Will NetApp's Public Cloud Business Maintain Its Growth Momentum?

NetApp, Inc.’s NTAP Public Cloud business is benefiting from sustained demand for hyperscaler first-party and marketplace storage services, supporting continued growth in the company’s cloud operations. Its fourth-quarter fiscal 2026 Public Cloud revenues were $182 million, increasing 11% year over year. Excluding the contribution from Spot in the prior-year period, growth was 18%, highlighting continued momentum in the business. For fiscal 2026, Public Cloud revenue totaled $688 million, while first-party and marketplace cloud services grew 30% for the year.

The growth reflects broader customer adoption of NetApp’s first-party and marketplace services. This expansion continues to support the Public Cloud business as customers increasingly use NetApp’s offerings across their cloud environments. The segment also maintains a high level of profitability, with Public Cloud gross margin reaching 85.7% in the fiscal fourth quarter. Such profitability provides support for earnings leverage as the Public Cloud business represents a larger part of the company’s overall mix.

NetApp’s fiscal 2027 outlook assumes continued momentum in enterprise IT demand and increasing AI activity. These trends are expected to support use cases that connect governed data with AI and analytics services in the cloud. As customers continue to extend their data environments into cloud platforms, first-party and marketplace cloud services remain important components of NetApp’s Public Cloud strategy.

Taking a Look at NTAP’s Competitors

Seagate Technology Holdings plc STX is gaining from strong data center demand, HAMR adoption and pricing discipline. Management expects cloud spending and AI-led storage demand to remain healthy. Demand visibility remains strong, with most nearline capacity allocated through calendar 2028 and customer commitments extending into 2029. Seagate's HAMR-based Mozaic roadmap, disciplined pricing and manufacturing efficiencies are expected to drive revenue growth, margin expansion and cash generation in fiscal 2027. Management anticipates fiscal first-quarter revenues of $4.1 billion (+/- $100 million). At the midpoint, this indicates a 56% year-over-year improvement.

Western Digital Corporation WDC is benefiting from sustained demand for high-capacity storage as AI, cloud and data-intensive workloads expand. Its cloud end market, which accounts for 89% of total sales, grew 43%, driven by strong demand for high-capacity nearline drives and favorable pricing. HDDs continue to offer favorable economics for large-scale data retention, while higher-capacity ePMR, UltraSMR and upcoming HAMR products strengthen WD’s position with hyperscale customers. Longer customer agreements improve demand visibility and support predictable pricing. A richer product mix, lower cost per terabyte and operating leverage are supporting margin expansion and cash generation. For the first quarter of fiscal 2027, Western Digital expects non-GAAP revenues of $4.1 billion, plus or minus $100 million, representing 45% year-over-year growth at the midpoint.

NTAP Price Performance, Valuation & Estimates

Shares of NetApp have gained 36.2% in the past three months against the Computer-Storage Devices industry’s decline of 7.1%.

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Regarding the price/book ratio, NTAP is trading at 28.16, higher than the industry’s multiple of 14.26.

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The Zacks Consensus Estimate for NTAP’s earnings for fiscal 2027 has been revised marginally upward over the past 60 days.

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NTAP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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