Conference Transcript - NTAP 2026-09-09

Asya Merchant, Analyst — Citi Conference Host

Okay. Good afternoon, everyone. Asya Merchant, day one of Citi's conference, just after lunch, mid-afternoon. Actually, there's been a couple of sessions after lunch, but the afternoon of day one of Citi's tech conference. Asya Merchant here, I lead the tech sector on the hardware and tech supply chain. Really happy here to have NetApps CFO, Wissam Jabri, as well as IR, VP of IR, Chris Newton here. We have a bunch of questions. We're have any questions at the end, we're going to leave a few minutes here for investors to ask questions. Please do raise your hand so we can bring the mic to you. All right. Well, thank you for coming. I'm going to first give it over to Chris. She has a few comments.

Kris Newton, Head of Investor Relations

All right. Thanks for having us. Today's discussion may include forward-looking statements regarding NetApp's future performance, which are subject to risk and uncertainty. Actual results may differ materially from the statements made today for a variety of reasons described in our most recent 10K and 10Q filed with the SEC and available on our website at netapp.com. We disclaim any obligation to update information, any forward-looking statement for any reason.

Asya Merchant, Analyst — Citi Conference Host

All right. Well, Vassam, Chris, you guys just reported earnings. It was not even a week ago, right? And you took your – you had very good, very strong results for fiscal 1Q coming out, and then you did raise your whole fiscal year outlook as well, almost 2x, right? I think one of the questions that investors here were asking, and I have been asking, something I've been asking all my companies, especially on the enterprise OEM side of things, like what gives you confidence that this is durable, right? I mean, you still have three quarters to go, and it's not just customers double ordering. You guys have backlogged demand outlooks. It's not just customers double ordering and trying to get a secure spot in place, given the constraints that are out there.

Wissam Jabre, CFO

Thanks, Asya. First, happy to be here. Thank you for having us. Look, we had a stellar start to the year. As you mentioned, we reported last week. And when it comes to Q1, we saw some really good broad-based strength in demand driven by AI adoption and infrastructure modernization. There's also many ways that we typically monitor our business. We look at pipeline. We look at orders. We look at backlog. And we monitor it that way. And so far, we haven't seen anything out of the ordinary. And so we do think that we do see an underlying strength in demand that basically also gave us enough confidence to increase the guidance for the fiscal year. As you noted, we basically increased the guidance for fiscal year 27, doubling roughly the growth rate year on year relative to where the guidance was 90 days ago. and that also goes to EPS more than doubling that and so there's the other the last point I would say in terms of our business we don't have our business goes directly to sort of is linked to end customer demand and so we don't there is no stocking the channel for instance type of dynamics that works in it and then while we're on the topic of demand maybe just

Asya Merchant, Analyst — Citi Conference Host

Because you're pretty well exposed, you have exposure to commercials, of course, enterprise, also government. Maybe if you can talk a little bit about demand. Was it a pretty broad-based that was underpinning your revenue outlook? Was it pretty broad-based? And then you also have first-party services on cloud as well.

Wissam Jabre, CFO

Yeah, so in Q1, we experienced broad-based demand. We saw growth across various geographic regions. and we saw growth across the various types of customers and across various types of industries. And when it comes to our public cloud business, which is where really the three top hyperscalers are our customers and they offer our software as a native storage software solution, we've also experienced some really nice growth. We had, we reported around 28%, but then when we adjust to for the extra week that we had in Q1, it was around 19%. And so, you know, the growth was fairly broad based. Okay.

Asya Merchant, Analyst — Citi Conference Host

And then given that supply, you know, you guys have to have supply in order to underpin your demand outlook. I think at the start of the year, a lot of questions were around supply. Do the OEMs have the supply in order to underpin the demand outlook here? You guys are doubling your demand outlook. So what's changed on the supply side? Have you signed LTAs that gives you access to supply? Just help us on the supply side.

Wissam Jabre, CFO

Yeah, we've always worked very closely with our suppliers on not only understanding what their supply situation is, but also sharing with them what our outlook looks like. And so that sort of has been our mode of operation for quite some time. Where we are now, we basically have, I mean, at this time, we feel comfortable about the supply we have to be able to deliver the outlook we guided. We have different types of arrangements with different types of suppliers. In some cases, we have LTAs. In others, we basically have agreed upon sort of commitments and so on. But we feel comfortable from a supply perspective at this time to be able to deliver our outlook.

Asya Merchant, Analyst — Citi Conference Host

Okay. And outside of supply, Misal, are there other things? I mean, you have a range, right, when you provide the outlook as well, both for the quarter, for the year. Like, what would it take for, you know, what are outside of supply? Are there other gating factors that we should think or other factors that could, you know, cause you to upside on that side? And maybe we can also talk about the risks maybe towards the lower end of your guide then.

Wissam Jabre, CFO

Yeah, I mean, when you look at the guide, we basically take into account all the information we have at the time when we build our outlook on which the guidance is based. And so, you know, we're one quarter in the year. And so we'll wait until the end of this quarter and we'll be able to provide a better update for the rest of the year.

Asya Merchant, Analyst — Citi Conference Host

Okay. And what about pricing? Because I know people often do the P times Q. I know I bugged Chris during the quarter to talk about this, that P times Q, when people look at the bits that you're shipping, but of course, pricing has gone up quite meaningfully for not just for yourself, for your entire OEM space. So how much is pricing factored into that outlook? I mean, and if we do continue to see uptick in pricing, is that upside to your guide? Is that how we should think about it?

Wissam Jabre, CFO

So, you know, it's pretty normal and understandable an inflationary environment for pricing to be a factor. But what's most important is that what's underlying the growth and the outlook is more of a strength in the business driven by what I mentioned earlier with respect to AI adoption in the enterprise, as well as infrastructure modernization.

Asya Merchant, Analyst — Citi Conference Host

Okay. And then your growth rate, though, obviously you had pretty meaningful growth in fiscal 1Q. You're guiding for strength in fiscal 2Q. And then there was the extra week in 1Q, I get that. But then the implied guide, at least, was a little bit of deceleration here as we get into the back half of your fiscal year. What's underpinning that? Is it just you're just being very prudent given you're just one quarter into the fiscal year? Are there other factors that we should think about, maybe supply, et cetera? that's kind of baked into a deceleration and growth rates in the back half.

Wissam Jabre, CFO

Yeah. So when you look at the guidance, it is important to note that the guidance for the full year relative to 90 days ago is higher. And the guidance for the second half also is higher than what we had 90 days ago. So when we looked at the full year guidance, we basically updated the guidance in total. And both the first and the second half year sort of are incrementally better than what we thought they would be 90 days ago. Now, when you look at the seasonality of the business and you factor in the extra week in Q1, it looks like roughly the revenue at the midpoint, roughly the revenue is split almost 50-50. 50% first half, 50% second half. Now, it's slightly, in fact, it's slightly less than 50 if you sort of want to go to this first decimal point. But it is, let's call it 50-50, which is not necessarily far from the area, sort of the split that we've had for multiple years.

Asya Merchant, Analyst — Citi Conference Host

Okay. All right. Okay. And then a little bit on margins, because obviously product gross margins, you talked about component inflation here. they are expected to moderate in 2Q, and I think you said about towards the low 50s, if I'm not mistaken, for the product gross margins. I mean, can you talk a little bit about how should investors think about that? I mean, components typically are passed through for you guys.

Wissam Jabre, CFO

At what point do you see component inflation sort of moderating here, maybe even reversing? so look it's we are operating in a tight supply chain environment so it's too early to sort of make a call on the component pricing but when it comes to product gross margin it is the the what we guided for q2 and and for the rest of the year so think of q2 to q4 is slightly better product gross margin than we had expected 90 days ago. Now, when it comes to the full-year gross margin, the number is, the guide is slightly lower, but that's solely driven by the richer product revenue mix. All the margin lines are either similar to what we thought they would be 90 days ago or better.

Asya Merchant, Analyst — Citi Conference Host

Right. Okay. But on the product gross margin side, you are seeing more mix towards flash, right? In general, the product is mixing more towards flash. Your flash revenue is a very strong year on year. Typically, those are associated with higher margins, product margins, because there's more software component in there. So just walk us through sort of what it, you know, that puts and takes to product gross margins as you continue to maybe see more demand mixing towards flash, which carry typically higher software component.

Wissam Jabre, CFO

Yeah, I think your comment is accurate for Q1, Asya. We did see a higher flash mix in the overall revenue relative to the hybrid flash side. For the forward-looking numbers, we typically don't break it out as such. I mean, to the extent it happens, maybe, but it's too early to touch.

Kris Newton, Head of Investor Relations

Okay. We did call out strength in the hybrid flash business. So as we look forward, that could come through. And I wouldn't necessarily assume that the historical kind of relative margin performance of different product classes stand in this current environment.

Asya Merchant, Analyst — Citi Conference Host

And then to mitigate the cost headwinds, right? I mean, we've talked, what are the additional tools? Some of it's just passed through a pricing. What other tools would you have to mitigate some of the costs?

Wissam Jabre, CFO

Yeah, so the first one is, as you mentioned, we tend to focus on, and it's very customary in our space to pass through the component cost inflation, which we've done for now a couple of quarters. We've sort of built also a certain agility in the business to enable us to do that in a faster way meaning sort of you know the whether it's the duration of our quotes etc to be to enable us to be to react faster in the event we have to uh we are encountering component cost increases and we have to increase our prices and we also have many other ways to where we work with our suppliers so for for most of the commodities we purchase we have more than one supplier and so that helps us work on securing the supply but in some cases also it helps a little bit on the on the cost side but in in from the business itself when you look at our portfolio we have a very broad portfolio so we don't only necessarily carry only all flash we have all flash we have a hybrid flash we have keystone and we have the public cloud business And so we're happy to help our customers solve their problem regardless which service we offer. And so for customers that tend to really want to focus on very high performance, for instance, they may want to choose an all-flash array solution where capacity is probably more important or maybe they're much more cost-sensitive and capacity is more important than we're happy to offer. To offer a hybrid flash, which is the hard disk drive-based. For customers who have limited budgets and prefer to split their spending over multi-years, we could offer Keystone, which is our storage-as-a-service solution. And for customers who are comfortable doing a consumption approach, we're happy to offer our public cloud business. So there's some ways we address it through the supply side, through the cost side. And there's other ways we address it also by offering different solutions. And as Chris mentioned, now from a hybrid flash versus all flash, we don't have much of a differential on the margin side as well.

Asya Merchant, Analyst — Citi Conference Host

Okay. All right. Good to know. And then AI wins. I know NetApp often talks about the AI wins per quarter. And, you know, people track. That's a KPI that you share on the call. Fiscal 1Q numbers showed a little bit of deceleration, but I think the size of these deals are getting larger. So just help investors understand, like, are you seeing as these AI wins are coming through, and we talk about it, even that's one of the focus for this conference as well about enterprise adoption. Are you seeing much more storage being attached to all these AI wins as you're talking to your customers? What kind of storage? Help us understand what you're seeing as your customers are talking about these AI wins that you're, you know, then communicating to the investor base.

Wissam Jabre, CFO

Yeah, I mean, what we disclosed for Q1 was much higher than what Q126 was in terms of the number of AI wins. That's what we disclosed. What we've noticed in Q1 also is that the average size of the deal is now bigger than before. And so for some of the proof of concept type of deals that we had, let's say a year ago, we're starting to see more of a production type of deals now and that sort of helps explain that larger average size deal this just basically demonstrates that you know our customers once they put up once they test the product they're happy in terms of the ai workloads they're happy with it and they come back for larger deployments okay and then when you think about you know some of your compute vendors or competitors, for example, in the ecosystem, they're talking about very, very strong, a lot

Asya Merchant, Analyst — Citi Conference Host

of strength in the traditional servers for CPU-based servers, big AI workloads. As you're thinking about storage attach, you know, like you said, it's being reflected in the size of these deals. Like, are you seeing that inflection where compute and storage may be more closely aligned versus compute, which has, you know, obviously first we had a lot of GPU spend, now we're seeing a lot of CPU spend. Are you starting to see storage being more and more attached to these agentic AI workloads? How meaningful could it be in the next couple of years?

Wissam Jabre, CFO

I mean, there is, as I mentioned earlier, a certain broad-based strength in demand. And so some of it I would imagine has to do with some of the CPU server deployments because ultimately, after all these servers are deployed, they will need to have some form of storage attached to them. So it's a bit too early to tell the magnitude, but I would imagine that typically it would be a tailwind to our business.

Asya Merchant, Analyst — Citi Conference Host

I know you said it's difficult to size it right now, but when you talk about these deals that you're winning and tracking, is there any way to carve out how big it could be over the next two or three years in terms of percentage of revenue that have come from just these AI wins?

Wissam Jabre, CFO

I mean, look, we know that AI is giving us a tailwind on the top line, right? And the one thing to note is, you know, there's the AI sort of workloads, but there's also other types of infrastructure modernization that could be related to or associated with AI workloads that are also happening at the same time, since AI could generate other types of applications and infrastructure needs. And so, you know, I think over time, the line between AI and non-AI could become blurry. Like if you think of, you mentioned, two, three, four years down the road, that could become a little bit of a blurry line.

Asya Merchant, Analyst — Citi Conference Host

Right. On the other hand, if you look at sort of the industry, let's just talk about the broader industry TAM, right? As you think about the AI, whether it's data modernization, whether it's this incremental workloads, Is there any way, the way you guys think about the TAM, like how big could enterprise storage become for the next two to three years as we're starting to see AI workloads now?

Wissam Jabre, CFO

I mean, it's clear that we're experiencing, at least today, based on what we've reported and what we're seeing in the market, it's clear that we're experiencing a certain TAM growth. And so it is too early for us to tell where this could be two to three years from now, but what's clear is that there's certain underlying demand that's driven from the AI adoption and from infrastructure modernization.

Asya Merchant, Analyst — Citi Conference Host

And then just your own competitive dynamics here, like how you think you could grow share within this expanding time, and where do you feel most comfortable? Is it on the flash side? Is it on the hybrid side? Is it on cloud storage, Keystone, which is storage as a service? Where do you feel like you have the biggest opportunity to gain share in a growing time?

Wissam Jabre, CFO

When we look at our numbers and how we're looking at sort of the next few quarters, basically all parts of the business are doing well. In Q1, for instance, the old Flash array business grew by 47%. And in Q1 also, we saw a small uptick in the hybrid Flash revenue year on year, which is the second quarter in a row. We see that after several quarters of, like many quarters of decline. We also saw some nice uptake on the public cloud business, as I mentioned earlier, that the business excluding the extra week was up 19%. If you sort of dissect that and look at the first party and marketplace within that revenue, it grew at a much faster pace than this. Just for reference, the first party and marketplace portion of the public cloud business last year grew at around 31%. So there's really high growth there. And when you look at the Keystone storage as a service, in Q1, we experienced similar types of year-on-year growth as we've seen in Q4. It's still growing rapidly and expanding.

Asya Merchant, Analyst — Citi Conference Host

You guys made a couple of acquisitions during the quarter. I think Data Pilago and Jetstream. I hope I'm pronouncing that correctly. Just, you know, I think they're tuck-in acquisitions more than transformational. So just help us understand, like, you know, what's the reasoning for these acquisitions? You know, how do you think it's going to change? What attracted you to these acquisitions? Two and a quarter, is that, could it be greater looking forward? Like, where are you guys focused on in terms of technology acquisition?

Wissam Jabre, CFO

Yeah, as you noted, both are token acquisitions. They're technology acquisitions to complement our portfolio. So when you look at Data Pelago, Data Pelago is basically an extremely high performance data processing software engine that's capable of processing compute and the CPU and GPU environments while basically keeping the data where it resides, meaning processing data at the storage layer at a very high speed and high performance, which provides typically lower cost and better performance for the customers. And when you're able to process data where it resides, it also enhances security and data protection because you don't have to sort of move the data from one place to where the AI, to sort of other AI systems, basically other compute clusters for AI systems. So that's the data Pellago, which is pretty much, think of it as an enhancement to potentially AIDE. On the Jetstream side, Jetstream is very much a disaster recovery type of solution for VMware environment. And so that combines well with our public cloud business where we could also be used for disaster recovery as a retention type of storage on the public cloud business. So it gives us basically additional capability for the public cloud business. So both of these are small tuck-ins that are more technology-oriented to help us complement our portfolio and basically be more competitive.

Asya Merchant, Analyst — Citi Conference Host

Okay. And then on the AI side, I know at the Insight last year, and you have an Insight Day coming up again, AFX, AIDE, you talked a lot about that. I mean, help us understand how is that differentiating you from some of your other, you know, competitors, whether the compute and storage vendors who are selling full stack solutions or maybe just the only storage competitors that are out there. And especially we also have, you know, the NeoCloud storage providers, whether it's VAST or WECA. So how does, where are you with your AFX, AI, DE offerings and how does that differentiate to you relative to your competitors?

Wissam Jabre, CFO

Yeah, I mean, we have some customers that are in certification phase on AFX. AFX is our disaggregated architecture solution where customers can choose either to focus on performance or on capacity. And when you think of AFX and AIDE, basically they're part of the NetApp platform, which is really the key differentiator for us because we provide unified solution which would include things like AI data services and so on for our customers. And so it helps us be more competitive in terms of our portfolio offering as well.

Kris Newton, Head of Investor Relations

Okay.

Asya Merchant, Analyst — Citi Conference Host

Let's see, I'm going to just ask if there's any questions here in the audience. If you do, please raise your hand. Public cloud, you know, sorry, did I miss anything? Public cloud grew, you just talked about it, 19% X the extra week, which is pretty, at the first party obviously grew much faster than that. That's pretty nice growth relative to what you guys were experiencing. How sustainable is that? And what should invest, you know, what could maybe drive further growth in that? Do you think this 19, 20% growth is pretty sustainable? What should investors be looking for?

Wissam Jabre, CFO

See if that growth could accelerate here especially as we are hearing about you know overall cloud growing pretty rapidly yeah look the public cloud business is a very nice high growth business for us and the high teens growth rate are sustainable this is a business that is very differentiated we continue to make investments in it and adding capabilities and features features to to ensure that it stays differentiated and it stays in sort of leadership place where it is overall the the the first party marketplace is growing at a much faster pace as you noted and so over time that will continue to sort of also drive a nice growth as you think of the sort of mix within the public cloud business so the high teens percentage is a sustainable number for us okay and i know you guys are exposed across various hyperscalers for their first party?

Asya Merchant, Analyst — Citi Conference Host

Was the growth pretty unanimous across, or I mean, similar across all the other hypers, or were there ones which were doing a little bit better?

Wissam Jabre, CFO

They're all growing at a nice pace. Obviously, they're not all of equal size, but they're all growing at a very nice pace, contributing to that high growth in the business.

Asya Merchant, Analyst — Citi Conference Host

Okay, and is there any way to carve out how much AI is contributing to that growth in the public cloud that you're experiencing?

Wissam Jabre, CFO

Well, the way to think of our public cloud segment is that really that our customers are really the three hyperscalers. So, Microsoft, Google, and AWS. And then obviously we serve end customers. We know that there are AI workloads that happen within our public cloud environment, but we don't necessarily the visibility isn't as great since obviously they are our customers customer. We get quite a bit of visibility, but it's not necessarily as great. But what we know is there There are AI workloads that are basically taking place on that or run in that environment.

Asya Merchant, Analyst — Citi Conference Host

Have you had to make investments or change some of those product offerings? Is that how you get to some understanding that this could be AI-driven?

Wissam Jabre, CFO

We continue to evolve the product offering. We continue to add capabilities to it, and we continue to enable and be able to plug into the various AI capabilities that are offered by our partners.

Asya Merchant, Analyst — Citi Conference Host

Public cloud margins, I mean, they have continued to go higher. They're past, I think, a target range that was shared at your last investor event. At what point do you consider revisiting that margin framework for your public cloud?

Wissam Jabre, CFO

So public cloud margins, to be precise, in Q1 we're at 86 plus percent. The long-term range for us is 80 to 85 percent. We've been operating at that level for, I think, actually slightly higher than this for the last three quarters. We're comfortable with the range where it is now. We think there's potentially some upward bias, but we're comfortable with the range that it is now because we want to allow to continue to invest in the business and drive growth. And so that's really why I think at this point we'll keep the range where it is.

Asya Merchant, Analyst — Citi Conference Host

Okay. And the upside for this quarter, is it just a scaling thing? So as you start to see more growth, you know, obviously you're scaling, and so you should drive better margins.

Wissam Jabre, CFO

Well, the one thing to keep in mind, Asia, is that in Q1, we had an extra week, so that helped a little bit, the margin, but it still would have rounded to 86 anyway.

Asya Merchant, Analyst — Citi Conference Host

Okay. Keystone, again, grew significantly last year. Where do you think Keystone could be for your business over the long term?

Wissam Jabre, CFO

So Keystone is another offering from our portfolio where this is our storage as a service. It's been growing at a really nice pace. In Q1, it grew at the same pace as we saw more or less in Q4. so really high growth. It has really nice margins. It's accretive to our overall gross margin and operating margins. It is one of those elements of the business that we offer to our customers who are interested in basically doing storage as a service. It is by itself what we focus on with respect to working with our customers is to provide the best solution for them. and so we don't necessarily push storage as a service solution versus an on-prem. We work with the customer to determine what is best for them in terms of what they're trying, the problem they're trying to solve and what the infrastructure they're putting in place. I expect the business to continue to grow at a nice pace, continue to be as profitable and drive good profit growth for the company.

Asya Merchant, Analyst — Citi Conference Host

Is it a totally different set of customers that choose one, like public cloud versus Keystone? Or do you see some customers maybe having both with just different workloads?

Wissam Jabre, CFO

I mean, it could be, yeah, we see customers who could have the on-prem versus solution and Keystone is not necessarily a specific type of customer. Sometimes it depends on their workloads. Sometimes it depends on if they have any migration projects. It varies on their requirements. And so this is why, what I mentioned earlier, we work with the customer to try to figure out what solution or what problem they're trying to solve. And we address it in the best way possible for them.

Asya Merchant, Analyst — Citi Conference Host

And keystone margins, public cloud margins, given key, I mean, obviously a public cloud business is bigger. The margin's fairly similar.

Wissam Jabre, CFO

I think the public cloud margin has really phenomenal margins. I mean, when you get to that sort of 86%, I...

Asya Merchant, Analyst — Citi Conference Host

All right. Operating income guidance. You guys continue to manage OPEX extremely well. I think now the last few years, You guys have shown that you can manage OPEX at half the growth rates versus the revenue. And so how we should think about that going forward, given complexity of offerings, AI, obviously you're making some technology acquisition. How does that kind of overall play into your OPEX guide?

Wissam Jabre, CFO

Yeah, I mean, when you look at our operating margin guide, the latest we shared for the year with the increased guidance on the top line. We also increased the operating margin guidance at the midpoint by around 120 basis points. And so this shows the operating leverage that exists in the business and sort of demonstrates the earnings power there. Our focus is to balance between growth and margin. And so, you know, you grow the top line, we grow the gross profit but also want to continue to see that operating margin leverage to some extent and so we when we so having said that we also want to invest in the business we want to invest in growth and so our approach is typically not to invest or not to have opex grow faster than half of the growth rate of the revenue and if you if you sort of look at what where we are for the fiscal 27 guide, it sort of gives you a good idea that we're pretty much still living within that framework. But we still want to invest in the growth of the business. We think there's a lot of opportunities for us ahead, especially in AI solutions. And so that's something we continue to focus on, as well as, of course, driving the revenue growth and operating margin.

Asya Merchant, Analyst — Citi Conference Host

And so, Rizal, as you think about, I mean, obviously, you guys generate quite a lot of cash. When you're thinking about deploying cash, you have these technology tuck-in acquisitions, you have capital returns, you obviously have to just lock in supply to some. You're sitting back here, how are you thinking about, have my objectives for deploying cash changed?

Wissam Jabre, CFO

Our capital allocation approach has not changed. We're still intent to return up to 100% of our free cash flow to our shareholders, either through dividends and buybacks. So that hasn't changed. On the M&A side, you saw us do a couple of tuck-in acquisitions. We're a technology business. We want to make sure that we have a competitive portfolio that's second to none. And so we will continue to complement our portfolio as needed with these types of investments.

Asya Merchant, Analyst — Citi Conference Host

All right. Any questions here from the audience? With the rising component prices, and obviously it's reflecting through as you guys are passing through that. You know, what are your customers saying? I know you talked a little bit about, you know, you have a full stack offering, so you can do anything. You can do it as a service. You can do public cloud. You can do hybrids. But at the end of the day, how are customers sort of adjusting their budgets? And where are they getting the incremental, given that storage is growing, where are they getting the incremental budgets to support, you know, compute spending going up, PC spending going up, storage spending going up? What are you hearing from your customers as they're adjusting their budgets to allow for the higher pricing that's flowing through?

Wissam Jabre, CFO

I mean, look, customers budget based on their business priorities. And they also spend based on their budgets. And so in many cases, if they need to reprioritize what they buy, they will adjust it based on what the prices are and what they need to buy. but what's most important is they do budget based on their business priorities and if we fit within those priorities obviously that's great for us and obviously we're seeing some of that probably happening over the last quarter and for this year so that's that's that's a positive all right as my one of my last questions always is what do you think investors are missing about the net app story Well, look, we've had a stellar start of the year. We had many records in Q1. We did exceed our guidance on all metrics. We did increase the outlook for the fiscal year for both actually for all the revenue as well as operating margin and EPS. We continue to invest in the innovation and maintain that sort of innovative approach to the technology and driving a very strong portfolio. And later this month, we have Insight, which is our customer conference where we also showcase some of the great innovations that the team at NetApp has developed and is developing. And so I encourage you to listen to that. We think we are in a nice period of growth that would help us to continue to drive sustainable growth, sustainable profitability and cash flow and drive value for our shareholders.

Asya Merchant, Analyst — Citi Conference Host

Thank you, Chris. Thank you, Assam. Appreciate it. And I'll see you at Insight.

Wissam Jabre, CFO

Thank you for having us.