NetApp Inc. delivered a solid earnings and revenue beat today before raising its guidance for both metrics, saying it’s seeing strong demand for data storage services as companies upgrade their cloud infrastructure.

The strong results and optimistic guidance helped to boost the company’s stock more than 5% in extended trading, adding to gains of just over 2% during the regular trading session.

The company reported earnings before certain costs such as stock compensation of $1.87 per share, above the average analyst estimate of just $1.79 per share. It also reported sales of $1.66 billion, up 6% from a year earlier and just ahead of Wall Street’s forecast of $1.65 billion.

All told, NetApp reported net income for the second quarter of $299 million, rising from $233 million in the same period one year earlier.

NetApp Chief Executive George Kurian (pictured) said the company’s strong quarter was driven by record sales of all-flash storage products and rising demand for cloud-based storage services. “Broad-based customer preference for our intelligent data infrastructure platform and visionary approach for a data-driven future has enabled us to outgrow the market and take share from competitors,” he added.

According to NetApp, demand for high-capacity data storage has been rampant in recent months, as enterprises race to incorporate artificial intelligence services and capabilities into their platforms and applications. Storage is essential for AI as the most advanced models need to process vast amounts of data to deliver accurate responses.

NetApp’s data storage is embedded in all of the world’s largest cloud infrastructure platforms, including Amazon Web Services, Microsoft Azure, Google Cloud and Oracle Cloud.

NAND Research Inc. analyst Steve McDowell said NetApp is now outperforming the rest of the storage market in terms of all-flash business, where it grew its annual recurring revenue to 43% compared to a year ago. Even more encouraging, he believes this growth will continue to accelerate in the coming quarters.

“Just last week the NetApp released six new all-flash arrays targeting entry-level and mid-tier storage, which are segments that historically would have gone to more affordable hard-drive arrays,” McDowell said.

The analyst was just as impressed with NetApp’s efforts in the public cloud market, saying that it is the only traditional storage vendor that has so far managed to create a viable business in this area.

“NetApp’s competitors all have cloud offerings, but none of them treat the cloud market as a primary revenue driver,” McDowell explained. “They use it to help with migration of disaster recovery. NetApp has methodically built a standalone business with its ONTAP cloud offerings and it grew that business by 9%, and it’s profitable, with margins dramatically improving this quarter.”

Looking to the current quarter, NetApp said it’s eyeing earnings of between $1.85 and $1.95 per share, the midpoint of that range well ahead of the analysts’ consensus target of $1.86. In terms of revenue, the company is looking at a range of $1.61 billion to $1.76 billion, which comes in ahead of the Street’s $1.67 billion forecast.

For fiscal 2025, NetApp said it’s increasing its earnings forecast to a range of $7.20 to $7.40 per share, up from a prior range of $7 to $7.20. It also upped its revenue guidance to a range of $6.54 billion to $6.74 billion, from $6.48 billion to $6.68 billion. Wall Street is looking for full-year earnings of $7.11 per share on sales of $6.59 billion.

NetApp’s growing optimism comes in the wake of a busy quarter that saw the company host its annual user conference NetApp Insight in September. During that event, Kurian appeared in an interview on SiliconANGLE Media’s livestreaming studio theCUBE, where he talked about how enterprises are putting more focus on their data management strategies to meet the demands of AI workloads:

That event took place shortly after NetApp unveiled its long-term vision of an intelligent data infrastructure for generative AI projects, positioning its NetApp ONTAP operating system for unified storage as the ideal platform for running AI applications of every type.

McDowell said NetApp’s AI vision could be key, because traditional storage companies have not yet seen strong tailwinds from the rampant growth in that industry.

“NetApp thinks it can change that story with a different approach to storage,” McDowell explained. “It looks more like what Vast Data and Weka are doing that what most other traditional storage vendors are doing, and if it can execute on that vision, it will have a nearly unmatched story. But we’ll have to wait and see on that one.”

NetApp’s stock has risen more than 40% in the year to date, outperforming the broader S&P 500 index, which has gained just 24% over the same period.

Photo: SiliconANGLE