 16% year on year. So we saw acceleration through the year. As you can see, our first party and marketplace cloud storage is growing in a very, very fast pace north of 40%. And it's becoming a bigger and bigger part of the overall cloud business mix. And that will drive continued acceleration of that part of the business, you can offset as we saw mentioned, spot was about $95 million. And so that's, you know, the offset to the cloud revenue as you model for next year. All right, great.

Speaker Change: And marketplace cloud storage is growing.

Speaker Change: A very fast pace north of 40% and it's becoming a bigger and bigger part of the overall cloud business mix and that will drive continued acceleration of that part of the business you can offset.

Speaker Change: With Tom mentioned spark was about $95 million and so that's the offset to the cloud revenue as you model for next year.

Speaker Change: Alright, great. Thank you thanks for taking my questions.

Samik Chatterjee: Thank you. Thanks for taking my question.

Operator: Thank you, Samik.

Speaker Change: Thank you next question.

Wamsi Mohan: Next question. The next question comes from Wamsi Mohan with Bank of America. Please go ahead. Yes, thank you. George, you noted in your prior answers that there were some large deals related to AI infrastructure. Can you just share some color on where these are? Are these at tier two CSPs or hyperscalers? And what's the potential contribution to growth from this? And I will follow We work with a lot of the very largest, you know, cloud and enterprise providers, and we have been working with some of them on data modernization transactions, supporting, building up, you know, enterprise AI cloud infrastructures.

Speaker Change: The next question comes from the ones you know him well.

Speaker Change: With Bank of America. Please go ahead.

Speaker Change: Yes. Thank you.

Speaker Change: George you noted in your.

Speaker Change: Prior answers that.

Speaker Change: There were some large deals related to AI infrastructure can you just share some color on on where these are are these at tier twos CSP is a hyper scaler and what's the potential contribution to growth from this and I will follow up.

Speaker Change: We worked quite a lot of the very largest.

Speaker Change: <unk> cloud and enterprise providers, and we have been working with some of them on data modernization transactions supporting building up you know enterprise AI cloud infrastructures. These are factored into the sequential ramp through the year.

George Kurian: These are factored into the sequential ramp through the year of our FY26 outlook. And so we feel very good about our position in the unfolding enterprise AI market, as well as the strength of our, you know, full year guide.

Speaker Change: Oh far FY 'twenty six outlook.

Speaker Change: You feel very good about our position in the unfolding enterprise AI market as well as the strength of our.

Speaker Change: Full year guide.

Speaker Change: Okay. Thanks sure as my follow up you noted a pretty cautious macro embedded in your fourth quarter guide.

Wamsi Mohan: Okay, thanks, George. As a follow-up, you noted a pretty cautious macro embedded in your first quarter guide. Are you derating your full year beyond that also on sort of macro? And on tariffs, it sounded like you're embedding Some caution related to demand from your customers who might be impacted by it, but do you have any direct impact from from tariffs and you just quantify if there was a We see the primary impact of tariffs or really the uncertainty introduced by tariffs causing enterprises to, you know, kind of slow down, particularly in the manufacturing segment in Europe.

Speaker Change: Our U D awaiting your full year beyond that also on on sort of macro and on tariffs it sounded like you're embedding.

Speaker Change: Some caution related to demand from your customers, who might be impacted by it but do you have any direct impact from from tariffs and.

Speaker Change: Could you just quantify if there was any.

Speaker Change: Yes, within our FY 'twenty six outlook.

Speaker Change: Tariffs are about 40 to 60 basis points of our gross margin saw a small amount and thats contemplated in the guide that we have given you that is based on the current tariff situation, which is really the 10% baseline Gareth.

Speaker Change: And not the rest of the proposed tariffs we have a diverse supply chain, we have no exposure to China.

Speaker Change: Final assembly of our products, which confers.

Speaker Change: Kind of country of origin is in Singapore, Hungary, Mexico, and the U S. So.

Speaker Change: Allows us to have a very small impact of tariffs to us.

Speaker Change: And also the semiconductor expansion allows us to have a pretty small contribution of costs from tariffs.

Speaker Change: We see the primary impact of tariffs or really the uncertainty introduced by tariffs, causing enterprises too.

Speaker Change: Slowdown, particularly in the manufacturing segment in Europe.

Speaker Change: Okay. That's really helpful. Thank you so much.

Wamsi Mohan: Okay, that's really helpful. Thank you.

Operator: All right. Thank you, Wamsi.

Speaker Change: Alright. Thank you next question.

Meta Marshall: Next question. The next question comes from Meta Marshall with Morgan Stanley. Please go ahead. Great, thanks. Wanted to ask a couple of questions, you know, obviously a lot of traction on the AI side, you know, kind of earlier in the year, you had noted, maybe some of these proof of concepts would start to become full blown deployments kind of towards the end of the year, or kind of into 26. Are you, you know, pull forward of that, that's kind of leading to some of the strength, or, you know, this is just kind of the beginning, and we should see more kind of later on.

Meta Marshall: Next question comes from meta Marshall with Morgan Stanley. Please go ahead.

Meta Marshall: Great. Thanks wanted to ask a couple of questions. You know obviously a lot of traction on the AI side, you know kind of earlier in the year. You had noted maybe some of these proof of concepts would start to become full blown deployments kind of towards the end of the year or kind of into 'twenty. Six are you in a pull forward.

Meta Marshall: Word of that that's kind of leading to some of the strength of our you know this is just kind of they may get anything we should see more kind of later on and then as a second question you know given the.

Meta Marshall: And then, as a second question, you know, given the strength you're seeing on the first party and marketplace, you know, is some of that also driven by kind of some of these AI use cases, or just kind of maturing of those offerings in general? Thanks.

Speaker Change: The strength, you're seeing on the first party and marketplace. You know if some of that also driven by kind of some of these AI use cases, or just kind of maturing of those offerings in general thanks.

Speaker Change: On the first question. Thank you for your question on the first one we see it as just ongoing unfolding of the enterprise AI.

George Kurian: On the first question, thank you for your question. On the first one, we see it as just ongoing unfolding of the enterprise AI market. As we said, inferencing and the use of AI tools to drive business advantage is the core of the opportunity in the enterprise and 80% of the overall storage opportunity. And we have done very well in that. We think that, you know, fiscal year 26 will continue to accelerate and expand that opportunity for us. With regard to cloud performing so strongly, yes, there is enterprise AI customers using our cloud footprints, either because they want to do AI in the cloud, or where they want to start their AI, you know, proof of concepts in the cloud, and we feel really good about that.

Speaker Change: Market as we said inferencing and the use of AI tools to drive business advantage is the core of the opportunity in the enterprise and 80% of the overall storage opportunity and we have done very well in that we think that.

Speaker Change: Fiscal year, 2006 will continue to accelerate and expand that opportunity for us.

Speaker Change: With regard to cloud.

Speaker Change: Performing so strongly yes, there is enterprise AI customers using our cloud footprints.

Speaker Change: Foot prints, either because they wanted to do AI in the cloud or where they want to start their AI proof.

Speaker Change: Proof of concepts in the cloud and feel really good about that.

Speaker Change: Overall, the cloud business is performing very well both due to a store.

George Kurian: Overall, the cloud business is performing very well, both due to, you know, strong technology differentiation and good execution. And as we have shared, we are expanding the range of not only enterprise application use cases, but analytics and AI use cases. And so I feel really pleased with the focus and the execution we've had in that part of our business this year. Great, thank you.

Speaker Change: Strong technology differentiation and good execution and as we have shared we are expanding the range of not only enterprise application use cases, but analytics and AI use cases, and so I feel really pleased with the focus on the execution. The fact in that part of our business. This year.

Speaker Change: Great. Thank you.

Speaker Change: Thank you Peter next question.

Meta Marshall: Thank you, Meta.

Operator: Next question.

David: The next question comes from David <unk> with UBS. Please go ahead.

David Vogt: The next question comes from David Vogt with UBS. Please go ahead. Great, thanks guys for taking my questions. So one for George, one for Wissam. So George, I guess, can you maybe help us understand, I know the macro is uncertain, but you're exiting fiscal 25 with your all flash AR growing double digits nicely, north of $4 billion. So can you kind of walk through how you bridge 25 to 26 with that kind of backdrop? Should we assume, you know, fairly meaningful deceleration in the all flash business in 26? And if not, then what's driving the more cautious tone?

David: Alright, Thanks, guys for taking my questions. So one for George one for wisdom. So George I guess can you maybe help us understand I know the macro is uncertain, but you're exiting fiscal 'twenty five with your all flash AAR growing double digits nicely north of $4 billion. So you can kind of walk through how you bridge 25 to 26 with that.

David: On a backdrop should we assume a fairly meaningful deceleration in the all flash business in 2006.

David: If not then what's driving the more cautious tone I get the macro and then I'll listen I'm just I'll give you both at the same time, obviously, you talked about where public and your cloud.

David Vogt: I get the macro.

Wissam Jabra: And then on Wissam, just I'll give you both at the same time. Obviously, you talked about where public and your cloud, your hybrid and your public cloud gross margins are. So can you help us understand the ramp in the second half of the year on margins to kind of get to that full year, roughly 20-29% operating margins coming off of a relatively modest base in the first fiscal quarter of the year. And it suggests that, you know, margins would have to be at least 30% in the back half, if we're doing the math correctly. So I just want to get a sense for how to think about it.

David: The hybrid in your public cloud gross margins are so can you help us understand the ramp in <unk>.

David: Second half of the year on margins to kind of get to that full year Lastly, 'twenty eight 'twenty, 9% operating margins coming off of a relatively.

Speaker Change: A modest pace in the first first fiscal quarter of the year and I would suggest that margins would have to be at least 30% in the back half we're doing the math correctly. So I just wanted to kind of get a sense of how to think about it. Thanks.

Wissam Jabra: Thanks.

Speaker Change: I'll take your first question I think if you look at the components of the FY 'twenty six guide you.

George Kurian: I'll take your first question.

George Kurian: I think if you look at the components of the FY 26 guide, you know, support continues to be a low single digits, you know, number, it doesn't, you know, go down or go up materially, it just waterfalls off of deferred revenue. And as deferred revenue has grown this year, you should see support sort of stabilize and start to grow in FY 26. Cloud should continue with the, you know, note of the headwind from the digestiture of spot, the momentum in the rest of the cloud business should continue. We had, you know, professional services, which is powered the growth of professional services, which is powered by our Keystone storage as a service business should continue at the same clip next year.

Speaker Change: Support continues to be low single digits.

Speaker Change: Number it doesn't.

Speaker Change: Go down or go up materially it just waterfalls off of deferred revenue.

Speaker Change: Our deferred revenue has grown this year, you should see support sort of stabilize and start to grow in that.

Speaker Change: Slide 26 cloud should continue.

Speaker Change: The note of the headwind from the divestiture of spot the momentum in the rest of the cloud business should continue we had professional services, which is powered the growth of professional services, which is powered by our Keystone.

Speaker Change: Storage as a service business should continue at the same clip on next year and in product. If you look at the market data for all flash. It has come down about 300 basis points, we are expecting to grow at or above the market. There is a part of the business.

Wissam Jabra: And in product, if you look at the market data for all flash, it has come down about 300 basis points, we are expecting to grow at or above the market, there is a part of the business that is non flash, which is probably less tied to consumer spending priorities, which is where we have also indicated a degree of caution. So listen, we feel really good about our competitive position.

Speaker Change: That is non flash, which is probably less tied to customer.

Speaker Change: Customer spending priorities, which is where we have also indicated.

Speaker Change: Three of caution so listen we feel really good about our competitive position Q4 was a strong you know print the full year was a strong result.

Wissam Jabra: Q4 was a strong, you know, print, the full year was a strong result, We feel that it's important to be prudent in our outlook, just given the range of volatility that's going on. And David, for the second question, so the way to think of it, look, without guiding quarter by quarter, the way to think of it is we expect, obviously, revenue to improve from here for the rest of the year. And as you sort of work yourself down the P&L, gross margins, as I said, for products are expected to be flourishing Q1 and gradually improve for the rest of the year.

Speaker Change: We feel that it's important to be prudent in our outlook just given the range of volatility that's going on.

David: Great and David.

David: Yes, and for the second question so the way to think of it look.

Speaker Change: Without guiding quarter by quarter, the way the way to think of it as a we expect obviously revenue to improve from here for the rest of the year and as you sort of foresee yourself down the P&L.

Speaker Change: Gross margin as I said for product set.

Speaker Change: In fact, it to be flattish in Q1 and gradually improve for the rest of the year.

Speaker Change: <unk> cloud you know we ended Q4 at a almost the top range of the long term targets that we set ourselves we expect that to sort of also improve from here.

Wissam Jabra: Cloud, you know, we ended Q4 at almost the top range of the long-term target that we set ourselves. We expect that to sort of also improve from here into the fiscal year 2026. And for the rest of the elements, you'd expect sort of roughly similar type of trends. So that gives you a good idea of how the gross margin should progress for the rest of the year. The way we think of operating expenses is we obviously want to continue to invest in high ROI projects on the R&D side. We also want to continue to invest in sales capacity strategically to drive the top line.

Speaker Change: Into the fiscal year 2026.

Speaker Change: As for the rest of the elements you would expect roughly a similar type of trends. So that gives you a good idea of how the gross margin should progress for the rest of the year.

Speaker Change: The way, we think of operating expenses as we obviously want to continue to invest in high ROI projects on the R&D side. We also want to continue to invest in sales capacity strategically to drive the top line, but.

Wissam Jabra: But the OPEX growth isn't expected to be faster than revenue growth. In fact, the way we think of it is OPEX growth should be at most half of the revenue growth. And so that gives us the operating leverage. And without really giving you the numbers for the rest of the quarters, I think it gets you mathematically to the numbers situation. That's more than helpful.

Speaker Change: The opex growth is and expect it to be faster than revenue growth in fact, with the way we think of it as opex growth should be at lost half of its revenue growth and so that gives us the operating leverage and without really giving you the numbers for the rest of the quarters I think it gets you mathematically.

Speaker Change: But that's more than the numbers that you mentioned.

Speaker Change: That's more than helpful. Thanks listen thanks George.

Wissam Jabra: Thanks, Wislam. Thanks, George.

Speaker Change: Alright. Thank you David next question please.

Operator: All right.

Asiya Merchant: Thank you, David.

Asiya Merchant: Next question, please. The next question comes from Asiya Merchant with Citigroup. Please go ahead. Excellent. Hi, this is Mike Cadiz for Asiya Merchant at Citi. So I'll give you my two questions at once.

Speaker Change: The next question comes from Ashwin <unk> with Citigroup. Please go ahead.

Mike Cadiz: Excellent Hi, this is Mike Cadiz Rossiya merchant City, Oh I'm sorry.

Speaker Change: My two questions at once.

Speaker Change: So the first is on Keystone can you describe the tenor of the customer conversations you're having as it pertains to <unk>.

Wissam Jabra: So the first is on Keystone, can you describe the tenor of the customer conversations they're having as it pertains to OPEX versus CAPEX spending, especially given this uncertain macro environment? That's question one.

Speaker Change: Opex versus capex spending, especially given this uncertain macro environment. That's question one and question two is can.

George Kurian: And question two is, can you provide any color on product momentum following your significant validations like NVIDIA SuperPOD that you did just earlier in March? Thank you. Yeah, I think, you know, Keystone has grown strongly. TCB sales of Keystone for fiscal year 25 is at 224 million up 54% year on year. So we feel good about the momentum of Keystone. I would say there was nothing unusual in terms of customer behavior. There are use cases for which Keystone makes sense. And there are use cases for which capital purchases make sense. We are seeing a growing number of use cases for which Keystone is the preferred choice in our customers.

Speaker Change: Can you provide any color on product momentum following your significant validation like Nvidia Super pod that you did just earlier in March Thank you.

Speaker Change: Yes, I think Keystone has grown strongly GCB sales of Keystone for fiscal year 'twenty five in fact $224 million up 54% year on year. So we feel good about the momentum of Keystone I would say there is nothing under.

Speaker Change: Usual in terms of customer behavior. There are use cases for which Keystone makes sense and there are use cases for which capital purchases makes sense. We are seeing a growing number of use cases for which Keystone is the preferred choice and our customers that were taken advantage of that with regard to the <unk>.

George Kurian: And we're taking advantage of that. With regard to the momentum, listen, our new product portfolio has done really well. It's ahead of our internal plan. And so we say we are we feel really good. We have seen some on tap super pot wins soon after we got the certification. And so you should see the acceleration continue strength of that part of our business this coming year. Excellent, thank you. Thank you Mike.

Speaker Change: Listen our new product portfolio has done really well its ahead of our internal plan and so we think we are really good we have seen some untapped super pod wins soon after we got the certification and so you should see the acceleration continued strength.

Speaker Change: As part of our business this coming year.

Speaker Change: Excellent.

Param Singh: Next question. The next question comes from Param Singh with Oppenheimer. Please go ahead. Hi, thank you for taking my question. I do appreciate all the color you provided in terms of the growth trajectory for the year. But it really seems contingent upon success with AI workloads, right? And probably implied guidances from like down three, 4% in product growth for the first quarter year over year and improving from there.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: The next question comes from Param Singh with Oppenheimer. Please go ahead.

Param Singh: Hi, Thank you for taking my question.

Speaker Change: I do appreciate all the color you provided.

Speaker Change: Terms of the growth trajectory for the year, but it really seems contingent upon success with AI workloads, right and probably implied guidance says like downstream, 4% product growth for the first quarter year over year and improving from there. So what I really want to understand is what are some of the technical advantages that you have in addressing these things.

George Kurian: So what I really want to understand is, you know, what are some of the technical advantages that you have in addressing these AI workloads versus some of your competitors in the market? And why should any customer, you know, choose NetApp and any kind of evidence you can provide that you are actually seeing that with customer growth? Listen, I think first of all, technologically, we have several advantages. We have a lot of proof points about the performance and scaling of our systems, as denoted by NVIDIA SuperPOD, NVIDIA NCP certifications, and the ability to configure our systems as part of multiple reference architectures.

Speaker Change: Workloads versus some of your competitors in the market and why should any customer choose that option and any kind of evidence you can provide that you are actually seeing that with customer growth right now.

Speaker Change: So listen I think first of all technologically we have several advantages we have a lot of proof points about the performance and scaling of our systems.

Speaker Change: As denoted by Nvidia a superpower.

Speaker Change: NCP certification.

Speaker Change: And the ability to configure our systems as part of multiple reference architectures. The second is the strength of our data management, where we provide privacy security and governance capabilities. In addition to a range of others like multi tenancy and others that customer.

George Kurian: The second is the strength of our data management, where we provide privacy, security, governance capabilities, in addition to a range of others, like multi-tenancy and others, that customers want in an enterprise AI platform. And then uniquely, we have hybrid cloud integration. So we saw many clients wanting to use their enterprise data with some of the tools, like Vertex or Bedrock, that we have unique integrations with in the public cloud. So lots of technological advantages. Listen, we had 150 customer wins this past quarter, and each of them had choices of multiple different vendors. And the level of penetration of AI into our install base is really small right now.

Speaker Change: There's one in an enterprise AI platform and then uniquely VF hybrid cloud integration. So we saw many clients wanted to use their enterprise data with some of the tools like vertex of bedrock that we have unique integrations with in the public cloud so.

Speaker Change: Lots of technological advantages listen we had a 150 customer wins this past quarter and each of them had choices of multiple different vendors and the level of penetration of AI into our installed base is really small right. Now. So we have a long roadmap to go right in terms of customer momentum and wins.

Param Singh: So we have a long roadmap to go, right, in terms of customer momentum and wins. I will just note that, listen, we have had a really strong year. We took 280 basis points of share in all flash, 100 basis points in addition in the block storage market. Any degree of caution going into next year is not because of our competitive position. It's just being prudent about the amount of uncertainty in the economy. Got it. Thanks, George. That's really helpful.

Speaker Change: I will just note that listen we have hired a really strong year, we took 280 basis points of share in the all flash a 100 basis points. In addition in the block storage market.

Speaker Change: The degree of caution going into next year is not because of our competitive position, it's just being prudent about the amount of uncertainty in the economy.

Speaker Change: Got it.

Speaker Change: Thanks, John that's really helpful. If I could just follow up on that.

Param Singh: If I could just follow up on that, you know, some of the wins that you talked about, as I think longer term in 2026, fiscal and beyond, what are some of the applications that customers are talking about within AI inferencing, where they feel, you know, or where you feel NetApp is best positioned to go and have a high win rate? I think broadly speaking, there's sort of three different use cases where we are doing really well. One is the need to modernize your data infrastructure so that you can bring it to AI models. These are in the form of new analytics environments like data lakes or, you know, high-performance analytics applications that are proprietary to certain clients.

Speaker Change: Some of the wins that you talked about I think longer term I mean, 'twenty 'twenty six high school and beyond.

Speaker Change: What are the some of the applications that customers talking about within AI.

Speaker Change: Infant thing, where they feel now or where you feel that Apple's best positioned to go out and have a high win rate.

Speaker Change: I think broadly speaking, there's sort of three different use cases, where we are doing really well one is the need to modernize.

Speaker Change: Our data infrastructure. So that you can bring it to AI models. These are in the form of new analytics environments like data lakes or you know high performance analytics applications that are proprietary to certain clients. The second is <unk>.

George Kurian: The second is AI centers of excellence. These could be like the very large Asian telecommunications provider that's building a national AI center of excellence. Or it could be a large enterprise that's building an AI factory for sharing across all their departments. And there, our reference architectures together with NVIDIA, for example, are the de facto motions. We've done really well there. And then the third is cloud, you know, sort of service providers that want to host inferencing environments for enterprises where our combination of our install base plus hybrid cloud capabilities allows us to do really well.

Speaker Change: Our youth centres of excellence this could be like the very large Asia telecommunications provider. That's building a national AI center of excellence or it could be a large enterprise that building an AI factory for sharing across all of their departments.

Speaker Change: And there are reference architectures together with Nvidia for example, or in fact, the emotion, we've done really well there and then the third is cloud you know sort of service providers that want to host.

Speaker Change: Interesting environments for enterprises, where our combination of our installed base plus hybrid cloud capabilities allows us to do really well so more to come we will share more updates as we go through the year, we have a super exciting R&D innovation pipeline and we will.

George Kurian: So more to come. We will share more updates as we go through the year. We have a super exciting R&D innovation pipeline, and we will invite you to come to Insight to watch it.

Speaker Change: We invite you to come to insight to watch it.

Speaker Change: Thank you Josh much appreciate it.

Param Singh: Thank you, George. Much appreciated.

Operator: Thank you, Param.

Speaker Change: Thank you for our next question.

Krish Sankar: Next question. The next question comes from Krish Sankar with TD Cowen. Please go ahead.

Speaker Change: The next question comes from Chris <unk> with TD Cowen. Please go ahead.

Chris: Yeah, Hi, Thanks for taking my question and there's some nice to hear from me again.

Speaker Change: I've two questions number one George I think we mentioned about two thirds of hybrid cloud revenues I'm kind of curious how to think about the other one third dynamic on the hard drive side are you seeing weakening demand or do you think that.

Speaker Change: One is in a secular decline and then I had a follow on.

Speaker Change: The two thirds was all flash.

Krish Sankar: The two-thirds was all flash arrays. They're two-third of hybrid cloud revenue and a bit higher in terms of their contribution to product revenue, given the all flash is primarily point of sale and is a little bit less contribution from the renewals business of maintenance. I think the second is the hard drive segment has declined a good amount over the course of the last few years as trenches of the hard drive segment have been replaced by flash. So, you know, high performance drives and now 10K drives are going through the transition. We expect that it will stabilize over the course of time to a smaller number as hard drives become used for use cases like backup and archival where today flash does not provide a compelling value proposition.

Speaker Change: Raisbeck, two third of hybrid cloud revenue and a bit higher in terms of their contribution to product revenue given you know.

Speaker Change: The all flash is primarily point of sale and <unk>.

Speaker Change: Little bit less contribution from the renewals business of maintenance I think the second is the hard drive segment declined.

Speaker Change: <unk> declined a good amount over the course of the last few years as tranches of the hard drive segment have been replaced by Flash. So high performance drive and now 10-K drives are going through the transition we expect that it will stabilize over the course of time.

Speaker Change: It was smaller number as hard drives become used for use cases like backup and archive.

Speaker Change: Today Flash does not provide a compelling value proposition and so we will continue to decline from here, but it will.

Wissam Jabra: And so it'll continue to decline from here, but it will, you know, asymptote to a smaller number soon enough. Got it, got it.

Speaker Change: <unk> talked to a smaller number soon enough.

Speaker Change: Got it got it another question, but with some maybe a two part question. One is on the gross margin guide, 772% for FY 'twenty six.

Wissam Jabra: Another question for Vissim, maybe a two-part question. One is on the gross margin guide, 772% for FY26. What is the implied product gross margin in it? And also what is your Last time you guys mentioned about it, I think the U.S. was probably 10 to 12, and global was a little more than that.

Speaker Change: Implied product gross margin in it and also what is your.

Speaker Change: Public sector exposure last time, you guys mentioned about it I think U S was probably 10 to 12 and global is is more than that can you just talk a little bit about your public sector exposure in the diet.

Wissam Jabra: Can you just talk a little bit about your public sector exposure and the dynamics there with DOJ and everything, and also the product growth model? Thank you. Yeah, hey, Krish, let me start with the product gross margin. Look, we don't typically guide for fiscal year down to that level. So what what I would tell you, though, is I would repeat the same comments I made a little bit earlier. You know, the way we think of product margin is in Q1, it's expected to be flattish to Q4. And then we expect it to improve gradually on a quarterly basis for the rest of the year.

Speaker Change: They have a diligent everything and also the product gross margin. Thank you.

Speaker Change: Okay.

Speaker Change: Yeah, Hey, Krish, let me start with the product gross margin look we don't typically guide for fiscal year down to that level. So what I would tell you, though is I will repeat the same comments I made a little bit earlier.

Speaker Change: We think our product margin as in Q1, it's expected to be flattish Tor.

Speaker Change: Q4, and then we expect it to improve gradually on a quarterly basis for the rest of the year. So that that should hopefully give you enough to.

Wissam Jabra: So that's that should hopefully give you enough to to to sort of monitor it.

Speaker Change: You sort of bought it.

Speaker Change: Or public sector.

Wissam Jabra: for Public Sector. U.S. public sector is in the low teens percentage of our business, of which federal is around 75 to 80 percent, depending on the quarter. You know, we don't break out global public sector. With regard to, you know, our view of that, we see the, you know, we are seeing doji hopefully wrapping up and, you know, a new, you know, spending bill getting authorized, which should help us in the public sector going forward. Thank you, George. Thanks, Listen. Thanks, Krish.

Speaker Change: U S public sector is in the low teens percentage of our business of which federal is around 75% to 80% depending on the quarter.

Speaker Change: You know, we don't break out global public sector.

Speaker Change: With regard to our view of that we see the you know we are seeing dodgy hopefully wrapping up soon.

Speaker Change: And you know a new spending bill getting authorized which should help us in the public sector going forward.

Nelson: Thanks Nelson.

Speaker Change: Thanks Rich next question.

Operator: Next question.

Mehdi Hosseini: The next question comes from Mehdi Hosseini with SIG. Please go ahead. Thanks for taking my question. George, I want to just go back to the old flash array and get your updated view on how this cycle could be the same as prior cycle, or is it any different? And for context, given your reported April quarter, the old flash array had a 12% CAGR from FY23 through FY25. Would you expect FY26 to carry on with the same momentum, or are we going to have kind of a deacceleration before growth accelerate into FY27? Listen, as a percentage of the business, all flash arrays should continue to pick up.

Speaker Change: Our next question comes from Mehdi Hosseini with <unk>. Please go ahead.

Mehdi Hosseini: Thanks for taking my question George I would just go back.

Speaker Change: Back to the all flash array and get your updated view on how this cycle could be the same as prior cycle or is it any different than for context.

Mehdi Hosseini: Given your reported quarter. The all flash array has a 12% CAGR from FY2023 through FY 'twenty five.

Mehdi Hosseini: Would you expect FY 'twenty six two.

Speaker Change: Carrier with the same momentum where are we going to have kind of an acceleration before before growth accelerate into FY 'twenty seven.

Speaker Change: Lithium as a percentage of the business all flash arrays should continue to pick up.

George Kurian: I think there is a transition from 10k HDDs to all flash. That is probably in the third or fourth inning of a nine inning ballgame, right? So plenty of runway. The pace at which that transition happens is driven by two things. One is new environments that get stood up. These are priority environments like analytics or, you know, cybersecurity or particularly AI, which contribute to the mix of all flash continuing to grow because those are predominantly all flash environments. And then the second is the tech refresh or the infrastructure modernization part that will be faced by, you know, GDP outlook.

Speaker Change: I think there is the transition from 10-K hte to all flash that is probably in the third or fourth inning of a nine inning ballgame right. So plenty of runway the pace at which that transition happens is driven by two things one is new environments that gets stood up.

Speaker Change: These are priority environments like analytics or you know cyber security are particularly AI, which contribute to the mix of all flash continuing to grow because those are predominantly all flash environments and then the second is the.

Speaker Change: Tech refresh or the infrastructure modernization park that will be paced by GDP outlook.

Speaker Change: Yeah.

Speaker Change: So is there any way you can kind of.

George Kurian: So, is there any way you can kind of quantify how each one of these... Contributor or each growth vectors lineup is the last one to upgrade meaningfully enough. And that's what the GDP sensitivity is. And I'm just trying to separate secular growth, secular opportunities from more of a GDP sensitive bucket. Listen, I think I'm not going to break it out. Specifically, I think, as we said, our outlook for next year implies that we continue to gain share, or at least stay at the market in all flash arrays. And if you look at, you know, public benchmarks for all flash arrays, like IDC, they're in the 9% down from around 12%.

Speaker Change: Quantified.

Speaker Change: Each one of these.

Speaker Change: <unk>, though each.

Speaker Change: Gross vectors lineup is the last one the upgrade.

Speaker Change: Meaningful enough.

Speaker Change: And that's what the GDP sensitivity is and I'm, just trying to separate secular growth opportunities.

Speaker Change: Opportunities from more of a GDP sensitive bucket.

Speaker Change: Listen I think I'm not going to break it out specifically I think as we said our outlook for next year.

Speaker Change: Implies that we continue to gain share or at least stay at the market in all flash arrays and if you look at you know public benchmarks for all flash arrays like IDC there in the 9% down from around 12%. So there's a slowing down a little bit given some of the <unk>.

Mehdi Hosseini: So there's a slowing down a little bit given some of the concerns. And I think we should be able to at least do that. Great, thanks for the Thanks, Eddie.

Speaker Change: Concerns and I think we should be able to at least do that.

Speaker Change: Great. Thanks for details.

Speaker Change: Thanks, Betty next question.

Steven Fox: Next question. The next question comes from Steven Fox with Fox Advisors. Please go ahead. Hi, good afternoon. Two questions if I could real quick. One, how do we think about the pressure included in your margin guidance from passing through higher cost input material costs for the year? I know you're passing them through, but I assume it's a margin rate pressure. And then secondly, George, if I could just push back a little bit on the guidance, because I'm kind of confused, given some of the momentum you've seen. And since it seems like you're concerned about some targeted areas, public and industrial Europe, how can you put it in perspective how big those pieces of sort of the macro are to your business relative to the AI growth you're seeing and the other incrementals you're seeing in market share?

Speaker Change: The next question comes from Steven Fox with Fox Advisors. Please go ahead hi.

Steven Fox: Good afternoon, two questions if I could real quick one how do we think about the pressure included in your margin guidance from passing through higher cost input material costs.

Steven Fox: For the year I know I know youre, passing them through but I assume it's a margin rate pressure and then secondly, George if I could just push back a little bit on the guidance because I'm kind of confused given some of the momentum you've seen and since it seems like youre concerned about some targeted areas public and industrial Europe, how how how can I put it.

Steven Fox: Perspective, how big those pieces of sort of.

Steven Fox: The macro are to your business relative to the AI growth Youre seeing in the other incrementals you're seeing in market share.

George Kurian: I'm just, it's confusing to me that we're talking about 3% year over year growth again this year. Thanks. Maybe I can take the second part of your question and Visam will take the first part. With regard to the outlook for next year, you know, just remember that the revenue guide has a headwind of about a point from the divestiture of the spot business. So if you look at it X spot, it's about 4% compared to this year's, you know, performance of about 5%. I think if you look at our business, the two segments we talked about where we have concerns are US public sector, which again is about low teens percentage of our business, where federal is about 75 to 80% of the business.

Steven Fox: It's confusing to me that we're talking about 3% year over year growth again this year. Thanks.

Speaker Change: Maybe I can take the second part of your question and with some will take the first part with regard to the outlook for next year.

Speaker Change: Just to remember that the revenue guide.

Speaker Change: As a headwind of about a point.

Speaker Change: The divestiture of the spot business. So if you look at it ex spot, it's about 4% compared to this year's.

Speaker Change: Performance of about 5%.

Speaker Change: If you look at our business. The two segments, we talked about where we have concerns are U S public sector, which again is about low teens percentage of our business.

Speaker Change: Federal is about 75% 80% of the business. So we have some concerns about just clarity of when budgets get approved what.

George Kurian: So we have some concerns about just clarity of when budgets gets approved, what, you know, will be the impact of doji and other things, right? And then EMEA, which is a decent chunk of our overall business, where some countries, particularly the larger ones, are awaiting clarity on, you know, export related tariffs. They have, you know, in some countries, the government has been installed, but hasn't deployed budgets yet. And so there's just a degree of caution there. We feel that our momentum is strong. We have less visibility into the timing and resolution paths of some of these geopolitical situations.

Speaker Change: It will be the impact of <unk> and other things right and then EMEA.

Speaker Change: Which is a decent chunk of our overall business, where some countries, particularly the larger ones.

Speaker Change: Awaiting clarity on you know export related tariffs. They have you know in some countries. The government has been installed but hasnt deployed budgets, yet and so there's just a degree of caution there we.

George Kurian: Feel that our momentum is strong we have less visibility into the timing and resolution paths of some of these geopolitical situation and it's important for us to be prudent about guidance given those circumstances I'll turn it over to <unk> to answer the second part of your question, yes. Thanks George.

Wissam Jabra: And it's important for us to be prudent about guidance given those circumstances. I'll turn it over to Visam to answer the second part of your question. Yeah, thanks, George. So with respect to input cost, Steve, when our guidance basically reflects all the information we have now. And so, as George mentioned a little bit earlier, we do have around 40 to 60 basis points impact to gross margin. But this is also an evolving area, right? When you think of tariffs, we do have a very agile, resilient and diverse supply chain. And so we will continue to work throughout the year to mitigate to the extent we can and hopefully improve from here.

Speaker Change: With respect to input costs.

Steve: Steve we win.

Speaker Change: Our guidance basically reflects all of the information we have now and so as George mentioned, a little bit earlier, we do have around 40 to 60 basis points.

Speaker Change: Impact to gross margin.

Speaker Change: But this is also an evolving area right. When you think of tariffs we do have a very.

Speaker Change: Agile and resilient and diverse supply chain and so we will continue to work throughout the year to mitigate to the extent, we can and hopefully improve from here and that's one thing. The other thing you know as it is an evolving.

Wissam Jabra: And that's one thing. The other thing, you know, as it is an evolving situation, you know, if there's any changes in that area, say on the trade policies and other types of things, that obviously we will be updating as well. But for now, that's how we're thinking of the input cost. It's all reflected in our guide within that 71 to 72 percent margin. Okay, thank you.

Speaker Change: The situation you know if the if the if there's any changes in that area I would say on the trade policies and other types of things that obviously, we will be updating as well.

Speaker Change: But for now that's how we're thinking of the input costs. That's all reflected in our guidance as the within that 71% to 72% margin.

Speaker Change: Okay. Thank you.

Speaker Change: It's a next question.

Operator: is the next question.

Jason Adder: The next question comes from Jason Adder with William Blair. Please go ahead. Thank you. Good afternoon. Just two questions.

Jason Ader: Question comes from Jason Ader with William Blair. Please go ahead.

Speaker Change: Yes. Thank you good afternoon, just two questions first.

Wissam Jabra: First, Visam, could you give us a sense of the upside opportunity for cloud gross margins from here? You're at 79%. Now, where do you think that might get to? And then Thank you. Thank you.

Speaker Change: Hum.

Speaker Change: Could you give us a sense of the upside opportunity for our cloud gross margins from here you are at 79% now where do you think that might get to.

Speaker Change: And then.

Speaker Change: My second question is really just on the impact of.

Wissam Jabra: My second question is really just on the impact of the Broadcom acquisition of VMware, you know, any positive or negative impacts that you guys have seen from, you know, the disruption caused by the licensing changes at VMware? Yeah, thanks for the question. So with respect to the opportunity on the cloud gross margin, look, we've been in the long term range for the last couple of quarters, Q3 and Q4 of 25. And that range, just to remind everybody, was 75 to 80%. We expect that, you know, we should be seeing improvement from here. So for the rest of the fiscal year 26, we anticipate gradual improvement on a quarterly basis, but we're not yet ready to sort of come out on an early call and come up with a new target range.

Speaker Change: The Broadcom acquisition of EMR.

Speaker Change: Any positive or negative impacts.

Speaker Change: Guys have seen.

Speaker Change: From the disruption caused by the licensing changes at Vmware.

Speaker Change: Yes. Thanks for the question so with respect to the opportunity on the cloud gross margin.

Jason Ader: Look we've been Oh.

Jason Ader: Longer and longtime range for the last couple of quarters.

Jason Ader: Q3, and Q4 of 25 in that range just to remind everybody it was 75% to 80%.

Jason Ader: We expect that our you know where we should be seeing improvement from here. So.

Jason Ader: For the rest of the fiscal year 'twenty six we anticipate gradual improvement on a quarterly basis, but we're not yet ready to sort of come out and.

Speaker Change: On an earnings call and come up with a long within your target range, but there's a there's definitely opportunity for improvement from here, albeit at a gradual pace.

Wissam Jabra: But there's definitely opportunity for improvement from here, albeit on a gradual basis.

Speaker Change: With regard to the Broadcom acquisition sort of two or three things that we see the first one is this a greater degree of caution about hyper converged infrastructures, which has caused some of the hyper converged vendors to now work with external storage providers.

George Kurian: With regard to the Broadcom acquisition, sort of two or three things right that we see the first one is, there's a greater degree of caution about hyper converged infrastructures, which has caused some of the hyper converged vendors to now work with external storage providers. Second, we have You know, and continue to expand the range of alternative hypervisors that we support. We support a broad range, and we'll continue to expand that range to give customers choice. And the third is, in select customers, there have been replatforming exercises, which is part of our success in block storage, for example, where they might have a hyper-converged solution, or a legacy disk-based solution.

Speaker Change: Second we have.

Speaker Change: And continue to expand the range of alternative Hypervisor that we support we support.

Speaker Change: Broad range.

Speaker Change: And we will continue to expand that range to give customers choice and the third is in select customers. There have been re platforming exercises, which is part of our success in block storage for example, where they might have a hyper converged solution or a legacy.

Speaker Change: Risk based solution and actually think about optimizing their vmware state they will choose to kind of re platform onto onto net app on Prem. We've also seen good growth with our DMR services for example, Azure Vmware services in the public cloud.

George Kurian: And as they think about optimizing their VMware estate, they will choose to, you know, kind of replatform onto NetApp on-prem. We've also seen good growth with our VMware services, for example, Azure VMware Service in the Puppet Cloud.

Speaker Change: Does it make sense George for you to partner with the hyper converged vendors.

George Kurian: Does it make sense, George, for you to partner with the hyperconverged vendors? We will partner with whoever our customers feel it's a good choice for us to make, we will partner with them, be our ongoing discussions with a broad range of solutions, right? And that has been our track record. Thank you. Thank you, Jason.

Speaker Change: We will partner with whoever the our customers feel it's a good choice for us to make we will partner with that would be our ongoing discussions with a broad range of solutions right and that has been our track records.

Speaker Change: Thank you.

Jason Ader: Thank you Jason next question.

Simon Leopold: Next question. The next question comes from Simon Leopold with Raymond James. Please go ahead. Thank you. I wanted to see if you could describe a little bit the linearity in the quarter and then into May. I guess what I'm trying to get a better understanding of is did the behaviors that are creating your concerns actually moderate when tariffs were delayed in May versus what you saw when they were first announced in the beginning of April? And then my follow-up is how are you thinking about the Section 232 reviews on semiconductors? What are your expectations for the impact of that?

Speaker Change: Next question comes from Simon Leopold with Raymond James. Please go ahead.

Speaker Change: Okay.

Speaker Change: Thank you I wanted to see.

Speaker Change: If you could.

Speaker Change: Describe a little bit the linearity in the quarter and then into May.

Speaker Change: I guess, what I'm trying to get a better understanding of is did the behaviors.

Speaker Change: That are creating your concerns actually moderate when tariffs were delayed in may.

Speaker Change: Versus what you saw when they were first announced at the beginning of April and then my follow up is.

Speaker Change: How are you thinking about the section 232 reviews on semiconductors, what what are your expectations for the impact of that thank you.

George Kurian: Thank you. Listen, I think that if you looked at linearity in the quarter, it was typical for a Q4. I note that in Europe, we had the unusual experience of having Easter, the Easter week, in the last week of our quarter. And you know, with the passing of the Pope, that was a unique situation. We had plans for that. And so we had worked hard to get the vast majority of our European business in early ahead of that. And so we were planful to deal with that.

Speaker Change: Listen I think that if you looked at linearity in the quarter. It was typical for a Q4 <unk>.

Speaker Change: Note that in Europe, we had the unusual experience of having Easter the Easter week in the last week of a quarter and you know with the passing of the hole that was a unique situation we had planned for that and so we.

Speaker Change: Had worked hard to get the vast majority of our European business. In early ahead of that and so we were platform to deal with that.

George Kurian: I think that, you know, the caution that we saw did not necessarily contribute to linearity, it just contributed to our view of the pipeline where deals that were, you know, sort of larger deals got broken up into smaller transactions, or we had to go through more procurement cycles of approval, something that you typically see when there's uncertainty.

Speaker Change: I think that you know the caution that we saw did not materially contribute to linearity. It just contributor to our view of the pipeline were deals that were you know.

Speaker Change: I'll sort of larger deals got broken up into smaller transactions or we have to go through more procurement cycles of approval.

Speaker Change: That you typically see when there's uncertainty.

Speaker Change: And the section 232 review on semiconductors.

George Kurian: and the Section 232 review on semiconductors. Listen, we are operating under a semiconductor exemption. I'm not an expert to predict what the administration will do. Thank you.

Speaker Change: Listen we are operating under a semiconductor extension I am not an expert to predict what the administration will do.

Speaker Change: Thank you.

Speaker Change: Thank you Simon next question the.

Operator: Thank you, Simon.

Ananda Baruah: Next question. The next question comes from Ananda Baruah with Blue Capital. Please go ahead. Yeah, guys, thanks for thanks for taking the question. Just just one for me, George, you may have covered some of this context in all of the public cloud context that you've given us, but just Gen AI in hyperscale, as those builds grow, as things like Gen AI video continue, well continue, begin to really become prominent. How does that impact, you know, sort of the value of your software and if that really amplifies that whole dynamic to sort of hyperscale data centers and AI adoption and video, just because I know it's very computing.

Speaker Change: Our next question comes from Ananda Baruah with loop capital. Please go ahead.

Speaker Change: Yeah, guys. Thanks for thanks for taking the question just just one for me George you may have covered.

Speaker Change: With this context in all of the public cloud.

Speaker Change: Got it.

Speaker Change: He has given us but.

Speaker Change: Yes.

Speaker Change: AI right in Hyperscale.

Speaker Change: Those builds grow as things like getting video continue well continue begin to really become prominent.

Speaker Change: Uh huh.

Speaker Change: Does that like Al does that impact you.

Speaker Change: Yeah, It was sort of the.

Speaker Change: The value of your software and if that really amplifies that whole dynamic.

Speaker Change: Just sort of acre scale datacenter Gen AI adoption.

Speaker Change: Just because I know, it's very confusing exit how much.

George Kurian: How might that, and it requires a lot of storage, how might that impact your software business there?

Speaker Change: That.

Speaker Change: Requires a lot of storage.

Speaker Change: That impacts.

Speaker Change: Your software business there. Thanks.

Speaker Change: Yeah listen I think thanks for the question listen I think that.

George Kurian: Yeah, listen, I think, thanks for the question. Listen, I think that we see a lot of clients wanting to use their data with a broad range of tools. You know, the hyperscalers are obviously one of the set of tool chains that they want to use. And so we have a unique position to bring enterprise data to the hyperscaler platform. And because of our flexibility in doing so, more and more people are choosing us.

Speaker Change: We see a lot of clients wanting to use their data with a broad range of tools.

Speaker Change: The Hyperscale alerts are obviously one of the set of tool chain that they want to use and so we averaged unique position to bring.

Speaker Change: Enterprise data to the hyper scalar platform and because of our flexibility and doing so more and more people are choosing us. So we had a few different wins this quarter I'll talk about a gaming company that is building a AI powered ultra real estate game development.

George Kurian: So we had a few different wins this quarter, I'll talk about a gaming company that is building a AI powered ultra realistic game development environment. And they wanted to have a mix of on prem and public cloud because their developers operate in different parts of the world and all of that. And we were chosen because of our hybrid use cases. With regard to the growth of data related to AI, you know, the inferencing use cases start to generate a lot of data first from vectorization of data, where when you take text or video and then convert it into these granular numerical representations of that, you can get much, much larger amounts of data that are created.

Speaker Change: The environment and.

Speaker Change: They wanted to have a mix of on Prem and public cloud because their developers operate in different parts of the world and all of that and we were chosen because of our hybrid use cases with regard to the growth of data related to AI.

Speaker Change: The infancy use cases start to generate a lot of data first from factorization of data, where when you take check store video and then converted into these granular numerical representation of that you can get much much larger amounts of data that our cream.

George Kurian: And then the second is multimodal data sets, obviously get richer and richer. And so you will see data growth. It's early, so I don't want to predict the outcome there. But if you look at the proof of concepts that we have going on with clients, there is clear indication of data growth in those proof of concepts. That's great. I appreciate it. Thanks. Thank you. Thank you, Ananda.

Speaker Change: And then the second is multimodal data sets, obviously get richer and richer and so you will see data growth. It's early so I don't want to predict the outcome there, but if you look at the proof of concepts that we have going on with clients. There is a clear indication of data growth in those proof of concepts.

Speaker Change: That's great I appreciate it thanks.

Speaker Change: Thank you. Thank you Amanda next question the.

Operator: Next question.

Nehal Chokshi: The next question comes from Nehal Chokshi with Northland Capital Markets. Please go ahead. Yes, thank you. Got a couple questions. First is the 150 AI wins in the quarter. I believe that's up from 100 last quarter and it sounds like 30 from a year ago. Have you seen your AI win rate go up? Or is this just a reflection of the increase in deal flow, AI deal flow? I think, first of all, the 5x number that we are talking about, that we mentioned in the call is related to revenue and dollars, not customers. That being said, your comment about acceleration from approximately 100 wins is accurate.

Joshi: The next question comes from <unk> Joshi with North land capital markets. Please go ahead.

Joshi: Yes. Thank you.

Speaker Change: Or got a couple of questions first is the 150 AI wins in the quarter I believe that's up from 100 last quarter and it sounds like it's early from a year ago.

Joshi: Have you seen your AI win rate go up or is this just.

Joshi: A reflection of the increase and our deal flow deal flow.

Joshi: I think.

Nehal Chokshi: First of all the five X number that we are talking up that Pete mentioned in the call is related to revenue and dollars not customers that being said your comment about acceleration from approximately 100 wins is accurate.

George Kurian: We feel very good about our competitive position. Our win rates are very, very strong. And I think what we are pushing our sales teams to do is to engage in more and more opportunities. Clearly, the range of tools that we have made available to them to compete is much larger, right? We have a fully refreshed, high-performance, all-flash storage portfolio. We've got certification across a broad range of technologies. We've got integrated reference, full-stack architectures. And we have a growing amount of AI integration, both with application providers as well as with hyperscaler providers, and with NVIDIA's toolchain.

Joshi: We feel very good about our competitive position our win rates are very very strong and I think what we are pushing our sales teams to do is to engage in more and more opportunities clearly the range of tools that we have made available to them to compete is much larger right. We have a fully <unk>.

Joshi: Fresh high performance all flash storage portfolio, we've got certification across a broad range of technologies. We've got integrated reference full stack architectures, and we have a growing amount of AI integration, both with application providers as well.

Joshi: With hyperscale providers and with Nvidia stool Jane so.

George Kurian: We want more deals to compete in because our win rate is really high, and we are giving our sales teams a lot more tools to compete.

Joshi: We want more deals to compete in because our win rate is really high and we are giving our sales teams a lot more tools to compete.

Speaker Change: Okay, great. Thank you and then another question here is for with some I'm not sure if you talked about it but can.

Nehal Chokshi: Okay, great. Thank you.

Wissam Jabra: And then another question here is for Wasam. I'm not sure if you talked about it, but can you just discuss what was the FX impact in the quarter? And was your expectations for fiscal year 26? Yes, sure. So for Q4, the FX impact was minimal, it's sub 1%. So it's not worth mentioning. And for the fiscal year 26, it's reflected in the guidance. So we typically, you know, use the predominant FX rates, let's say, for when we project. And so we'll be talking about it more as the year progresses, I would say, when we start seeing actual So I believe that should be at least about 100 basis point positive tailwind, is that correct?

Joshi: Can you just discuss what was the FX impact in the quarter and what's your expectations for fiscal year 'twenty six.

Joshi: Yeah sure. So for Q4, the FX impact was minimal that sub sub 1%. So it's not a it's not worth mentioning and for the fiscal year 'twenty six is reflected in the AR.

Joshi: And the guidance.

Joshi: Guidance. So we typically you know USD.

Joshi: The predominant FX rates, let's say for where we are when we are project and so we'll be talking about it more as the year progresses I would say when we started seeing actuals.

Joshi: So I believe that should be at least about 100 basis point positive tailwind is that correct.

Joshi: No sorry.

Wissam Jabra: No, sorry, with respect, I'm... What I said with respect to Q4 is that the impact is much less than 100 basis points. So it's like the minimus. That's why I didn't want to I didn't mention it. But I did not give any numbers for FY26. Yeah, I guess I was I was referring for respect to fiscal year 26. Given current rates, there should be at least 100 basis point positive impact. Is that not correct? Look, if this is your calculation, I mean, I won't comment on that. Okay, thank you. Thank you all.

Joshi: With respect.

Joshi: What I said with respect to Q4 is that the impact is much less than a 100 basis points. So it's de Minimis, that's why I didn't want to I didn't mention it.

Joshi: But I did not give any numbers for FY 'twenty six.

Speaker Change: Yeah, I guess I was sorry, I was referring for respect to fiscal year 'twenty steps given current rates. So it should be at least 100 basis points of positive impact is that not correct.

Joshi: Look at AR.

Joshi: Is your calculation.

Joshi: I mean, I won't comment on that.

Joshi: Okay. Thank you.

Speaker Change: Our next question.

Operator: Next question.

Speaker Change: The last question today will come from Lou <unk> with Daiwa. Please go ahead.

Lou Miscoscia: The last question today will come from Lou Miscoscia with DIAWA. Please go ahead. Okay, thanks for fitting me in. And in essence of time, I'll keep it to just one question. You know, George, you talked, gosh, going back a while ago, maybe a year that was going to take time for AI to really ramp up. And obviously, you've given four year guidance for this year. But do you think that as we get to the following year, I'm not really looking for guidance, guidance, with inference really starting to ramp with enterprises starting to buy AI servers that will get a step function of growth for storage, due to AI, let's maybe say, no calendar 26, either first half or second half or Listen, what we've said is that we believe the real value of AI, if it is to grow at the rate that it's growing, has to deliver business impact to organizations, right.

Speaker Change: Okay. Thanks for fitting me in.

Speaker Change: Since of time I'll keep it to just one question.

Speaker Change: You know George you talked to.

Speaker Change: Going back a while ago, maybe a year that was going to take time for AI to really ramp up and obviously, you've given full year guidance for this year, but do you think that as we get to the following year I'm not really looking for Guy Guy with influence really starting to ramp with enterprises, starting to buy AI servers that we'll get a step function of growth.

Speaker Change: For storage due to AI, let's maybe say.

Speaker Change: Calendar 'twenty, six either first half or second half or something.

Speaker Change: Listen what we said is that we believe the real value of AI.

Speaker Change: It is to grow at the rate that its growing has to deliver business impact to organization right and I think that business impact really comes from the used tool chain for inferencing and reasoning models on H M think AI I think bill overall AI.

George Kurian: And I think that business impact really comes from the use of tool chains for inferencing and reasoning models and agentic AI. I think the overall AI market has been in the, hey, we got to get the large language models, which I think are like enabling tools ready. And we are now starting to see some of those tools get implemented in use cases for the enterprise. Of course, you know, that some of those use cases are more mature than others. I think what we have seen in our business is the first phase of the enterprise is getting ready to use AI, which is, hey, I got to get my data infrastructure in a good place.

Speaker Change: <unk> has been the case, you're going to get the large language models, which I think are like enabling tools ready and we are now starting to see some of those tools get implemented and used cases for the enterprise of course, you know that some of those use cases are more mature than others I think what.

Speaker Change: We have seen in our business is the first phase of the enterprise is getting ready to use AI, which is hey, I got to get my data infrastructure in a good place I'm wondering unified my data I want a catalog. It I wanted to know lineage I wanted to have privacy control. We are seeing that it's in the early phases of the large.

George Kurian: I want to unify my data, I want to catalog it, I want to know lineage, I want to have privacy control. We are seeing that it's in the early phases of the large enterprise. And we see that, you know, expanding quarter by quarter, there are more enterprises engaged in those discussions with us. With regard to how it plays out, it really, really depends on the business value and impact that these use cases have on the enterprise. Obviously, if they are transformative business value, there will be super rapid adoption. And you can see that, you know, over the next 12 to 18 months, but I'm not the expert on the business value, right?

Speaker Change: Price when we see that expanding quarter by quarter. There are more enterprises engaged in those discussions with us.

Speaker Change: Regarding to how it plays out it really really depends on the business value and impact that these use cases on the enterprise. Obviously, if they are transformative business value there will be super rapid adoption and you can see that over the next 12 to 18 months, but I'm not the expert on that.

Speaker Change: Is this value right you got to wait and see what our clients tell us about the impact on that.

George Kurian: We got to wait and see what our clients tell us about the impact on that.

Speaker Change: Okay. Thank you good luck on the fiscal year.

Operator: Okay, thank you. Good luck in the new fiscal year. Thank you so much. Thank you. Thank you, Lou.

Speaker Change: Thank you so much.

George Kurian: I'll turn it over to George for some closing comments. Thank you to our customers, partners, employees, and investors for your continued support. Fiscal year 25 marked many all-time highs. All flash, public cloud, keystone, support, and total revenue, gross and operating profit, operating margin, net income, and EPS. I believe we've reached an inflection point where the growth of all-flag systems and public cloud services bolstered by the ongoing development of the enterprise AI market will drive sustained growth. We are entering FY26, following a year of market share gains, equipped with the strongest portfolio in the company's history, and a clear alignment of our value proposition with customer needs.

George Kurian: Turn it over to George for some closing comments.

George Kurian: Thank you to our customers partners employees and investors for your continued support fiscal year 'twenty five mark to many all time highs all flash public cloud Keystone support and total revenue.

George Kurian: Gross and operating profit operating margin net income and EPS.

George Kurian: I believe we have reached an inflection point, where the growth of all flash systems and public cloud services bolstered by the ongoing development of the enterprise AI market will drive sustained growth.

George Kurian: We are entering FY 'twenty six following a year of market share gains equipped with the strongest portfolio in the company's history, and a clear alignment of our value proposition with customer needs.

George Kurian: Looking forward, we believe our focus and strong execution will lead to even more company records in FY26 and beyond.

George Kurian: Looking forward, we believe our focus and strong execution will lead to even more company records in FY 'twenty six and beyond.

George Kurian: The call has now concluded. Thank you for attending today's presentation. You may now is the die.

Operator: The call has now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

George Kurian: Okay.

George Kurian: [music].