NetApp (NASDAQ:NTAP) Delivers Strong Q2 CY2026 Numbers But Stock Drops
Data storage company NetApp (NASDAQ:NTAP) reported Q2 CY2026 results topping the market’s revenue expectations, with sales up 29.9% year on year to $2.03 billion. On top of that, next quarter’s revenue guidance ($2.1 billion at the midpoint) was surprisingly good and 13.2% above what analysts were expecting. Its non-GAAP profit of $2.58 per share was 21.5% above analysts’ consensus estimates.
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NetApp (NTAP) Q2 CY2026 Highlights:
- Revenue: $2.03 billion vs analyst estimates of $1.84 billion (29.9% year-on-year growth, 10.2% beat)
- Adjusted EPS: $2.58 vs analyst estimates of $2.12 (21.5% beat)
- The company lifted its revenue guidance for the full year to $8.1 billion at the midpoint from $7.45 billion, a 8.7% increase
- Management raised its full-year Adjusted EPS guidance to $9.88 at the midpoint, a 11.6% increase
- Operating Margin: 23.9%, up from 19.8% in the same quarter last year
- Free Cash Flow Margin: 19.8%, down from 39.8% in the same quarter last year
- Market Capitalization: $35.94 billion
Company Overview
Founded in 1992 as a pioneer in networked storage technology, NetApp (NASDAQ:NTAP) provides data storage and management solutions that help organizations store, protect, and optimize their data across on-premises data centers and public clouds.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $7.39 billion in revenue over the past 12 months, NetApp is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because finding new avenues for growth becomes difficult when you already have a substantial market presence. To expand meaningfully, NetApp likely needs to tweak its prices, innovate with new offerings, or enter new markets.
As you can see below, NetApp grew its sales at a mediocre 4.6% compounded annual growth rate over the last five years. This shows it couldn’t generate demand in any major way and is a tough (but perhaps misleading) starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. NetApp’s annualized revenue growth of 7.7% over the last two years is above its five-year trend, suggesting its demand recently accelerated. 
This quarter, NetApp reported robust year-on-year revenue growth of 29.9%, and its $2.03 billion of revenue topped Wall Street estimates by 10.2%. Company management is currently guiding for a 23.2% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 2.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Adjusted Operating Margin
Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.
NetApp has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average adjusted operating margin of 27%.
Looking at the trend in its profitability, NetApp’s adjusted operating margin rose by 7.1 percentage points over the last five years, as its sales growth gave it operating leverage.
In Q2, NetApp generated an adjusted operating margin profit margin of 28.7%, up 3 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
NetApp’s EPS grew at 15.5% compounded annual growth rate over the last five years, higher than its 4.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into NetApp’s earnings to better understand the drivers of its performance. As we mentioned earlier, NetApp’s adjusted operating margin expanded by 7.1 percentage points over the last five years. On top of that, its share count shrank by 12.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For NetApp, its two-year annual EPS growth of 15.5% is similar to its five-year trend, implying strong and stable earnings power.
In Q2, NetApp reported adjusted EPS of $2.58, up from $1.55 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects NetApp’s full-year EPS to shrink by 1.1% from $9.18 to $9.08.
Key Takeaways from NetApp’s Q2 Results
It was good to see NetApp beat analysts’ EPS expectations this quarter. We were also excited its EPS guidance for next quarter outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. Investors were likely hoping for more, and shares traded down 8.7% to $166.47 immediately after reporting.
Big picture, is NetApp a buy here and now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).