NTAP 10-K & 10-Q changes, risk factors and insider trading

Global economic and geopolitical conditions have adversely affected and may in the future continue to adversely affect our industry, business operations, and financial performance, including our revenue growth, profitability, financial condition and cash flows.

As a global company, our business is influenced by worldwide economic and market conditions, including, among others, rising inflation, slower growth, economic downturndownturns or recession,recessions, changes in fiscal and monetary policies, higher interest and tax rates, economic uncertainty, political instability, ongoing international and regional conflicts,conflicts military(including conflicts in the Middle East), warfare, extreme weather events and effects from climate change, natural disasters and pandemics, supply chain interruptions and shortages, changes in laws,laws and regulations, reduced consumer confidence and spending, international trade protection measures and disputes (including economic and trade barriers, tariffs, sanctions and export controls), rapid technological changes, and the threat and potential of trade control policies and retaliatory trade control policies (including retaliatory tariffs). These factors, as well as the fear or anticipation of such conditions, may influence decisions and actions by our key stakeholders and the market generally, and can lead to increased volatility in the information technology (IT) industry, making it difficult to predict future demand for our products and services. They can also negatively impact the availability of supplies and limit access to capital for our suppliers, customers and partners.

Any of these factors above, as well as other adverse macroeconomic conditionsconditions, can significantly reduce demand for our products and negatively affect our operating results due to customer concerns about declining demand for their products, reduced asset values, fluctuating energy costs, geopolitical issues, the cost and availability of credit, and the stability of financial institutions, markets, businesses, and governments.results. These conditions may be widespread, and their resolution could be uncertain. If we are not able to efficiently and effectively resolvemanage our business in the face of such issues in a timely manner, or if our chosen strategies are not successful, then our business, operations and financial condition could be materially adversely impacted. Consequently, these risks and conditions could materially adversely affect our future sales and operating results.

The growth in our industry and the markets we compete in is driven by the increasing demand for data, which in turn drives the need for storage and data management solutions. However, our markets could face challenges due to technology transitions, increased storage efficiency, competitive pricing dynamics, changing consumption models, and uncertain macroeconomic conditions. Additionally, the impact of generative artificial intelligence (GenAI) on the storage and data management markets and regulation thereof is still unfolding and could evolve unpredictably.

As customers undergoundertake their information technology (IT) transformations, leveraging modern architectures and hybrid cloud environments, they seek simpler solutions and new consumption models. This shift is directing spending towards transformational projects and architectures like flash storage, hybrid cloud, cloud storage, and IT as a service.IT-as-a-service. The future impact of these trends on both short- and long-term demand for our products is uncertain, and we may struggle to meet customer demand with the expected level of quality and support for new products or services.

Our business may suffer if we fail to keep pace with rapid industry, technological, or market changes, or if our products and services are not well-received in the marketplace. These factors, along with other considerations discussed in this Annual Report on Form 10-K, could lead to a decline in customer demand for our products and services, resulting in decreased revenue on a year-over-year basis, as seen in fiscal 2017, 2020, and 2024. If the overall growth rate of our industry declines, if specific markets we compete in experience reduced growth, if storage consumption models change, if our new and existing products and services do not gain customer acceptance, or if we do not adapt our sales programs to market changes, our business, operating results, financial condition, and cash flows could be adversely affected.

A significant portion of our operations are located and revenues are derived from outside of the U.S., and most of our products are sourced and manufactured outside of the U.S. We also have research and development, sales, and service centers internationally. Consequently, our international operations and future financial results could be adversely affected by various economic, business, regulatory, social and political factors in foreign countries. These factors include government controls, local political or economic conditionscountries, such as recessions,government economic downturns, inflation and political uncertainty, economic sanctions, trade protections and regulations,controls, export and import requirements (including but not limited to government and regulatory authorizations), tariffs, investment restrictions, tax policies, treaties or laws, local labor conditions, transportation costs, government spending patterns, geopoliticalenvironmental tensionsprotection regulations (including new laws and uncertainties,regulations actsrelated ofto terrorism,climate internationalchange conflicts,and naturalsustainability disasters,marketing claims) and adverse public health developments.

Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we source and/or manufacture products, including the impact on our suppliers and contract manufacturers who may look to pass through additional costs imposed on them, could have a material adverse effect on our business and financial results. The U.S. government hascontinues recentlyto enactedenact changes to U.S. trade policy and has signaled plans for possible additional changes.changes, Forincluding example,future withdrawal from or material modification of certain international trade agreements such as the U.S.United governmentStates-Mexico-Canada hasAgreement, imposed sweepingimposing tariffs on certain productsproducts, andas countrieswell andas has signaled that furtherimposing tariffs mayon begoods imposedoriginating in thecertain future.countries. The U.S. government's tariffs policy remains fluid, with tariffs on certain countries delayed or reduced in scope, and additional tariffs likely to be forthcoming on other countries or specified products. Additional tariffs and restrictive policies, particularly with respect to the tariffs on Mexico,policies could have a significant impact on our business and results of operations. The exact magnitude of any potential impact remains uncertain given possible further changes in tariffs and increased tensions with U.S.among trading partners targeted by tariffs or other restrictive trade policies.partners. Our risk exposure may increase further ifas anyU.S. countriestrading levypartners consider imposing retaliatory tariffs, taxes, or other trade restrictions or penalties against the United States or U.S. companies.restrictions.

Additionally, ongoing trade tensions between the U.S. and China and recent investment restrictions, such as the U.S. Outbound Investment Security Program, could impact our business and operating results. Any increase in tensions between China and Taiwan, including threats of military actions or escalation of military activities, could adversely affect our ability, or the ability of our contract manufacturers’ abilitymanufacturers, to source key supply chain components included in our products. As a result of Russia’s actions in Ukraine, numerous countries and organizations have imposed sanctions and export controls, while businesses, including the Company, have limited or suspended Russian operations. Russia has likewise imposed currency restrictions and regulations and may further take retaliatory trade or other actions, including the nationalization of foreign businesses. These actions could impact our supply chain, pricing, business and operating results and expose us to cyberattacks. In addition, due to the global nature of our business, we are subject to complex legal and regulatory requirements in the U.S. and the foreign jurisdictions in which we operate and sell our products, including antitrust and anti-competition laws, and regulations related to data privacy, data protection, and cybersecurity. We are also subject to the potential loss of proprietary information due to piracy, misappropriation, or laws that may be less protective of our intellectual property rights than U.S. laws. Such factors have had or could have an adverse impact on our business, operating results, financial condition and cash flows.

We face exposure to adverse movements in foreign currency exchange rates as a result of our international operations.operations, These exposureswhich may change over time as business practices evolve, and they could have a material adverse impact on our operating results, financial condition and cash flows.evolve. We utilize forward and option contracts in an attempt to reduce the adverse impact of exchange rate fluctuations on certain assets and liabilities. Our hedging strategies may not be successful, and currency exchange rate fluctuations could have a material adverse effect on our operating results and cash flows. In addition, our foreign currency exposure on assets, liabilities, and cash flows that we do not hedge could have a material impact on our financial results in periods when the U.S. dollar significantly fluctuates in relation to foreign currencies.

Moreover, in many foreign countries, particularly in those with developing economies, it is a common business practice to engage in activities that are prohibited by NetApp's internal policies and procedures, or laws and regulations applicable to us. There can be no assurance that allIf our employees, contractors andcontractors, agents, as well as thoseor companies to which we outsource certain of our business operations,operations willfail to comply with these policies, procedures, laws and/or regulations.regulations, Anywe suchmay violation couldbe subject us to fines and other penalties, which could have a materialan adverse effect on our business, operating results, financial condition and cash flows.business.

The dynamic markets in which we operate and our sales and distribution structure make it challenging to forecast revenues, and any disruption to our partner relationships could harm our business, operating results, financial condition, and cash flows.

We participate in dynamic markets and employ diverse business and sales models, which complicate revenue forecasting. We sell to a wide range of customers across various industries and geographies, both directly and through multiple channels, each with different sales cycles. Our historical patterns of revenue seasonality within a fiscal year and linearity within a fiscal quarter may not hold true going forward and may be affected by pricing changes we announce or implement, macroeconomic conditions, or other factors. Most of our sales are made and/or fulfilled indirectly through channel partners, including value-added resellers, systems integrators, distributors, original equipment manufacturers (OEMs), and strategic business partners, including public cloud providers. This structure makes it particularly difficult to predict future revenue, especially within any specific fiscal quarter or year.

Our relationships with our indirect channel partners and strategic business partners are crucial to our success. Qualifying and developing new indirect channel partners typically requires significant time and resource investment before achieving acceptable productivity levels. If we fail to maintain strong relationships with our indirect channel partners and strategic partners, including public cloud providers, if our partners seek to renegotiate or terminate existing contracts or agreements, or if their financial condition, business, or customer relationships weaken, if they fail to comply with legal or regulatory requirements, or if we cease to do business with them for these or other reasons, our business, operating results, financial condition and cash flows could be adversely affected.

Our future growth relies on the successful development and introduction of new hardware and software products and services. The complexity of storage and data management software, subsystems and appliances, as well as the challenges in estimating the engineering effort required to produce new products and services, pose significant technical and quality control risks for these new products and services. If we encounter technological challenges, customer reluctance, or other obstacles that prevent us from developing, introducing and gaining market acceptance for new products and services, or if we fail to provide the expected level of product and support quality, our business, operating results, financial condition and cash flows could be materially and adversely affected. Introducing new products and features exposes us to additional financial and operational risks.risks, These includeincluding the ability to forecast customer preferences and demand, managing production capacity to meet the demand for new products and services and avoid excessive inventories of older products and components, managemanaging the transition from older products and solutions, and handlehandling the impact of customer demand for new offerings versus those being replaced.

As customers transition from older products to newer ones, delays or decisions to postpone the transition could leadreduce tocustomer non-renewaluptake of new offerings, impacting our ability to manage and forecast customer churn and expansion rates. Additionally, uncertainties related to the price-performance of new products compared to competitors, competitors’ responses to our new products, extended evaluation periods by customers, and our partners’ investment in selling our new products add to the inherent risks. If we do not manage these risks effectively, our business, operating results, financial condition, and cash flows could face significant adverse impacts. Furthermore, entering new or emerging markets will likely increase demands on our service and support operations and expose us to additional competition. We may struggle to provide competitive products, services and support for these market opportunities.

Our gross margins are influenced by a variety of factors, including macroeconomic volatility, competitive pricing, customer price sensitivity, component and product design costs, inflation, foreign exchange currency fluctuations, and the volume and relative mix of revenues from product sales, software support, hardware support, and other services offerings. Factors such as increased componentcomponent, labor, and labortransportation costs, cost of any substandard materials, pricing and discounting pressures, changes in component costs and product prices, or shifts in revenue mix and volume from different offerings could negatively impact our revenues, gross margins or earnings.

Additionally, our gross margins are affected by the cost of any substandard materials and our sales and distribution activities, including pricing actions, rebates, sales initiatives, discount levels, and the timing of service contract renewals. Third-party component costs make up a significant portion of our product costs. We may have difficulty managing theseThese costs are difficult to manage if supplies of certain components, including NAND, become limited relative to demand or component prices rise.rise Such limitations could increase our product costs.significantly.

We have experienced, and may continue to experience, negative impacts on our gross margins due to rising component costs, logistics costs, tariffs and other trade barriers, and inflationary pressures. For example, we have experienced inflationary pressure and supply chain constraints beginning in the second half of fiscal 2026, resulting in increased costs for memory and other components, which have affected our gross margins. An increase in component or design costs relative to our product prices could continue to harm our gross margins and earnings.margins. Failure to sustain or improve our gross margins may have a material adverse effect on our business and stock price.

Issues related to the development and use of artificial intelligence (AI), including GenAI, could lead to legal or regulatory action, damage our reputation, or otherwise materially harm our business.

As a technology company at the forefront of AI innovation, our business faces potential risks associated with the rapidly evolving regulatory landscape for AI. Governments and regulatory bodies worldwide are increasingly enacting new laws and guidelines to address the ethical, privacy, and security implications of AI technologies. Non-compliance,Non-compliance with these emerging regulations, even if inadvertent or without our knowledge, with these emerging regulations could result in legal and financial penalties, reputational damage, and operational disruptions. Additionally, the diverse and sometimes conflicting nature of international AI regulations may pose challenges in maintaining consistent compliance across different jurisdictions. The complexity and novelty of these laws may also require investments in compliance infrastructure, including enhanced data governance frameworks, algorithmic transparency, and bias mitigation strategies.

We are increasingly building and/or leveragingdeploying AI technology in certain products, services, and business operations, and our research and development in this area is ongoing. As with many innovations, AI presents risks, challenges, and potential unintended consequences that could affect our and our customers’ adoption and use of this technology. AI algorithms and training methodologies may be flawed, andbiased, or produce inaccurate outputs, which could result in public controversy or loss of customer trust. Furthermore, AI technologies are complex and rapidly evolving.evolving and could expose us to an increased risk of cybersecurity threats and incidents. Our usage of third-party AI technologies introduces challenges, including with respect to vendor management, oversight, and integration, that may increase our risk exposure. We face significant competition in the market and from other companies regarding suchAI technologies.

We may be unsuccessful in identifying or resolving ethical and legal issues presented by the use of AI before they arise. AI-related issues, deficiencies and/or failures could result in (i) legal or regulatory action, including to enforce new legislation regulating AI in various jurisdictions where we operate, and the application of existing data protection, privacy, intellectual property, and other laws; (ii) damage to our reputation; (iii) time-consuming and costly litigation, including related to intellectual property; (iv) inability to protect our intellectual property, including the inability to claim intellectual property ownership over content or source code generated using AI; (v) disclosure of our confidential informationinformation, including the inadvertent input of proprietary, sensitive, or customer data into publicly available third-party AI training models; or (vi) other material harm to our business. If regulation significantly delays or impedes the adoption of AI, we may not be able to meet our development goals or our sales forecasts.

Increasing competition andor industry consolidation could harm our business, operating results, financial condition and cash flows.

Our markets are highly competitive, fragmented, and characterized by rapidly changing technology. We face competition from many companies, including established public companies, newer public companies with a strong focusfocused on flash storage, and new market entrants targeting opportunitiesthe inAI GenAI and application data management for Kubernetes.opportunity. Some competitors offer a broad range of IT products and services (full-stack vendors), while others offer a more limited set.

Technology trends, such as GenAI, hosted or public cloud storage, software as a service (SaaS), IT as a service, and flash storage are driving significant changes in storage architectures and solution requirements. Cloud service providers offer storage on demand without requiring capital expenditure, which meets rapidly evolving business needs and has altered the competitive landscape. Competitors may develop new technologies, products, or services ahead of us or establish new business models, more flexible purchase models, or disruptive technologies. By extending our offerings in flash, cloud storage, converged infrastructure, and block storage, and GenAI, we are entering new segments and facing competition from both traditional competitors and emerging competitors. The long-term potential and competitiveness of emerging vendors remainsremain uncertain.

New competitors or alliances among existing competitors could emerge and quickly gain significant market share or buying power. Changes in customer requirements or increased industry consolidation could result in stronger competitors who are better able to compete.compete against us. Additionally, current and potential competitors may establish cooperative relationships among themselves or with third parties, including some of our partners or suppliers. For additional information regarding our competitors, see the section entitled “Competition” contained in Part I, Item 1 - Business of this Annual Report on Form 10-K.

We offer customers a variety of consumption models, including cloud-based storage services and storage as a servicestorage-as-a-service (STaaS) delivered on-premises. As these business models continue to evolve, we may face challenges in competing effectively, generating significant revenues, or maintaining the profitability of our consumption-based offerings. Additionally, the growing prevalence of cloud and software-as-a-service (SaaS) delivery models offered by us and our competitors may reduce overall demand for our traditional on-premises offerings sold through a capital expenditure (capex) model, which could negatively impact our revenues and cash flow, at least in the short term. Failure to successfully execute our consumption model strategy or anticipate customer needs could lead to a decline in our revenues and our profitability could decline.

Our success depends on our ability to hire and retain qualified personnel to advance our corporate strategy and maintain key aspects of our corporate culture. As our future success relies on enhancing and introducing new products and features, we particularly need to attract and retain qualified engineers and technical talent, especially in emerging technology areas like AI and machine learning. To increase revenues, we must also increase the productivity of our sales force, which may require an increase in support infrastructure and personnel, to achieve adequate customer coverage.

Competition for qualified employees, particularly in the technology industry, is intense. Higher compensation costs to retain and recruit qualified employees may not be offset by innovation, improved productivity or increased sales. We have periodically reduced our workforce, including restructuring plans announced in fiscal 2023,2024, fiscal 2024,2025, and fiscal 2025, respectively.2026. These actions may make it more challenging to attract and retain qualified employees. Failure to hire and retain skilled management and personnel, particularly engineers, salespeople, and key executive management, could disrupt our development efforts, sales results, business relationships, and our ability to execute our business plan and strategy, adversely affecting our operating results, financial conditionscondition and cash flows.

Many of our employees participate in our hybrid work program and work remotely on a full- or part-time basis. Changes to our office environments, including the adoption of new work models and our requirements and/or expectations about when or how often certain employees work on-site or remotely may not meet the expectations of our employees, and may create challenges in attracting and retaining qualified personnel, adversely affecting our business operations and financial performance.

Additionally, many of our employees are foreign nationals relying on visas and entry permits to work legally in the U.S. and other countries, and may be dependent on licenses to work with controlled technology. Restrictions or difficulties in obtaining H-1B, L-1 and other business visas, as well as licenses to work with controlled technologies, along with compliance with new immigration and labor laws and unintended impacts from changes in immigration policy or in the enforcement of existing immigration laws and policies, could lead to unexpected labor costs and hinder our ability to retain and attract skilled professionals, negatively impacting our business, results of operationsoperations, financial condition or financialcash conditions.flows.

A competitive broad-based equity compensation program is essential to compete for talent in both the hardware and software industries, where competitors offer significant equity compensation. If we cannot obtain shareholder approval to offer additional stock-based awards to our employees, or if our stock price declines significantly, our ability to hire and retain employees may be adversely affected. Furthermore, the structure of our sales, cash, and equity incentive compensation plans may increase the risk of losing employees at certain times, such as after the payment of periodic bonuses or the vesting of equity awards.

As part of our strategy, we may seek to acquire other businesses and technologies to complement our current products and services, expand our market reach, or enhance our technical capabilities. The benefits we have received, and expect to receive, from these and other acquisitions depend on our ability to successfully conduct due diligence, negotiate the terms of the acquisition and integrate the acquired business into our systems, proceduresprocedures, and organizational structure. We may also divest businesses, product lines, or divisions that no longer align with our current offerings.offerings or strategy. For example, we sold Spot by NetApp, our FinOpscloud businessoptimization and management software business, to Flexera Software LLC in fiscal 2025. Realizing the benefits we would expectforecast to receive from a divestiture would dependdepends on our ability to manage the separation of operations, services, products, and personnel, in addition to other risks.

Any inaccuracy in our assumptions or failures to identify and mitigate liabilities or risks associated with an acquisition or divestiture –divestiture, such as differing or inadequate cybersecurity and data privacy protection controls or contractual limitations of liability –liability, could reduce or eliminate the expected acquisition or divestiture benefits. If we fail to make acquisitions or divestitures on favorable terms, integrate or divest the subject business or assets as planned, or retain or separate key employees, our costs could increase, our operations could be disrupted, and we could face additional liabilities, investigations and litigation. This could harm our strategy, business, and operating results. Additionally, the failure to achieve expected benefits from acquisitions or divestitures may result in impairment charges for goodwill and intangible assets.

We have made, and will continue to make, significant investments in engineering, sales, service and support, marketing, and other functions to support and grow our business. The costs associated with these investments are likely to be recognized earlier than some of the related anticipated benefits, such as revenue growth. Additionally, the return on these investments may be lower or may develop more slowly than we expect, which could harm our business, operating results, financial conditioncondition, and cash flows.

We continuously strive to make our cost structure and business processes more efficient, includingwhich byincludes relocating our business activities from higher-cost to lower-cost locations, outsourcing certain business processes and functions, and implementing changes to our business information systems. These efforts require significant investment of financial and human resources and substantial changes to our current operations. For example, in fiscal 2025, we continuedcontinue ourto implementation ofimplement certain new business information systems, includingwhich included implementing the final phase of a new enterprise resource planning (ERP)system systemin the third quarter of fiscal 2026 to enhance and standardize our processes, improve oversight, and better serve our customers. However, any disruptionDisruptions during this transition couldhave impacted and may continue to impact our ability to sendefficiently process customer orders and trackissue invoices, and may impact our ability to process vendor payments, pay employees, fulfill contractual obligations, report financial results, maintain effective internal controls, or operate our business effectively.

We may also encounter difficulties in implementing new business information systems or maintaining and upgrading existing systems and software. These difficulties could lead to significant expenses or losses due to unexpected additional costs, disruption in business operations, loss of sales or profits, or delays in processing and reporting key financial information. As a result, our business, results of operations, financial conditioncondition, and prospects could be materially adversely affected.

We have publicly announced, and may continue to establish and announce, initiatives regarding sustainability and corporate responsibility matters, as well as other related matters in our Impact Report, on our website and elsewhere. These statements, which are included in our Impact Report, on our website, in our SEC filings, and elsewhere, reflect our current plans and aspirations but are not guarantees of achievement. Implementing these initiatives and goals can be challenging and costly, and our current plans and aspirations may not all succeed or be achieved in the way and on the timelines we expect or at all. While these initiatives and goals are not a critical part of our business operations and may not significantly impact our financial performance directly, they are an important part of our business ethos and corporate culture that we believe is valued and appreciated by our investors and key stakeholders.

If we are unable to maintain and develop relationships with strategic partners, our ability to innovate may be diminished and our revenues may be harmed.

Our growth strategy relies on developing and maintaining strategic partnerships with major third-party software and hardware vendors to integrate our products into their products and co-market them. Many of our strategic partners are industry leaders that provide us with expanded access to market segments where we do not directly participate. Strategic partnerships with public cloud providers and other cloud service vendors are particularly critical to the success of our cloud-based business.business, and partnerships with AI vendors are critical for our continued innovation.

However, thereThere is intense competition for attractive strategic partners,partners. and theseThese relationships may not be exclusive, may not generate significant revenues, and may be terminated on short notice. Some of our partners also collaborate with our competitors, which can increase the availability of competing solutions and hinder our ability to grow these relationships. Additionally, some partners, especially large and diversified technology companies, including major cloud providers, are also our competitors, complicating our relationships.

If we are unable to establish new or maintain current partnerships, if our strategic partners prioritize their relationships with other vendors in the storage industry, ifour partners are unsuccessful in providing the services we need, our strategic partners seek to renegotiate or terminate our agreements, or if our strategic partners increasingly compete with us, we could experience lower-than-expected revenues, delays in product development, and other adverse effects on our business, operating results, financial condition and cash flows.

In fiscal 20242025 and fiscal 2025,2026, we reorganized our sales resources, including changes and additions to our sales leadership team, to gain operational efficiencies and better align our resources with customer and market opportunities. However, such reorganization and ongoing adjustments to our go-to-market model could disrupt our sales cycles in the short- or long-term, may not yield the desired efficiencies and benefits, and could harm our business, operating results, financial condition, and cash flows.

We have undertaken, and may in the future undertake, initiatives that include reorganizing our workforce, restructuring, discontinuing certain products, acquisitions and dispositions of businesses, exiting or entering geographic markets, reducing facilities, or a combination of these actions, which could result in restructuring charges. Rapid changes in the size, alignment, or organization of our workforce, including our business unit structure, structure of our sales team, and sales account coverage, could impair our ability to develop, sell and deliver products and services as planned, or hinder our ability to achieve our business and financial objectives. Charges associated with these activities could harm our operating results.

TheAdditionally, we have faced, and may in the future face, a prolonged U.S. government isshutdown, anwhich importantcould customer for us, but its demand is uncertain duelead to politicalprogram cancellations or disruptions, delays in funding authorizations or appropriations and budgetarylimitations fluctuations and constraints. Uncertainty related toon the U.S. governmentgovernment's budgetability make timely payments, which could in turn harm our business and debtfinancial levels,condition. changes to governmental agency structure, compliance with new initiatives and executive orders, and reductions in force have increased demand uncertainty for our products. Changes in administration may also lead to programsPrograms and initiatives movingmay change or move in or out of favor, which may lead to varied perception of our company in the U.S. government market and may negatively impact our sales to the U.S. government. Additionally, the U.S. government, like other customers, may evaluate competing products and delay purchases during technology transitions in the storage industry. If the U.S. government or its agencies reduce or shift their IT spending patterns, our revenues and operating results may be adversely affected.

Selling our products to the U.S. government, whether directly orgovernment through channel partners, subjects us to specific regulatory and contractual requirements, which may change or increase at short notice. Some of these requirements may extend past the specific nature and products of the arrangement and impact our broader corporate policies, initiatives and employee resources. Failure to comply with these requirements by either us or our channel partners could lead to investigations, fines, and other penalties (including the loss of access to such government contracts), harming our operating results and financial condition. For example, the U.S. Department of Justice (DOJ) has previously pursued claims and settlements with IT vendors, including us and our competitors and channel partners, under the False Claims Act and other statutes related to violations of regulatory and contractual requirements, which may include such areas as pricing and discount practices, cybersecurity, or procurement integrity. These actions, in addition to potential fines and other penalties as well as potential government audits and investigations, could also result in suspension or disbarment from future government contracts. Additionally, government certification requirements may change and, in doing so, restrict our ability to sell into the government sector until we have attained revised certifications (or are able to make the required certifications to the government). We could also be harmed by claims of non-compliance with these requirements by us or our channel partners. Any of these outcomes could materially adversely affect our business, operating results, financial condition and cash flows. In response to evolving and increasing security threats, the U.S. government has imposed additional requirements on IT vendors, including us. These requirements range from software development security (e.g., the Executive Order on Improving the Nation’s Cybersecurity (EO 14028), issued in May 2021, to require attestation to minimum requirements for our software development framework), to supply chain security (e.g., Section 5949 of the FY23 National Defense Authorization Act (NDAA) prohibits us from including in our products or using in our corporate environment certain semiconductor products and services), to cybersecurity (e.g., the U.S. Department of Defense’s Cybersecurity Maturity Model Certification (CMMC) program). Failure to meet these requirements as they apply to us and our products may result in delays or inability to execute contracts with customers, particularly with government entities.

Most of our sales to customers are on an open credit basis, with typical payment terms of 30 days. During periods of economic uncertainty, when access to liquidity may be limited, we may experience increased losses as more customers become unable to pay their obligations to us, either in full or in part. Additionally,Our someexposure to credit risks from our customers haveincreases enteredduring intoeconomic recourse and non-recourse financing leasing arrangements using third-party leasing companies. Under recourse leases, which typically last three yearsuncertainty or less,volatility. weThis remainrisk liablemay forfurther the unpaid remaining lease payments to the third-party leasing companiesincrease if theour end-usercustomers customeror defaults.their customers are adversely affected by global economic conditions.

We do not manufacture certain components used in our products. We rely on third parties to manufacture criticalthe components used in our products and handle associated logistics. Our lack of direct control over these elements, combined with the diverse international geographic locations of our manufacturing partners and suppliers, creates significant risks for us, including:

Public Cloud offers a portfolio of products delivered primarily as-a-service, including related support. This portfolio includes cloud storage, data services, and operational services. These services are generally available on the leading public clouds, including Amazon AWS, Microsoft Azure, and Google Cloud.

The following table provides an overview of key financial metrics for each of the lastyears three fiscal yearsindicated (in millions, except per share amounts and percentages):

Net revenues: Our net revenues increased approximately 5% in fiscal 20252026 compared to fiscal 2024,2025, due to increases in both product revenues and services revenues.

Gross margin: Our gross margin decreasedincreased less than one percentage point in fiscal 20252026 compared to fiscal 2024,2025, due to the decreaseincrease in gross margins on services revenues, partially offset by lower gross margins on product revenues.

Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by onefour percentage pointpoints in fiscal 20252026 compared to fiscal 2024,2025, primarily due to higher net revenues.

Provision (benefit) for income taxes: Our provision for income taxes decreasedincreased in fiscal 20252026 compared to fiscal 20242025 primarily asdue ato resultbenefits related to the Internal Revenue Service ("IRS") examination of differencesour fiscal 2018 and 2019 U.S. income tax returns in discretethe tax impacts in eachprior year.

During fiscal 2025,2026, we repurchased 10.29.0 million shares of our common stock at an average price of $112.55$105.89 per share, for an aggregate purchase price of $1.2$950 billion.million. We also declared aggregate cash dividends of $2.08 per share in fiscal 2025,2026, for which we paid a total of $424$413 million.

During fiscal 2025,2026, we executed severala restructuring plansplan and recognized expenses totaling $83$21 million consisting primarily of employee severance-related costs.costs related to the current year and prior year plans.

Senior Notes IssuanceRepayment

The increase in net revenues for fiscal 20252026 compared to fiscal 20242025 was due to an increase in both product revenues and services revenues. Product revenues as a percentage of net revenues increased by approximately one percentage point in fiscal 2025 compared to fiscal 2024, whileand services revenues as a percentage of net revenues decreasedremained relatively flat in fiscal 2026 as compared to fiscal 2025. Fluctuations in foreign currency exchange rates favorably impacted net revenues percentage growth year-over-year by approximately onetwo percentage point.points.

The decreaseincrease in net revenues for fiscal 20242025 compared to fiscal 20232024 was due to aan decreaseincrease in both product revenues partially offset by an increase inand services revenues. Product revenues as a percentage of net revenues decreasedincreased by approximately threeone percentage pointspoint in fiscal 20242025 compared to fiscal 2023,2024, while services revenues as a percentage of net revenues increaseddecreased by approximately threeone percentage points.point.

The followingTwo customers, each of which is a distributor, accounted for 10% or more of net revenues:

Product revenues are derived through the sale of our Hybrid Cloud solutions and consist of sales of configured all-flash array systems (including All-Flash FASAFF A-Series and All-Flash FASAFF C-Series with capacity flash) and hybrid systems,systems (including FAS), which are bundled hardware and software products, as well as add-on flash, disk and/or hybrid storage and related OS, StorageGrid, OEM products, NetApp HCIproducts and add-on optional software.

Total product revenues increased in fiscal 20252026 compared to fiscal 2024,2025, primarily due to higher sales of C-Series all-flash array systems,systems partiallyand offsetthe byfavorable impact from foreign exchange rate fluctuations. Product revenues in fiscal 2026 also benefited from the execution of a decreasemulti-year inenterprise sales of hybrid systems.agreement.

Total product revenues decreasedincreased in fiscal 20242025 compared to fiscal 2023,2024, primarily due to lowerhigher sales of all-flash array systems, partially offset by a decrease in sales of hybrid systems due to softening customer demand, partially offset by an increase in sales of C-Series all-flash array systems.

Professional and other services revenues increased in fiscal 2026 and fiscal 2025 compared to fiscalthe 2024respective prior years primarily duereflecting to an increase inhigher revenues from our Keystone storage-as-a-serviceStorage-as-a-Service offering and remained relatively flat in fiscal 2024 compared to fiscal 2023.offering.

Public Cloud revenues increased in fiscal 20252026 and fiscal 20242025 compared to the respective prior years primarily due to higher customer demanddemand, fordriven by NetApp’s diversified cloud offerings,offerings coupled withand overall growth in the cloud market. The smaller increase in fiscal 2026 reflects the loss of revenue from our Spot by NetApp business which we sold in the fourth quarter of fiscal 2025.

Net Revenues by Geographic Area:

Americas revenues consist of salesSales to Americas commercial and United States (U.S.) public sector markets.markets includes revenue from the U.S. federal government and U.S. state governments, local municipalities and education institutions. Demand across geographies was relatively consistent for each fiscal year presented.

(1) cost of product revenues, composed of (a) cost of Hybrid Cloud product revenues, which includes the costs of manufacturing and shipping our products, inventory write-downs, and warranty costs, and (b) unallocated cost of product revenues, which includes stock-based compensation and amortization of intangibles,compensation, and;

(2) cost of services revenues, composed of (a) cost of support revenues, which includes the costs of providing support activities for hardware and software support, global support partnership programs, and third partythird-party royalty costs, (b) cost of professional and other services revenues, constituting the cost of delivering such services which includes depreciation expense, (c) cost of public cloud revenues, constituting the cost of providing our Public Cloud offerings which includes depreciation and amortization expense and third partythird-party datacenter fees, and (d) unallocated cost of services revenues, which includes stock-based compensation and amortization of intangibles.

Materials costs increased by $126 million in fiscal 2026 compared to fiscal 2025 primarily reflecting the increase in product revenues and higher component costs. Materials costs increased by $140 million in fiscal 2025 compared to fiscal 2024 primarily reflecting the increase in product revenues.

Hybrid Cloud product gross margins decreased by approximatelytwo percentage points in fiscal 2026 compared to fiscal 2025 primarily due to higher component costs, partially offset by the favorable impact from a multi-year enterprise agreement. Hybrid Cloud product gross margins decreased by two percentage points in fiscal 2025 compared to fiscal 2024 primarily due to higher component costs.

Cost of Hybrid Cloud services revenues, which are composed of the costs of support and professional and other services, increased in fiscal 20252026 and fiscal 20242025 compared to the respective prior years reflecting the increase in Hybrid Cloud services revenues. Cost of Hybrid Cloud services revenues represented 16%, 16% and 14% of Hybrid Cloud services revenues in fiscal 2025,2026, 20242025 and 2023, respectively.2024.

Hybrid Cloud support gross margins were similar in fiscal 2025,2026, fiscal 20242025 and fiscal 2023.2024. Hybrid Cloud professional and other services gross margins increased by approximatelyfive percentage points in fiscal 2026 compared to fiscal 2025 and by two percentage points in fiscal 2025 compared to fiscal 2024 while they decreased by approximately ten percentage points in fiscal 2024 compared to fiscal 2023 primarily due to the mix of services provided.provided in each year.

Cost of Public Cloud revenues decreased in fiscal 2025 compared to fiscal 2024,decreased, while Public Cloud gross margins increased by eight percentage pointspoints, in fiscal 2026 and fiscal 2025 compared to fiscalthe 2024.respective Theprior decreaseyears. inThese costfluctuations of Public Cloud revenues and improved gross margins waswere due to cost optimization that included a decrease in fixed assets depreciationdepreciation, and the mix of offerings provided.provided which was impacted by the sale of our Spot by NetApp business in the fourth quarter of fiscal 2025.

Unallocated cost of services revenues decreased in fiscal 2026 and fiscal 2025 compared to fiscalthe 2024respective prior years due to the derecognition of certain intangible assets asresulting a result offrom the sale of our cloud optimization and management software business known as Spot by NetApp business during the fourth quarter of fiscal 2025. Unallocated cost of services revenues decreased in fiscal 2024 compared to fiscal 2023 due to certain intangible assets becoming fully amortized during the first quarter of fiscal 2024.

Total compensation costs included in sales and marketing, research and development and general and administrative expenses in fiscal 2025 wereremained relatively flat compared toin fiscal 2026, 2025 and 2024.

Our future business, operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our 2026 Annual Report on Form 10-K for the year ended April 25, 2025,10-K, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, Item 2, "Management's Discussion and Analysis of Financial Conditions and Results of Operations), there have been no material changes to the Company’s risk factors since our 2026 Annual Report on Form 10-K for the year ended April 25, 2025.10-K.

Public Cloud offers a portfolio of products delivered primarily as-a-service, including related support. This portfolio includes cloud storage, data services, and operational services. These services are generally available on the leading public clouds, including Amazon AWS, Microsoft Azure, and Google Cloud.

Stock Repurchase Program and Dividend Activity

During the first ninethree months of fiscal 2026,2027, we repurchased 7.01.5 million shares of our common stock at an average price of $107.26$133.32 per share, for an aggregate purchase price of $750$200 million. We also declared aggregate cash dividends of $1.56$0.52 per share in that period, for which we paid $310$102 million.

Restructuring EventsEvent

In the first nine monthsquarter of fiscal 2026,2027, we approvedexecuted a restructuring plan to redirect resources to highest return activities and reduce costs. Aggregate restructuring charges recorded from restructuring plans during the first nine monthsquarter of fiscal 20262027 totaled $22$56 million.

Our fiscal year is reported ason a 52- or 53-week year that ends on the last Friday in April. FiscalAn additional week is included in the first fiscal quarter approximately every six years 2026to andrealign 2025,fiscal months with calendar months. Fiscal 2027, ending on April 24,30, 20262027, is a 53-week year, with 14 weeks included in its first quarter and April13 25,weeks 2025, respectively, arein each subsequent quarter. Fiscal 2026, which ended on April 24, 2026, was a 52-week years,year, with 13 weeks in each of their quarters.quarter. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’sour fiscal years ended in April and the associated quarters, months and periods of those fiscal years.

The increase in net revenues for the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of fiscalthe 2025prior year was duedriven by higher product revenues and, to a lesser extent, an increase in bothservices productrevenues. andThe extra week in the first quarter of fiscal 2027 contributed approximately $65 million of additional services revenues.revenues to that period. Product revenues as a percentage of net revenues remainedincreased relativelyby flatseven percentage points in the thirdfirst quarter and first nine months of fiscal 2026, as2027 compared to the corresponding periodsperiod of fiscal 2025. Fluctuations in foreign currency exchange rates favorably impacted net revenues percentage growth by approximately two percentage points in the third quarter and first nine months of fiscal 2026, compared to the corresponding periods of fiscal 2025.2026.

Product revenues are derived through the sale of our Hybrid Cloud solutions and consist of sales of configured all-flash array systems (including All-Flash FASAFF A-Series and All-Flash FASAFF C-Series with capacity flash) and hybrid systems,systems (including FAS), which are bundled hardware and software products, as well as add-on flash, disk and/or hybrid storage and related OS, StorageGrid, OEM products, and add-on optional software.

Total product revenues increased in the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of the prior year primarily due to higher revenues from sales of all-flash array systemssystems, andsupported by the favorableprice impactincreases fromwe foreignimplemented exchangein ratethe fluctuations.fourth quarter of fiscal 2026.

Support revenues increased in the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of the prior year, primarily due to an additional week in the current year period, which contributed approximately $50 million of additional revenues and, to a lesser extent, a higher aggregate support contract value for our installed base and the favorable impact from foreign exchange rate fluctuations.base.

Professional and other services revenues increased in the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of the prior year primarily due to an increase in revenues from our Keystone storage-as-a-service offering.

Public Cloud revenues were flat in the third quarter and increased marginally in the first nine monthsquarter of fiscal 20262027 compared to the corresponding periodsperiod of the prior year, due to higher customer demand,demand driven by NetApp’s diversified cloud offerings and overall growth in the cloud market, offsetand byan theadditional loss of revenue from our Spot by NetApp business which we soldweek in the fourthperiod, quarterwhich contributed approximately $15 million of fiscaladditional 2025.revenues.

(2) cost of services revenues, composed of (a) cost of support revenues, which includes the costs of providing support activities for hardware and software support, global support partnership programs, and third partythird-party royalty costs, (b) cost of professional and other services revenues, constituting the cost of delivering such services which includes depreciation expense, (c) cost of public cloud revenues, constituting the cost of providing our Public Cloud offerings, which includes depreciation and amortization expense and third partythird-party datacenter fees, and (d) unallocated cost of services revenues, which includes stock-based compensation and amortization of intangibles.

Cost of Hybrid Cloud product revenues represented 45% andof 44%Hybrid ofCloud product revenues for the thirdfirst quarter and first nine months of fiscal 2026, respectively,2027, compared to 43% and 41%46% for the corresponding periodsperiod of the prior year, respectively.year. Materials costs represented 90%94% of cost of Hybrid Cloud product revenues for the thirdfirst quarter and first nine months of fiscal 2026,2027, compared to 89% for the corresponding periodsperiod of the prior year.

Materials costs increased by $25 million and $73$152 million in the thirdfirst quarter and first nine months of fiscal 2026, respectively,2027 compared to the corresponding periodsperiod of the prior year.year, primarily reflecting the increase in product revenues and higher component costs.

Hybrid Cloud product gross margins decreasedwere onerelatively percentage point in the third quarter and decreased three percentage pointsflat in the first nine monthsquarter of fiscal 20262027 compared to the corresponding periodsperiod of the prior year primarily duereflecting tohigher selling prices offset by higher component costs.

Cost of Hybrid Cloud services revenues, which are composed of the costs of support and professional and other services,services increasedremained relatively flat in the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of the prior year. Cost of Hybrid Cloud services revenues represented 16%14% of Hybrid Cloud services revenues for the thirdfirst quarter and first nine months of fiscal 20262027, andcompared to 16% for the corresponding periodsperiod of the prior year.

Hybrid Cloud support gross margins wereincreased relatively flatmarginally in the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of the prior year. Hybrid Cloud professional and other services gross margins increased by three percentage points in the third quarter of fiscal 2026 and fiveseven percentage points in the first nine monthsquarter of 2026fiscal 2027 compared to the corresponding periodsperiod of the prior year primarily due primarily to the mix of services provided.

Unallocated costCost of servicesPublic Cloud revenues decreased in the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of the prior year,year. dueCost toof lowerPublic intangibleCloud assetrevenues amortizationrepresented expense14% fromof Public Cloud revenues for the derecognition of certain intangible assets as a result of the sale of our Spot by NetApp business during the fourthfirst quarter of fiscal 2025.2027, compared to 20% for the corresponding period of the prior year.

Sales and marketing, research and development, and general and administrative expenses for the thirdfirst quarter and first nine months of fiscal 20262027 totaled $778$879 million, or 45%43% of net revenues, and $2,370 million, or 48% of net revenues, respectively, reflecting a decrease of twoseven percentage points and one percentage point, respectively,points, compared to the corresponding periodsperiod of the prior year, primarily due to the increase in net revenues.

Total compensation costs included in sales and marketing, research and development and general and administrative expenses increased by $75 million, or 15%, in the thirdfirst quarter and first nine months of fiscal 2026 were relatively flat2027 compared to the corresponding periodsperiod of the prior year, despiteprimarily attributable to higher incentive compensation expense and the unfavorable impact fromof fluctuationsone additional week in foreignthe currencyfirst exchangequarter rates.of fiscal 2027.

The increase in sales and marketing expenses in the thirdfirst quarter of fiscal 20262027 compared to the corresponding period of the prior year was primarily due to higher commissioncompensation expenses,costs. partiallyThis offsetincrease in compensation costs was primarily driven by lowerhigher incentive compensation costs.expense and the impact of the extra week in the first quarter of fiscal 2027.

Research and development expenses decreasedincreased in the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of the prior year, primarily attributabledue to lowerhigher compensation costs. This increase in compensation costs was primarily driven by higher incentive compensation expense and lowerthe spendimpact onof engineeringthe projects.extra week in the first quarter of fiscal 2027.

General and administrative expenses increased in the thirdfirst quarter and first nine months of fiscal 20262027 compared to the corresponding periodsperiod of the prior year, primarily attributabledue to higher compensation costs. This increase in compensation costs was primarily driven by higher incentive compensation expense and higherthe spendimpact onof professionalthe services.extra week in the first quarter of fiscal 2027.