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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 31, 2026
or
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 000-27130
NetApp, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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77-0307520 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
3060 Olsen Drive,
San Jose, California 95128
(Address of principal executive offices, including zip code)
(408) 822-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
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Name of exchange on which registered |
Common Stock, $0.001 Par Value |
NTAP |
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The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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☑ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☐ |
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Smaller reporting company |
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☐ |
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Emerging growth company |
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☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of August 28, 2026, there were 196,419,005 shares of the registrant’s common stock, $0.001 par value, outstanding.
TABLE OF CONTENTS
TRADEMARKS
© 2026 NetApp, Inc. All Rights Reserved. No portions of this document may be reproduced without prior written consent of NetApp, Inc. NetApp, the NetApp logo, and the marks listed at http://www.netapp.com/TM are trademarks of NetApp, Inc. Other company and product names may be trademarks of their respective owners.
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
NETAPP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
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July 31, 2026 |
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April 24, 2026 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
1,573 |
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$ |
2,070 |
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Short-term investments |
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2,003 |
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1,514 |
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Accounts receivable |
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966 |
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1,286 |
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Inventories |
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375 |
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198 |
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Other current assets |
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755 |
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708 |
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Total current assets |
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5,672 |
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5,776 |
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Property and equipment, net |
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663 |
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592 |
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Goodwill |
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2,916 |
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2,772 |
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Purchased intangible assets, net |
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38 |
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22 |
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Other non-current assets |
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1,666 |
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1,582 |
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Total assets |
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$ |
10,955 |
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$ |
10,744 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
566 |
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$ |
550 |
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Accrued expenses |
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1,200 |
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1,151 |
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Current portion of long-term debt |
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550 |
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— |
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Short-term deferred revenue |
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2,252 |
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2,320 |
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Total current liabilities |
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4,568 |
|
|
|
4,021 |
|
Long-term debt |
|
|
1,938 |
|
|
|
2,487 |
|
Other long-term liabilities |
|
|
360 |
|
|
|
360 |
|
Long-term deferred revenue |
|
|
2,594 |
|
|
|
2,525 |
|
Total liabilities |
|
|
9,460 |
|
|
|
9,393 |
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
Common stock and additional paid-in capital, $0.001 par value, 885 shares authorized; 196 shares issued and outstanding as of July 31, 2026 and April 24, 2026 |
|
|
1,281 |
|
|
|
1,209 |
|
Retained earnings |
|
|
235 |
|
|
|
153 |
|
Accumulated other comprehensive loss |
|
|
(21 |
) |
|
|
(11 |
) |
Total stockholders' equity |
|
|
1,495 |
|
|
|
1,351 |
|
Total liabilities and stockholders' equity |
|
$ |
10,955 |
|
|
$ |
10,744 |
|
See accompanying notes to condensed consolidated financial statements.
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Revenues: |
|
|
|
|
|
|
Product |
|
$ |
987 |
|
|
$ |
654 |
|
Services |
|
|
1,038 |
|
|
|
905 |
|
Net revenues |
|
|
2,025 |
|
|
|
1,559 |
|
Cost of revenues: |
|
|
|
|
|
|
Cost of product |
|
|
450 |
|
|
|
302 |
|
Cost of services |
|
|
156 |
|
|
|
159 |
|
Total cost of revenues |
|
|
606 |
|
|
|
461 |
|
Gross profit |
|
|
1,419 |
|
|
|
1,098 |
|
Operating expenses: |
|
|
|
|
|
|
Sales and marketing |
|
|
507 |
|
|
|
461 |
|
Research and development |
|
|
274 |
|
|
|
242 |
|
General and administrative |
|
|
98 |
|
|
|
84 |
|
Restructuring charges |
|
|
56 |
|
|
|
2 |
|
Total operating expenses |
|
|
935 |
|
|
|
789 |
|
Income from operations |
|
|
484 |
|
|
|
309 |
|
Other expense, net |
|
|
— |
|
|
|
(5 |
) |
Income before income taxes |
|
|
484 |
|
|
|
304 |
|
Provision for income taxes |
|
|
109 |
|
|
|
71 |
|
Net income |
|
$ |
375 |
|
|
$ |
233 |
|
Net income per share: |
|
|
|
|
|
|
Basic |
|
$ |
1.91 |
|
|
$ |
1.16 |
|
Diluted |
|
$ |
1.88 |
|
|
$ |
1.15 |
|
Shares used in net income per share calculations: |
|
|
|
|
|
|
Basic |
|
|
196 |
|
|
|
201 |
|
Diluted |
|
|
200 |
|
|
|
203 |
|
See accompanying notes to condensed consolidated financial statements.
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
Net income |
|
$ |
375 |
|
|
$ |
233 |
|
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
(10 |
) |
|
|
26 |
|
|
Unrealized losses on available-for-sale securities: |
|
|
|
|
|
|
|
Unrealized holding losses arising during the period |
|
|
— |
|
|
|
(1 |
) |
|
Unrealized gains (losses) on cash flow hedges: |
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during the period |
|
|
1 |
|
|
|
(1 |
) |
|
Reclassification adjustments for (gains) losses included in net income |
|
|
(1 |
) |
|
|
2 |
|
|
Other comprehensive (loss) income |
|
|
(10 |
) |
|
|
26 |
|
|
Comprehensive income |
|
$ |
365 |
|
|
$ |
259 |
|
|
See accompanying notes to condensed consolidated financial statements.
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Cash flows from operating activities: |
|
|
|
|
|
Net income |
$ |
375 |
|
|
$ |
233 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
33 |
|
|
|
51 |
|
Non-cash operating lease cost |
|
11 |
|
|
|
11 |
|
Stock-based compensation |
|
98 |
|
|
|
83 |
|
Deferred income taxes |
|
(5 |
) |
|
|
9 |
|
Other items, net |
|
(15 |
) |
|
|
46 |
|
Changes in assets and liabilities: |
|
|
|
|
|
Accounts receivable |
|
317 |
|
|
|
466 |
|
Inventories |
|
(176 |
) |
|
|
54 |
|
Other operating assets |
|
(114 |
) |
|
|
110 |
|
Accounts payable |
|
19 |
|
|
|
(107 |
) |
Accrued expenses |
|
(75 |
) |
|
|
(240 |
) |
Deferred revenue |
|
32 |
|
|
|
(48 |
) |
Other operating liabilities |
|
3 |
|
|
|
5 |
|
Net cash provided by operating activities |
|
503 |
|
|
|
673 |
|
Cash flows from investing activities: |
|
|
|
|
|
Purchases of investments |
|
(1,603 |
) |
|
|
(741 |
) |
Maturities, sales and collections of investments |
|
1,109 |
|
|
|
598 |
|
Purchases of property and equipment |
|
(102 |
) |
|
|
(53 |
) |
Acquisition of business, net of cash acquired |
|
(78 |
) |
|
|
— |
|
Other investing activities, net |
|
— |
|
|
|
15 |
|
Net cash used in investing activities |
|
(674 |
) |
|
|
(181 |
) |
Cash flows from financing activities: |
|
|
|
|
|
Proceeds from issuance of common stock under employee stock award plans |
|
57 |
|
|
|
54 |
|
Payments for taxes related to net share settlement of stock awards |
|
(74 |
) |
|
|
(57 |
) |
Repurchase of common stock |
|
(200 |
) |
|
|
(300 |
) |
Repayments and extinguishment of debt |
|
— |
|
|
|
(750 |
) |
Dividends paid |
|
(102 |
) |
|
|
(104 |
) |
Net cash used in financing activities |
|
(319 |
) |
|
|
(1,157 |
) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
(6 |
) |
|
|
7 |
|
Net change in cash, cash equivalents and restricted cash |
|
(496 |
) |
|
|
(658 |
) |
Cash, cash equivalents and restricted cash: |
|
|
|
|
|
Beginning of period |
|
2,075 |
|
|
|
2,749 |
|
End of period |
$ |
1,579 |
|
|
$ |
2,091 |
|
See accompanying notes to condensed consolidated financial statements.
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Common Stock and |
|
|
|
|
|
Other |
|
|
|
|
|
|
Additional Paid-in Capital |
|
|
Retained |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Earnings |
|
|
Loss |
|
|
Total |
|
Balances, April 24, 2026 |
|
|
196 |
|
|
$ |
1,209 |
|
|
$ |
153 |
|
|
$ |
(11 |
) |
|
$ |
1,351 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
375 |
|
|
|
— |
|
|
|
375 |
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
(10 |
) |
Issuance of common stock under employee stock award plans, net of taxes |
|
|
2 |
|
|
|
(17 |
) |
|
|
— |
|
|
|
— |
|
|
|
(17 |
) |
Repurchase of common stock |
|
|
(2 |
) |
|
|
(9 |
) |
|
|
(191 |
) |
|
|
— |
|
|
|
(200 |
) |
Stock-based compensation |
|
|
— |
|
|
|
98 |
|
|
|
— |
|
|
|
— |
|
|
|
98 |
|
Cash dividends declared ($0.52 per common share) |
|
|
— |
|
|
|
— |
|
|
|
(102 |
) |
|
|
— |
|
|
|
(102 |
) |
Balances, July 31, 2026 |
|
|
196 |
|
|
$ |
1,281 |
|
|
$ |
235 |
|
|
$ |
(21 |
) |
|
$ |
1,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 25, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Common Stock and |
|
|
|
|
|
Other |
|
|
|
|
|
|
Additional Paid-in Capital |
|
|
Retained |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Earnings |
|
|
Loss |
|
|
Total |
|
Balances, April 25, 2025 |
|
|
201 |
|
|
$ |
1,106 |
|
|
$ |
— |
|
|
$ |
(66 |
) |
|
$ |
1,040 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
233 |
|
|
|
— |
|
|
|
233 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26 |
|
|
|
26 |
|
Issuance of common stock under employee stock award plans, net of taxes |
|
|
2 |
|
|
|
(3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
Repurchase of common stock |
|
|
(3 |
) |
|
|
(67 |
) |
|
|
(233 |
) |
|
|
— |
|
|
|
(300 |
) |
Stock-based compensation |
|
|
— |
|
|
|
83 |
|
|
|
— |
|
|
|
— |
|
|
|
83 |
|
Cash dividends declared ($0.52 per common share) |
|
|
— |
|
|
|
(104 |
) |
|
|
— |
|
|
|
— |
|
|
|
(104 |
) |
Balances, July 25, 2025 |
|
|
200 |
|
|
$ |
1,015 |
|
|
$ |
— |
|
|
$ |
(40 |
) |
|
$ |
975 |
|
See accompanying notes to condensed consolidated financial statements.
NETAPP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business and Significant Accounting Policies
NetApp, Inc. (NetApp, we, us, our, or the Company) empowers organizations to realize the full potential of their data in a rapidly evolving digital world. NetApp delivers innovative solutions that enable seamless data management, protection, and mobility across on-premises, hybrid, and multi-cloud environments.
Basis of Presentation and Preparation
Our fiscal year is reported on a 52- or 53-week year ending on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal 2027, ending on April 30, 2027, is a 53-week year, with 14 weeks included in its first quarter and 13 weeks in each subsequent quarter. Fiscal 2026, which ended on April 24, 2026, was a 52-week year, with 13 weeks in each quarter.
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company, and reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, comprehensive income, cash flows and stockholders’ equity for the interim periods presented. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, these statements do not include all information and footnotes required by GAAP for annual consolidated financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the fiscal year ended April 24, 2026 contained in our Annual Report on Form 10-K. The results of operations for the three months ended July 31, 2026 are not necessarily indicative of the operating results to be expected for the full fiscal year or future operating periods.
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; inventory valuation; valuation of goodwill and intangibles; restructuring reserves; employee benefit accruals; stock-based compensation; loss contingencies; investment impairments; income taxes and fair value measurements. Actual results could differ materially from those estimates, the anticipated effects of which have been incorporated, as applicable, into management's estimates as of July 31, 2026.
2. Recent Accounting Pronouncements
In September 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, with early adoption permitted. Adoption of this ASU can be applied prospectively; or following a modified transition approach that is based on the status of each project and whether software costs were capitalized before adoption; or retrospectively. We are currently evaluating the effect of this pronouncement on our consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement. The standard requires disclosures about specific types of expenses included in the expense captions presented in the income statement as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements can be applied on a prospective or retrospective basis. We are currently evaluating the effect of this pronouncement on our disclosures.
3. Business Combination
DataPelago, Inc. Acquisition
On July 16, 2026, we acquired all the outstanding shares of DataPelago, Inc., (DataPelago), a privately-held company, for $193 million, of which $87 million was paid in cash at closing. The remaining $106 million represents contingent consideration, which we recognized in accrued expenses in our condensed consolidated balance sheet, and which will be paid if certain criteria as defined in the merger agreement are achieved. DataPelago is an AI data infrastructure company recognized for its innovative approach to eliminate data processing bottlenecks for AI and analytics workloads.
The preliminary acquisition-date values of the assets acquired and liabilities assumed are as follows (in millions):
|
|
|
|
|
|
|
Amount |
|
Cash |
|
$ |
9 |
|
Developed technology |
|
|
22 |
|
Goodwill |
|
|
151 |
|
Other assets |
|
|
16 |
|
Total assets acquired |
|
|
198 |
|
Liabilities assumed |
|
|
(5 |
) |
Total purchase price |
|
$ |
193 |
|
The acquired net assets of DataPelago were recorded at their estimated values, which we determined with the assistance of valuations performed by third party specialists. The acquisition resulted in the recognition of a developed technology intangible asset with an estimated useful life of five years. We expect to realize revenue synergies and anticipate future opportunities for growth through the ability to leverage additional future products and capabilities. These factors, among others, contributed to a purchase price in excess of the estimated value of the identifiable net assets acquired, and as a result, we have recorded goodwill in connection with the acquisition. This goodwill has been allocated between our Hybrid Cloud and Public Cloud reporting units, and it is not deductible for income tax purposes.
The purchase price allocation is preliminary and subject to revision as additional information about the fair value of acquired assets and liabilities assumed becomes available during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Similarly, the allocation of goodwill among our reporting units is subject to revision.
The results of operations related to the acquisition of DataPelago have been included in our condensed consolidated statements of income from the acquisition date. Pro forma results of operations have not been presented because the impact from the acquisition was not material to our consolidated results of operations.
4. Goodwill and Purchased Intangible Assets, Net
Goodwill activity by reportable segment is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hybrid Cloud |
|
|
Public Cloud |
|
|
Total |
|
Balance as of April 24, 2026 |
|
$ |
1,714 |
|
|
$ |
1,058 |
|
|
$ |
2,772 |
|
Additions |
|
|
125 |
|
|
|
26 |
|
|
|
151 |
|
Impact of foreign currency translation |
|
|
— |
|
|
|
(7 |
) |
|
|
(7 |
) |
Balance as of July 31, 2026 |
|
$ |
1,839 |
|
|
$ |
1,077 |
|
|
$ |
2,916 |
|
Purchased intangible assets, net are summarized below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
|
Assets |
|
|
Amortization |
|
|
Assets |
|
|
Assets |
|
|
Amortization |
|
|
Assets |
|
Developed technology |
|
$ |
77 |
|
|
$ |
(47 |
) |
|
$ |
30 |
|
|
$ |
55 |
|
|
$ |
(44 |
) |
|
$ |
11 |
|
Customer contracts/relationships |
|
|
50 |
|
|
|
(42 |
) |
|
|
8 |
|
|
|
50 |
|
|
|
(39 |
) |
|
|
11 |
|
Other purchased intangibles |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
— |
|
Total purchased intangible assets |
|
$ |
127 |
|
|
$ |
(89 |
) |
|
$ |
38 |
|
|
$ |
107 |
|
|
$ |
(85 |
) |
|
$ |
22 |
|
5. Supplemental Financial Information
Cash and cash equivalents (in millions):
The following table presents cash and cash equivalents as reported in our condensed consolidated balance sheets, as well as the sum of cash, cash equivalents and restricted cash as reported on our condensed consolidated statements of cash flows:
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
Cash and cash equivalents |
|
$ |
1,573 |
|
|
$ |
2,070 |
|
Restricted cash |
|
|
6 |
|
|
|
5 |
|
Cash, cash equivalents and restricted cash |
|
$ |
1,579 |
|
|
$ |
2,075 |
|
Inventories (in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
Purchased components |
|
$ |
120 |
|
|
$ |
14 |
|
Finished goods |
|
|
255 |
|
|
|
184 |
|
Inventories |
|
$ |
375 |
|
|
$ |
198 |
|
Property and equipment, net (in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
Property and equipment, at cost |
|
|
2,068 |
|
|
|
1,986 |
|
Accumulated depreciation and amortization |
|
|
(1,405 |
) |
|
|
(1,394 |
) |
Property and equipment, net |
|
$ |
663 |
|
|
$ |
592 |
|
Accrued expenses (in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
Accrued compensation and benefits |
|
$ |
390 |
|
|
$ |
543 |
|
Income tax payable |
|
|
27 |
|
|
|
29 |
|
Operating lease liabilities |
|
|
46 |
|
|
|
42 |
|
Other current liabilities |
|
|
737 |
|
|
|
537 |
|
Accrued expenses |
|
$ |
1,200 |
|
|
$ |
1,151 |
|
Deferred revenue:
Deferred revenue represents unrecognized revenue related to undelivered product commitments and other product deliveries that have not met all revenue recognition criteria, as well as customer payments made in advance for services, which include software and hardware support contracts, certain public cloud services and other services.
During the three months ended July 31, 2026 and July 25, 2025, we recognized revenue of $743 million and $714 million, respectively, that was included in the deferred revenue balance at the beginning of the respective periods.
Remaining performance obligations
As of July 31, 2026, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied was $5.6 billion. Because customer orders are typically placed on an as-needed basis, and cancellable without penalty prior to shipment, orders in backlog may not be a meaningful indicator of future revenue and have not been included in this amount. We expect to recognize as revenue 44% of our remaining performance obligations in the next 12 months and the remainder thereafter.
Statements of cash flows additional information (in millions):
Non-cash investing activities and other supplemental cash flow information are presented below:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Non-cash Investing Activities: |
|
|
|
|
|
|
Liabilities incurred to former owners of acquired business |
|
$ |
106 |
|
|
$ |
— |
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
Income taxes paid, net of refunds |
|
$ |
29 |
|
|
$ |
11 |
|
Interest paid |
|
$ |
16 |
|
|
$ |
23 |
|
6. Financial Instruments and Fair Value Measurements
The accounting guidance for fair value measurements provides a framework for measuring fair value on either a recurring or nonrecurring basis, whereby the inputs used in valuation techniques are assigned a hierarchical level. The following are the three levels of inputs to measure fair value:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs that reflect quoted prices for identical assets or liabilities in less active markets; quoted prices for similar assets or liabilities in active markets; benchmark yields, reported trades, broker/dealer quotes, inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Unobservable inputs that reflect our own assumptions incorporated in valuation techniques used to measure fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our own or the counterparty’s non-performance risk is considered in measuring the fair values of liabilities and assets, respectively.
Investments
The following is a summary of our investments at their cost or amortized cost as of July 31, 2026 and April 24, 2026 (in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
U.S. Treasury and government debt securities |
|
$ |
2,103 |
|
|
$ |
2,112 |
|
Money market funds |
|
|
651 |
|
|
|
808 |
|
Certificates of deposit |
|
|
137 |
|
|
|
86 |
|
Mutual funds |
|
|
52 |
|
|
|
49 |
|
Total debt and equity securities |
|
$ |
2,943 |
|
|
$ |
3,055 |
|
The fair value of our investments approximates their cost or amortized cost for both periods presented. Investments in mutual funds relate to the non-qualified deferred compensation plan offered to certain employees.
As of July 31, 2026, all our debt investments are due to mature in one year or less.
Fair Value of Financial Instruments
The following table summarizes our financial assets and liabilities measured at fair value (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
685 |
|
|
$ |
685 |
|
|
$ |
— |
|
|
$ |
— |
|
Money market funds |
|
|
651 |
|
|
|
651 |
|
|
|
— |
|
|
|
— |
|
Certificates of deposit |
|
|
137 |
|
|
|
— |
|
|
|
137 |
|
|
|
— |
|
U.S. Treasury and government debt securities |
|
|
100 |
|
|
|
100 |
|
|
|
— |
|
|
|
— |
|
Total cash and cash equivalents |
|
|
1,573 |
|
|
|
1,436 |
|
|
|
137 |
|
|
|
— |
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and government debt securities |
|
|
2,003 |
|
|
|
2,003 |
|
|
|
— |
|
|
|
— |
|
Total short-term investments |
|
|
2,003 |
|
|
|
2,003 |
|
|
|
— |
|
|
|
— |
|
Total cash, cash equivalents and short-term investments |
|
$ |
3,576 |
|
|
$ |
3,439 |
|
|
$ |
137 |
|
|
$ |
— |
|
Other items: |
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds (1) |
|
$ |
10 |
|
|
$ |
10 |
|
|
$ |
— |
|
|
$ |
— |
|
Mutual funds (2) |
|
$ |
42 |
|
|
$ |
42 |
|
|
$ |
— |
|
|
$ |
— |
|
Foreign currency exchange contracts assets (1) |
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
14 |
|
|
$ |
— |
|
Contingent consideration liability (3) |
|
$ |
(106 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 24, 2026 |
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
578 |
|
|
$ |
578 |
|
|
$ |
— |
|
Money market funds |
|
|
808 |
|
|
|
808 |
|
|
|
— |
|
Certificates of deposit |
|
|
86 |
|
|
|
— |
|
|
|
86 |
|
U.S. Treasury and government debt securities |
|
|
598 |
|
|
|
598 |
|
|
|
— |
|
Total cash and cash equivalents |
|
|
2,070 |
|
|
|
1,984 |
|
|
|
86 |
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
U.S. Treasury and government debt securities |
|
|
1,514 |
|
|
|
1,514 |
|
|
|
— |
|
Total short-term investments |
|
|
1,514 |
|
|
|
1,514 |
|
|
|
— |
|
Total cash, cash equivalents and short-term investments |
|
$ |
3,584 |
|
|
$ |
3,498 |
|
|
$ |
86 |
|
Other items: |
|
|
|
|
|
|
|
|
|
Mutual funds (1) |
|
$ |
9 |
|
|
$ |
9 |
|
|
$ |
— |
|
Mutual funds (2) |
|
$ |
40 |
|
|
$ |
40 |
|
|
$ |
— |
|
Foreign currency exchange contracts assets (1) |
|
$ |
10 |
|
|
$ |
— |
|
|
$ |
10 |
|
Foreign currency exchange contracts liabilities (3) |
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
(1 |
) |
(1)Reported as other current assets in the condensed consolidated balance sheets
(2)
Reported as other non-current assets in the condensed consolidated balance sheets
(3)Reported as accrued expenses in the condensed consolidated balance sheets
Our contingent consideration liability is related to the acquisition of DataPelago and was valued using a probability-weighted discounted cash flow model. See Note 3 – Business Combination for further details of the acquisition and contingent consideration.
Fair Value of Debt
As of July 31, 2026 and April 24, 2026, the fair value of our long-term debt, including the current portion, was $2,443 million and $2,468 million, respectively. These fair values of our long-term debt were based on observable market prices in a less active market.
7. Financing Arrangements
Long-Term Debt
The following table summarizes information relating to our long-term debt, which we collectively refer to as our Senior Notes (in millions, except interest rates):
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Interest Rate |
|
July 31, 2026 |
|
|
April 24, 2026 |
|
2.375% Senior Notes Due June 2027 |
|
2.51% |
|
|
550 |
|
|
|
550 |
|
2.70% Senior Notes Due June 2030 |
|
2.81% |
|
|
700 |
|
|
|
700 |
|
5.50% Senior Notes Due March 2032 |
|
5.71% |
|
|
625 |
|
|
|
625 |
|
5.70% Senior Notes Due March 2035 |
|
5.90% |
|
|
625 |
|
|
|
625 |
|
Total principal amount |
|
|
|
|
2,500 |
|
|
|
2,500 |
|
Unamortized discount and issuance costs |
|
|
|
|
(12 |
) |
|
|
(13 |
) |
Total senior notes |
|
|
|
|
2,488 |
|
|
|
2,487 |
|
Less: Current portion of long-term debt |
|
|
|
|
(550 |
) |
|
|
— |
|
Total long-term debt |
|
|
|
$ |
1,938 |
|
|
$ |
2,487 |
|
Senior Notes
Our Senior Notes, which are unsecured, unsubordinated obligations, rank equally in right of payment with any existing and future senior unsecured indebtedness. Interest on our Senior Notes is payable semi-annually.
We may redeem the Senior Notes in whole or in part, at any time at our option at specified redemption prices. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Senior Notes under specified terms. The Senior Notes also include covenants that limit our ability to incur debt secured by liens on assets or on shares of stock or indebtedness of our subsidiaries; to engage in certain sale and lease-back transactions; and to consolidate, merge or sell all or substantially all of our assets. As of July 31, 2026, we were in compliance with all covenants associated with the Senior Notes.
Credit Facility and Commercial Paper Program
We have a senior unsecured credit agreement with a syndicated group of lenders. The credit agreement, which was amended in March 2025, provides for a $1.0 billion revolving unsecured credit facility, with a sublimit of $50 million available for the issuance of letters of credit on our behalf. The credit facility matures on March 5, 2030, with an option for us to extend the maturity date for two additional 1-year periods, subject to certain conditions. The proceeds of the loans may be used by us for general corporate purposes and as liquidity support for our existing commercial paper program. As of July 31, 2026, we were compliant with all associated covenants in the agreement. No amounts were drawn against this credit facility during any of the periods presented.
We also have a commercial paper program (the “Program”), under which we may issue unsecured commercial paper notes. Amounts available under the Program, as amended in July 2017, may be borrowed, repaid and re-borrowed, with the aggregate face or principal amount of the notes outstanding under the Program at any time not to exceed $1.0 billion. The maturities of the notes can vary, but may not exceed 397 days from the date of issue. The notes are sold under customary terms in the commercial paper market and may be issued at a discount from par or, alternatively, may be sold at par and bear interest at rates dictated by market conditions at the time of their issuance. The proceeds from the issuance of the notes are used for general corporate purposes. There were no commercial paper notes outstanding as of July 31, 2026 or April 24, 2026.
8. Stockholders’ Equity
Equity Awards
We granted 3 million restricted stock units (RSUs), including performance-based RSUs (PBRSUs), with a weighted average grant date fair value of $153.44 per share during the three months ended July 31, 2026. As of July 31, 2026, total unrecognized compensation expense related to our equity awards was $918 million, which is expected to be recognized on a straight-line basis over a weighted-average remaining service period of 2.4 years.
Stock Repurchase Program
Under our common stock repurchase program, which we may suspend or discontinue at any time, we may purchase shares of our outstanding common stock through solicited or unsolicited transactions in the open market, in privately negotiated transactions, through accelerated share repurchase programs, pursuant to a Rule 10b5-1 plan or in such other manner as deemed appropriate by our management.
The following table summarizes activity related to the stock repurchase program for the three months ended July 31, 2026 (in millions, except for per share amounts):
|
|
|
|
|
Number of shares repurchased |
|
|
1.5 |
|
Average price per share |
|
$ |
133.32 |
|
Stock repurchases allocated to additional paid-in capital |
|
$ |
9 |
|
Stock repurchases allocated to retained earnings |
|
$ |
191 |
|
Remaining authorization at end of period |
|
$ |
1,302 |
|
On May 21, 2026, our Board of Directors authorized the repurchase of an additional $1.0 billion of our common stock.
Dividends
The following is a summary of our activities related to dividends on our common stock (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Dividends per share declared |
|
$ |
0.52 |
|
|
$ |
0.52 |
|
Dividend payments allocated to additional paid-in capital |
|
$ |
— |
|
|
$ |
104 |
|
Dividend payments allocated to retained earnings |
|
$ |
102 |
|
|
$ |
— |
|
On August 27, 2026, we declared a cash dividend of $0.52 per share of common stock, payable on October 28, 2026 to shareholders of record as of the close of business on October 9, 2026. The timing and amount of future dividends will depend on market conditions, corporate business and financial considerations and regulatory requirements. All dividends declared have been determined by the Company to be legally authorized under the laws of the state in which we are incorporated.
9. Derivatives and Hedging Activities
We use derivative instruments to manage exposures to foreign currency risk. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The maximum length of time over which forecasted foreign currency denominated revenues are hedged is 12 months. The program is not designated for trading or speculative purposes. Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet their obligations under the terms of our agreements. We seek to mitigate such risk by limiting our counterparties to major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on an ongoing basis. We also have in place master netting arrangements to mitigate the credit risk of our counterparties and to potentially reduce our losses due to counterparty nonperformance. We present our derivative instruments as net amounts in our condensed consolidated balance sheets. The gross and net fair value amounts of such instruments were not material as of July 31, 2026 or April 24, 2026. All contracts have a maturity of less than 12 months.
The notional amount of our outstanding U.S. dollar equivalent foreign currency exchange forward contracts consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
Cash Flow Hedges |
|
|
|
|
|
|
Forward contracts purchased |
|
$ |
133 |
|
|
$ |
75 |
|
Balance Sheet Contracts |
|
|
|
|
|
|
Forward contracts sold |
|
$ |
1,295 |
|
|
$ |
995 |
|
Forward contracts purchased |
|
$ |
43 |
|
|
$ |
13 |
|
The effect of cash flow hedges recognized in net revenues is presented in the condensed consolidated statements of comprehensive income.
The effect of derivative instruments not designated as hedging instruments recognized in other expense, net on our condensed consolidated statements of income was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
Gain (Loss) Recognized into Income |
|
Foreign currency exchange contracts |
|
$ |
(24 |
) |
|
$ |
18 |
|
10. Restructuring Charges
In the first three months of fiscal 2027, management approved a restructuring plan to redirect resources to the highest return activities and reduce costs. Charges related to the plan consisted primarily of employee severance-related costs. The activities under the plan are expected to be substantially complete by the end of fiscal 2027.
Activities related to our restructuring plans are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Balance at beginning of period |
|
$ |
6 |
|
|
$ |
51 |
|
Net charges |
|
|
56 |
|
|
|
2 |
|
Cash payments |
|
|
(22 |
) |
|
|
(37 |
) |
Balance at end of period |
|
$ |
40 |
|
|
$ |
16 |
|
Liabilities for our restructuring activities are included in accrued expenses in our condensed consolidated balance sheets.
11. Income Taxes
Our effective tax rates for the periods presented were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Effective tax rates |
|
|
22.5 |
% |
|
|
23.4 |
% |
Our effective tax rate reflects the impact of a significant amount of earnings being taxed in foreign jurisdictions at rates below the United States (U.S.) statutory rate which is offset by non-deductible stock-based compensation and state taxes. Our effective tax rate for the three months ended July 31, 2026 includes an increase in discrete tax benefits related to stock-based compensation compared to the corresponding period of the prior year.
On July 4, 2025, the reconciliation bill H.R. 1, referred to as the One Big Beautiful Bill Act (OBBB), was signed into law in the United States. The OBBB contains several changes to corporate taxation including the extension of key provisions of the 2017 Tax Cuts and Jobs Act and modifications to the international tax framework. The legislation has multiple effective dates, with certain provisions effective in our fiscal 2026 and others phased in through our fiscal 2027. The OBBB did not have a material impact to our income tax provision for the three months ended July 31, 2026.
The Organisation for Economic Co-operation and Development (“OECD”) introduced an international tax framework under Pillar Two that provides for a global minimum tax of 15% for large multinational companies. We are currently subject to Pillar Two rules enacted in certain foreign jurisdictions in which we operate. As of July 31, 2026, Pillar Two taxes did not have a significant impact on our financial statements, particularly due to the safe harbor relief during the transition period. On January 5, 2026, the OECD issued administrative guidance outlining a framework under which U.S.-parented groups may be excluded from the application of Pillar Two rules through a “side-by-side arrangement.” Each member jurisdiction will need to adopt this guidance into local law, and the timing and manner of adoption may vary. We will continue to monitor U.S. and international legislative developments, including further announcements on the side-by-side arrangement, to assess any potential impacts to our financial statements.
We are currently undergoing various income tax audits in the U.S. and audits in several foreign tax jurisdictions. Transfer pricing calculations are key topics under these audits and are often subject to dispute and appeals.
We continue to monitor the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. We engage in continuous discussion and negotiation with taxing authorities regarding tax matters in multiple jurisdictions.
12. Net Income per Share
The following is a calculation of basic and diluted net income per share (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Numerator: |
|
|
|
|
|
|
Net income |
|
$ |
375 |
|
|
$ |
233 |
|
Denominator: |
|
|
|
|
|
|
Shares used in basic computation |
|
|
196 |
|
|
|
201 |
|
Dilutive impact of employee equity award plans |
|
|
4 |
|
|
|
2 |
|
Shares used in diluted computation |
|
|
200 |
|
|
|
203 |
|
Net Income per Share: |
|
|
|
|
|
|
Basic |
|
$ |
1.91 |
|
|
$ |
1.16 |
|
Diluted |
|
$ |
1.88 |
|
|
$ |
1.15 |
|
The following table presents the number of potential shares of common stock from outstanding employee equity awards that have been excluded from the computation of diluted net income per share, as their inclusion would have had an anti-dilutive effect, for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Employee equity award plans |
|
|
1 |
|
|
|
— |
|
13. Segment, Geographic, and Significant Customer Information
Our operations are organized into two segments: Hybrid Cloud and Public Cloud. The two segments are based on the information reviewed by our Chief Operating Decision Maker (CODM), who is the Chief Executive Officer, to evaluate results and allocate resources. The CODM measures performance of each segment based on segment revenue and segment gross profit by comparing actual revenue and gross profit results to historical results and previously forecasted financial information. We do not allocate to our
segments certain cost of revenues which we manage at the corporate level. These unallocated costs include stock-based compensation and amortization of intangible assets. We do not allocate assets to our segments.
Hybrid Cloud offers a unified data storage portfolio of storage management and infrastructure solutions that helps customers modernize their data centers. This portfolio accommodates both structured and unstructured data with unified storage optimized for flash, disk, and cloud storage, capable of handling data-intensive workloads and applications. Hybrid Cloud includes software, hardware, and related support, along with professional and other services.
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. Public Cloud includes certain reseller arrangements in which the timing of our consideration follows the end user consumption of the reseller services.
Segment Revenues and Gross Profit
Financial information by segment is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2026 |
|
|
Hybrid Cloud |
|
|
Public Cloud |
|
|
Total |
|
Product revenues |
$ |
987 |
|
|
$ |
— |
|
|
$ |
987 |
|
Support revenues |
|
720 |
|
|
|
— |
|
|
|
720 |
|
Professional and other services revenues |
|
112 |
|
|
|
— |
|
|
|
112 |
|
Public cloud revenues |
|
— |
|
|
|
206 |
|
|
|
206 |
|
Net revenues |
|
1,819 |
|
|
|
206 |
|
|
|
2,025 |
|
Cost of product revenues |
|
448 |
|
|
|
— |
|
|
|
448 |
|
Cost of support revenues |
|
49 |
|
|
|
— |
|
|
|
49 |
|
Cost of professional and other services revenues |
|
71 |
|
|
|
— |
|
|
|
71 |
|
Cost of public cloud revenues |
|
— |
|
|
|
28 |
|
|
|
28 |
|
Segment cost of revenues |
|
568 |
|
|
|
28 |
|
|
|
596 |
|
Segment gross profit |
$ |
1,251 |
|
|
$ |
178 |
|
|
$ |
1,429 |
|
Unallocated cost of revenues1 |
|
|
|
|
|
|
|
(10 |
) |
Operating expenses |
|
|
|
|
|
|
|
(935 |
) |
Other expense, net |
|
|
|
|
|
|
|
— |
|
Income before income taxes |
|
|
|
|
|
|
$ |
484 |
|
1 Unallocated cost of revenues are composed of $7 million of stock-based compensation expense and $3 million of amortization of intangible assets. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 25, 2025 |
|
|
Hybrid Cloud |
|
|
Public Cloud |
|
|
Total |
|
Product revenues |
$ |
654 |
|
|
$ |
— |
|
|
$ |
654 |
|
Support revenues |
|
647 |
|
|
|
— |
|
|
|
647 |
|
Professional and other services revenues |
|
97 |
|
|
|
— |
|
|
|
97 |
|
Public cloud revenues |
|
— |
|
|
|
161 |
|
|
|
161 |
|
Net revenues |
|
1,398 |
|
|
|
161 |
|
|
|
1,559 |
|
Cost of product revenues |
|
301 |
|
|
|
— |
|
|
|
301 |
|
Cost of support revenues |
|
50 |
|
|
|
— |
|
|
|
50 |
|
Cost of professional and other services revenues |
|
68 |
|
|
|
— |
|
|
|
68 |
|
Cost of public cloud revenues |
|
— |
|
|
|
32 |
|
|
|
32 |
|
Segment cost of revenues |
|
419 |
|
|
|
32 |
|
|
|
451 |
|
Segment gross profit |
$ |
979 |
|
|
$ |
129 |
|
|
$ |
1,108 |
|
Unallocated cost of revenues1 |
|
|
|
|
|
|
|
(10 |
) |
Operating expenses |
|
|
|
|
|
|
|
(789 |
) |
Other expense, net |
|
|
|
|
|
|
|
(5 |
) |
Income before income taxes |
|
|
|
|
|
|
$ |
304 |
|
1 Unallocated cost of revenues are composed of $7 million of stock-based compensation expense and $3 million of amortization of intangible assets. |
|
Hybrid Cloud Segment Net Revenues by Storage Category are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
All-flash revenues |
|
$ |
1,309 |
|
|
$ |
893 |
|
Hybrid-flash and other revenues |
|
|
510 |
|
|
|
505 |
|
Hybrid Cloud segment net revenues |
|
$ |
1,819 |
|
|
$ |
1,398 |
|
Geographical Revenues
Revenues summarized by geographic region are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
United States, Canada and Latin America (Americas) |
|
$ |
978 |
|
|
$ |
791 |
|
Europe, Middle East and Africa (EMEA) |
|
|
668 |
|
|
|
503 |
|
Asia Pacific (APAC) |
|
|
379 |
|
|
|
265 |
|
Net revenues |
|
$ |
2,025 |
|
|
$ |
1,559 |
|
Americas revenues consist of sales to Americas commercial and U.S. public sector markets. Sales to customers inside the U.S. were $930 million and $746 million during the three months ended July 31, 2026 and July 25, 2025, respectively.
Significant Customers
Two customers, each of which is a distributor, accounted for 10% or more of our net revenues:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Customer A |
|
|
20 |
% |
|
|
23 |
% |
Customer B |
|
|
21 |
% |
|
|
21 |
% |
One customer, which is a distributor, accounted for 10% or more of accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
Customer B |
|
|
18 |
% |
|
|
18 |
% |
14. Commitments and Contingencies
Purchase Orders and Other Commitments
In the ordinary course of business, we make commitments to third-party contract manufacturers and component suppliers to manage manufacturer lead times and meet product forecasts, and to other parties, to purchase various key components used in the manufacture of our products. A significant portion of our reported purchase commitments arising from these agreements consist of firm, non-cancelable, and unconditional commitments. As of July 31, 2026, we had $1.9 billion in non-cancelable purchase commitments for inventory.
In addition to inventory commitments with contract manufacturers and component suppliers, we have open purchase orders and contractual obligations associated with our ordinary course of business for which we have not yet received goods or services. As of July 31, 2026, we had $0.4 billion in other purchase obligations.
Of the total $2.3 billion in purchase commitments, $2.1 billion is due in the next twelve months, with the remainder due thereafter.
Legal Contingencies
When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency.
We are subject to various legal proceedings and claims that arise in the normal course of business. We may, from time to time, receive claims that we are infringing third parties’ intellectual property rights, including claims for alleged patent infringement brought by non-practicing entities. We are currently involved in patent litigation brought by non-practicing entities and other third parties. We believe we have strong arguments that our products do not infringe and/or the asserted patents are invalid, and we intend to vigorously defend against the plaintiffs’ claims. However, there is no guarantee that we will prevail at trial and if a jury were to find that our products infringe, we could be required to pay significant monetary damages, and may cause product shipment delays or stoppages, require us to redesign our products, or require us to enter into royalty or licensing agreements.
Although management at present believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could include significant monetary damages. In addition, in matters for which injunctive relief or other conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways or requiring other remedies. An unfavorable outcome may result in a material adverse impact on our business, results of operations, financial position, cash flows and overall trends. No material accrual has been recorded as of July 31, 2026 related to such matters.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements also can be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the actual results of NetApp, Inc. ("NetApp," “we,” “us,” "our," or the “Company”) may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those described in our Annual Report on Form 10-K for the year ended April 24, 2026 ("2026 Annual Report on Form 10-K"), including under the heading “Risk Factors” and discussed in this Form 10-Q under the heading “Risk Factors,” which are incorporated herein by reference. The following discussion should be read in conjunction with our consolidated financial statements as of and for the fiscal year ended April 24, 2026, and the notes thereto, contained in our 2026 Annual Report on Form 10-K, and the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Overview
Our Company
NetApp is a global leader in intelligent data infrastructure, empowering organizations to realize the full potential of their data in a rapidly evolving digital world. Headquartered in San Jose, California, and serving customers in approximately 150 countries, NetApp delivers innovative solutions that enable seamless data management, protection, and mobility across on-premises, hybrid, and multi-cloud environments.
Our flagship ONTAP® data management software, together with a comprehensive portfolio of all-flash, hybrid-flash, and cloud-native offerings, forms the foundation for customers’ digital transformation initiatives. NetApp’s deep integration with all major public cloud providers—Amazon Web Services (AWS), Microsoft Azure, and Google Cloud—enables our customers to run critical workloads anywhere, with consistent performance, security, and governance.
NetApp's strategic focus is on modernizing data infrastructure, enabling resilient and secure operations, optimizing cloud strategies, and accelerating artificial intelligence (AI) adoption. Our portfolio includes advanced AI-ready infrastructure, Storage-as-a-Service (Keystone), and robust cyber resilience solutions, and we continue to invest in innovation. Our partnerships with leading technology companies and a global ecosystem of channel partners further extend our reach and solution capabilities.
Our operations are organized into two segments: Hybrid Cloud and Public Cloud.
Hybrid Cloud offers a unified data storage portfolio of storage management and infrastructure solutions that helps customers modernize their data centers. Our Hybrid Cloud portfolio accommodates both structured and unstructured data with unified storage optimized for flash, disk, and cloud storage, capable of handling data-intensive workloads and applications. Hybrid Cloud includes software, hardware, and related support, along with professional and other services.
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 AWS, Microsoft Azure, and Google Cloud.
Global Business Environment
Supply Chain
Inflationary pressures and global supply chain constraints continued to impact our operations during the first quarter of fiscal 2027. We have experienced increased costs for memory and other components, which have affected our gross margins, and we expect costs will remain elevated, or continue to increase, in the near term. Additionally, the tight supply environment for specific products, which is anticipated to persist, could pose challenges in meeting customer demand for those products.
To address these challenges, we have implemented several strategic actions:
•We raised our pricing in the fourth quarter of fiscal 2026 and at the beginning of the second quarter of fiscal 2027, in line with market trends. We expect to continue adjusting prices as necessary to offset rising costs and remain aligned with the market. While we aim to match supplier costs with our pricing to customers, we recognize the need to give customers time to adjust to these changes.
•We are leveraging our relationships with multiple suppliers where available to enable component availability and manage costs effectively. This strategy helps us maintain competitive positions in the market from a pricing standpoint. Our history of successful supplier management positions us well to navigate these challenges.
•We continue to offer a wide range of solutions to meet various customer needs and priorities. This includes competitive storage options, all-flash solutions, hybrid-flash solutions, public cloud solutions, and our Keystone Storage-as-a-Service offering. By providing diverse options, we aim to align with our customers’ budget priorities and deliver the best value offerings.
These actions are part of our ongoing efforts to mitigate the impact of inflation and supply chain constraints on our operating results. We will continue to monitor these trends and uncertainties and adjust our strategies as needed to maintain our financial performance.
Stock Repurchase Program and Dividend Activity
During the first three months of fiscal 2027, we repurchased 1.5 million shares of our common stock at an average price of $133.32 per share, for an aggregate purchase price of $200 million. We also declared aggregate cash dividends of $0.52 per share in that period, for which we paid $102 million.
Acquisition
On July 16, 2026, we acquired all the outstanding shares of DataPelago, Inc., a privately-held company recognized for its innovative approach to eliminate data processing bottlenecks for AI and analytics workloads, for $193 million. Of this amount, $87 million was paid in cash at closing, and the remainder will be paid in a future period if certain criteria as defined in the merger agreement are achieved.
Restructuring Event
In the first quarter of fiscal 2027, we executed a restructuring plan to redirect resources to highest return activities and reduce costs. Aggregate restructuring charges recorded during the first quarter of fiscal 2027 totaled $56 million.
Results of Operations
Our fiscal year is reported on a 52- or 53-week year that ends on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal 2027, ending on April 30, 2027, is a 53-week year, with 14 weeks included in its first quarter and 13 weeks in each subsequent quarter. Fiscal 2026, which ended on April 24, 2026, was a 52-week year, with 13 weeks in each quarter. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in April and the associated quarters, months and periods of those fiscal years.
The following table sets forth certain condensed consolidated statements of income data as a percentage of net revenues for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Revenues: |
|
|
|
|
|
|
Product |
|
|
49 |
% |
|
|
42 |
% |
Services |
|
|
51 |
|
|
|
58 |
|
Net revenues |
|
|
100 |
|
|
|
100 |
|
Cost of revenues: |
|
|
|
|
|
|
Cost of product |
|
|
22 |
|
|
|
19 |
|
Cost of services |
|
|
8 |
|
|
|
10 |
|
Gross profit |
|
|
70 |
|
|
|
70 |
|
Operating expenses: |
|
|
|
|
|
|
Sales and marketing |
|
|
25 |
|
|
|
30 |
|
Research and development |
|
|
14 |
|
|
|
16 |
|
General and administrative |
|
|
5 |
|
|
|
5 |
|
Restructuring charges |
|
|
3 |
|
|
|
— |
|
Total operating expenses |
|
|
46 |
|
|
|
51 |
|
Income from operations |
|
|
24 |
|
|
|
20 |
|
Other expense, net |
|
|
— |
|
|
|
— |
|
Income before income taxes |
|
|
24 |
|
|
|
19 |
|
Provision for income taxes |
|
|
5 |
|
|
|
5 |
|
Net income |
|
|
19 |
% |
|
|
15 |
% |
Percentages may not add due to rounding
Discussion and Analysis of Results of Operations
Net Revenues (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Net revenues |
|
$ |
2,025 |
|
|
$ |
1,559 |
|
|
|
30 |
% |
The increase in net revenues for the first quarter of fiscal 2027 compared to the corresponding period of the prior year was driven by higher product revenues and, to a lesser extent, an increase in services revenues. The extra week in the first quarter of fiscal 2027 contributed approximately $65 million of additional services revenues to that period. Product revenues as a percentage of net revenues increased by seven percentage points in the first quarter of fiscal 2027 compared to the corresponding period of fiscal 2026.
Product Revenues (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Product revenues |
|
$ |
987 |
|
|
$ |
654 |
|
|
|
51 |
% |
Hybrid Cloud
Product revenues are derived through the sale of our Hybrid Cloud solutions and consist of sales of configured all-flash array systems (including AFF A-Series and AFF C-Series with capacity flash) and hybrid 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 first quarter of fiscal 2027 compared to the corresponding period of the prior year primarily due to higher revenues from sales of all-flash array systems, supported by the price increases we implemented in the fourth quarter of fiscal 2026.
Services Revenues (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Services revenues |
|
$ |
1,038 |
|
|
$ |
905 |
|
|
|
15 |
% |
Support |
|
|
720 |
|
|
|
647 |
|
|
|
11 |
% |
Professional and other services |
|
|
112 |
|
|
|
97 |
|
|
|
15 |
% |
Public cloud |
|
|
206 |
|
|
|
161 |
|
|
|
28 |
% |
Hybrid Cloud
Hybrid Cloud services revenues are derived from the sale of: (1) support, which includes both hardware and software support contracts (the latter of which entitle customers to receive unspecified product upgrades and enhancements, bug fixes and patch releases), and (2) professional and other services, which include customer education and training.
Support revenues increased in the first quarter of fiscal 2027 compared to the corresponding period 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.
Professional and other services revenues increased in the first quarter of fiscal 2027 compared to the corresponding period of the prior year primarily due to an increase in revenues from our Keystone storage-as-a-service offering.
Public Cloud
Public Cloud revenues are derived from the sale of public cloud offerings delivered primarily as-a-service, which include cloud storage, data services and operational services.
Public Cloud revenues increased in the first quarter of fiscal 2027 compared to the corresponding period of the prior year, due to higher customer demand driven by overall growth in the cloud market, and an additional week in the period, which contributed approximately $15 million of additional revenues.
Hybrid Cloud Segment Net Revenues by Storage Category (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Hybrid Cloud segment net revenues |
|
$ |
1,819 |
|
|
$ |
1,398 |
|
All-flash revenues as a percentage of Hybrid Cloud segment net revenues |
|
|
72 |
% |
|
|
64 |
% |
Hybrid-flash and other revenues as a percentage of Hybrid Cloud segment net revenues |
|
|
28 |
% |
|
|
36 |
% |
Percentages may not add due to rounding
The increases in all-flash revenues (comprised of all-flash product and related service revenues) as a percentage of total Hybrid Cloud segment net revenues in the first quarter of fiscal 2027 compared to the corresponding period of the prior year is primarily due
to growing customer demand for our all-flash storage solutions, supported by price increases we implemented in the fourth quarter of fiscal 2026.
Net Revenues by Geographic Area:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
United States, Canada and Latin America (Americas) |
|
|
48 |
% |
|
|
51 |
% |
Americas Commercial |
|
|
37 |
% |
|
|
40 |
% |
U.S. Public Sector |
|
|
11 |
% |
|
|
11 |
% |
Europe, Middle East and Africa (EMEA) |
|
|
33 |
% |
|
|
32 |
% |
Asia Pacific (APAC) |
|
|
19 |
% |
|
|
17 |
% |
Percentages may not add due to rounding
Sales to United States (U.S.) public sector markets includes revenue from the U.S. federal government and U.S. state governments, local municipalities and education institutions. While revenues attributable to all geographies increased on a dollar basis in the first quarter of fiscal 2027 compared to the prior-year period, APAC and EMEA revenues grew at a higher rate than Americas revenues (primarily due to slower Americas Commercial growth), resulting in a minor shift in geographical revenue mix.
Cost of Revenues
Our cost of revenues consists of:
(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;
(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-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-party datacenter fees, and (d) unallocated cost of services revenues, which includes stock-based compensation and amortization of intangibles.
Cost of Product Revenues (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Cost of product revenues |
|
$ |
450 |
|
|
$ |
302 |
|
|
|
49 |
% |
Hybrid Cloud |
|
|
448 |
|
|
|
301 |
|
|
|
49 |
% |
Unallocated |
|
|
2 |
|
|
|
1 |
|
|
|
100 |
% |
Hybrid Cloud
Cost of Hybrid Cloud product revenues represented 45% of Hybrid Cloud product revenues for the first quarter of fiscal 2027, compared to 46% for the corresponding period of the prior year. Materials costs represented 94% of cost of Hybrid Cloud product revenues for the first quarter of fiscal 2027, compared to 89% for the corresponding period of the prior year.
Materials costs increased by $152 million in the first quarter of fiscal 2027 compared to the corresponding period of the prior year, primarily reflecting the increase in product revenues and higher component costs.
Hybrid Cloud product gross margins were relatively flat in the first quarter of fiscal 2027 compared to the corresponding period of the prior year primarily reflecting higher selling prices offset by higher component costs.
Unallocated
Unallocated cost of product revenues were relatively flat in the first quarter of fiscal 2027 compared to the corresponding period of the prior year.
Cost of Services Revenues (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Cost of services revenues |
|
$ |
156 |
|
|
$ |
159 |
|
|
|
(2 |
)% |
Support |
|
|
49 |
|
|
|
50 |
|
|
|
(2 |
)% |
Professional and other services |
|
|
71 |
|
|
|
68 |
|
|
|
4 |
% |
Public cloud |
|
|
28 |
|
|
|
32 |
|
|
|
(13 |
)% |
Unallocated |
|
|
8 |
|
|
|
9 |
|
|
|
(11 |
)% |
Hybrid Cloud
Cost of Hybrid Cloud services revenues, which are composed of the costs of support and professional and other services remained relatively flat in the first quarter of fiscal 2027 compared to the corresponding period of the prior year. Cost of Hybrid Cloud services revenues represented 14% of Hybrid Cloud services revenues for the first quarter of fiscal 2027, compared to 16% for the corresponding period of the prior year.
Hybrid Cloud support gross margins increased marginally in the first quarter of fiscal 2027 compared to the corresponding period of the prior year. Hybrid Cloud professional and other services gross margins increased by seven percentage points in the first quarter of fiscal 2027 compared to the corresponding period of the prior year primarily due to the mix of services provided.
Public Cloud
Cost of Public Cloud revenues decreased in the first quarter of fiscal 2027 compared to the corresponding period of the prior year. Cost of Public Cloud revenues represented 14% of Public Cloud revenues for the first quarter of fiscal 2027, compared to 20% for the corresponding period of the prior year.
Public Cloud gross margins increased by six percentage points in the first quarter of fiscal 2027 compared to the corresponding period of the prior year. The decrease in cost of Public Cloud revenues and improved gross margins were primarily due to cost optimization that included a decrease in fixed assets depreciation.
Unallocated
Unallocated cost of services revenues were relatively flat in the first quarter of fiscal 2027 compared to the corresponding period of the prior year.
Operating Expenses
Sales and Marketing, Research and Development and General and Administrative Expenses
Sales and marketing, research and development, and general and administrative expenses for the first quarter of fiscal 2027 totaled $879 million, or 43% of net revenues, reflecting a decrease of seven percentage points, compared to the corresponding period of the prior year, primarily due to the increase in net revenues.
Compensation costs represent the largest component of operating expenses. Included in compensation costs are salaries, benefits, other compensation-related costs, stock-based compensation expense and employee incentive compensation plan costs.
Total compensation costs included in sales and marketing, research and development and general and administrative expenses increased by $75 million, or 15%, in the first quarter of fiscal 2027 compared to the corresponding period of the prior year, primarily attributable to higher incentive compensation expense and the impact of one additional week in the first quarter of fiscal 2027.
The extra week in the first quarter of fiscal 2027 contributed approximately $22 million of additional sales and marketing, research and development and general administrative expenses in that period.
Sales and Marketing (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Sales and marketing expenses |
|
$ |
507 |
|
|
$ |
461 |
|
|
|
10 |
% |
Sales and marketing expenses consist primarily of compensation costs, commissions, outside services, facilities and IT support costs, advertising and marketing promotional expense and travel and entertainment expense.
The increase in sales and marketing expenses in the first quarter of fiscal 2027 compared to the corresponding period of the prior year was primarily due to higher compensation costs. This increase in compensation costs was primarily driven by higher incentive compensation expense and the impact of the extra week in the first quarter of fiscal 2027.
Research and Development (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Research and development expenses |
|
$ |
274 |
|
|
$ |
242 |
|
|
|
13 |
% |
Research and development expenses consist primarily of compensation costs, facilities and IT support costs, depreciation, equipment and software related costs, prototypes, non-recurring engineering charges and other outside services costs.
Research and development expenses increased in the first quarter of fiscal 2027 compared to the corresponding period of the prior year, primarily due to higher compensation costs. This increase in compensation costs was primarily driven by higher incentive compensation expense and the impact of the extra week in the first quarter of fiscal 2027.
General and Administrative (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
General and administrative expenses |
|
$ |
98 |
|
|
$ |
84 |
|
|
|
17 |
% |
General and administrative expenses consist primarily of compensation costs, professional and corporate legal fees, outside services and facilities and IT support costs.
General and administrative expenses increased in the first quarter of fiscal 2027 compared to the corresponding period of the prior year, primarily due to higher compensation costs. This increase in compensation costs was primarily driven by higher incentive compensation expense and the impact of the extra week in the first quarter of fiscal 2027.
Restructuring Charges (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
Restructuring charges |
|
$ |
56 |
|
|
$ |
2 |
|
|
NM |
NM – Not Meaningful
In the first three months of fiscal 2027, management approved a restructuring plan to redirect resources to the highest return activities and reduce costs. Charges related to the plan consisted primarily of employee severance-related costs. The activities under this plan are expected to be substantially complete by the end of fiscal 2027.
Other Expense, Net (in millions, except percentages)
The components of other expense, net were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Interest income |
|
$ |
33 |
|
|
$ |
36 |
|
|
|
(8 |
)% |
Interest expense |
|
|
(29 |
) |
|
|
(29 |
) |
|
|
— |
% |
Other, net |
|
|
(4 |
) |
|
|
(12 |
) |
|
NM |
|
Total |
|
$ |
— |
|
|
$ |
(5 |
) |
|
NM |
|
NM – Not Meaningful
Interest income decreased in the first quarter of fiscal 2027 compared to the corresponding period of the prior year, primarily due to lower average cash and investment balances.
The difference in Other, net in the first quarter of fiscal 2027 compared to the corresponding period of the prior year is primarily due to fluctuations in foreign exchange gains and losses year-over-year.
Provision for Income Taxes (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
July 31, 2026 |
|
|
July 25, 2025 |
|
|
% Change |
|
Provision for income taxes |
|
$ |
109 |
|
|
$ |
71 |
|
|
|
54 |
% |
Effective tax rate |
|
|
22.5 |
% |
|
|
23.4 |
% |
|
NM |
|
NM – Not Meaningful
Our effective tax rate reflects the impact of a significant amount of earnings being taxed in foreign jurisdictions at rates below the United States (U.S.) statutory rate which is offset by non-deductible stock-based compensation and state taxes. Our effective tax rate for the three months ended July 31, 2026 includes an increase in discrete tax benefits related to stock-based compensation compared to the corresponding period of the prior year.
Liquidity, Capital Resources and Cash Requirements
|
|
|
|
|
|
|
|
|
(In millions) |
|
July 31, 2026 |
|
|
April 24, 2026 |
|
Cash, cash equivalents and short-term investments |
|
$ |
3,576 |
|
|
$ |
3,584 |
|
Principal amount of debt |
|
$ |
2,500 |
|
|
$ |
2,500 |
|
The following is a summary of our cash flow activities:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
(In millions) |
|
July 31, 2026 |
|
|
July 25, 2025 |
|
Net cash provided by operating activities |
|
$ |
503 |
|
|
$ |
673 |
|
Net cash used in investing activities |
|
|
(674 |
) |
|
|
(181 |
) |
Net cash used in financing activities |
|
|
(319 |
) |
|
|
(1,157 |
) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(6 |
) |
|
|
7 |
|
Net change in cash, cash equivalents and restricted cash |
|
$ |
(496 |
) |
|
$ |
(658 |
) |
Cash Flows
As of July 31, 2026, our cash, cash equivalents and short-term investments were $3.6 billion, relatively flat compared to April 24, 2026. During the first quarter of fiscal 2027, we used $200 million for the repurchase of our common stock, $102 million for the payment of dividends, $102 million for purchases of property and equipment, and $78 million, net of cash acquired, for the acquisition of DataPelago Inc., partially offset by $503 million provided by operating activities. Our working capital was $1.1 billion as of July 31, 2026, a decrease of $651 million compared to April 24, 2026, primarily due to the reclassification of $550 million principal amount of our 2.375% Senior Notes due in June 2027 from long-term to current liabilities in the first quarter of fiscal 2027.
Cash Flows from Operating Activities
During the first three months of fiscal 2027, cash provided by operating activities reflected net income of $375 million which was increased for non-cash depreciation and amortization expense of $33 million and non-cash stock-based compensation expense of $98 million. During the first three months of fiscal 2026, cash provided by operating activities reflected net income of $233 million which was increased for non-cash depreciation and amortization expense of $51 million and non-cash stock-based compensation expense of $83 million.
Significant changes in assets and liabilities in the first three months of fiscal 2027 included the following:
•
Accounts receivable decreased by $317 million, primarily reflecting more favorable invoicing linearity in the first quarter of fiscal 2027 compared to the fourth quarter of fiscal 2026.
•
Inventories increased by $176 million, primarily due to higher strategic purchases of components and an increase in finished goods to fulfill customer demand.
We expect that cash provided by operating activities may materially fluctuate in future periods due to a number of factors, including fluctuations in our operating results, shipping linearity, accounts receivable collections performance, inventory and supply chain management, vendor payment initiatives, and the timing and amount of compensation, income taxes and other payments.
Cash Flows from Investing Activities
During the first three months of fiscal 2027, we used $494 million for purchases of investments, net of maturities and sales, and paid $102 million for capital expenditures, as compared to the same period of fiscal 2026, in which we used $143 million for purchases of investments, net of maturities and sales, and paid $53 million for capital expenditures. Additionally, during the first three months of fiscal 2027, we paid $78 million, net of cash acquired, for the acquisition of DataPelago, Inc.
Cash Flows from Financing Activities
During the first three months of fiscal 2027, we used $200 million for the repurchase of 1.5 million shares of common stock, and $102 million for the payment of dividends. During the first three months of fiscal 2026, we used $750 million for the principal repayment upon maturity of our 1.875% Senior Notes due in June 2025, $300 million for the repurchase of 3.0 million shares of common stock and $104 million for the payment of dividends.
Key factors that could affect our cash flows include changes in our revenue mix and profitability, our ability to effectively manage our working capital, in particular, accounts receivable, accounts payable and inventories, the timing and amount of stock repurchases and payment of cash dividends, the impact of foreign exchange rate changes, our ability to effectively integrate acquired products, businesses and technologies and the timing of repayments of our debt. Based on past performance and our current business outlook, we believe that our sources of liquidity, including cash, cash equivalents and short-term investments, cash generated from operations, and our ability to access capital markets and committed credit lines will satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on our debt and other liquidity requirements associated with operations and meet our cash requirements for at least the next 12 months and thereafter for the foreseeable future. We may choose to periodically raise additional debt capital based on certain conditions, including the refinancing of upcoming maturities and/or for potential strategic acquisitions and investments. Our ability to obtain this, or any additional financing that we may pursue or need, will depend on, among other things, our business plans, operating performance and the condition of the capital markets at the time we seek financing. We may not be able to obtain such financing on terms acceptable to us or at all. In the event our liquidity is insufficient and we are unable to enter into new financing arrangements, we may be required to curtail spending and implement additional cost saving measures and restructuring actions. We cannot be certain that we will continue to generate cash flows at or above current levels. For a discussion of risks related to our cash flows and liquidity requirements, see Item 1A. Risk Factors.
Liquidity
Our principal sources of liquidity as of July 31, 2026 consisted of cash, cash equivalents and short-term investments, cash we expect to generate from operations, and our credit facility and commercial paper program.
Cash, cash equivalents and short-term investments consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31, 2026 |
|
|
April 24, 2026 |
|
Cash and cash equivalents |
|
$ |
1,573 |
|
|
$ |
2,070 |
|
Short-term investments |
|
|
2,003 |
|
|
|
1,514 |
|
Total |
|
$ |
3,576 |
|
|
$ |
3,584 |
|
As of July 31, 2026 and April 24, 2026, $2.5 billion and $2.3 billion, respectively, of cash, cash equivalents and short-term investments were held by various foreign subsidiaries and were generally based in U.S. dollar-denominated holdings, while $1.1 billion and $1.3 billion, respectively, were available in the U.S.
Our principal liquidity requirements are primarily to meet our working capital needs, support ongoing business activities, fund research and development, meet capital expenditure needs, invest in critical or complementary technologies through asset purchases and/or business acquisitions, service interest and principal payments on our debt, fund our stock repurchase program, and pay dividends, as and if declared. In the ordinary course of business, we engage in periodic reviews of opportunities to invest in or acquire companies or units in companies to expand our total addressable market, leverage technological synergies and establish new streams of revenue.
The principal objectives of our investment policy are the preservation of principal and maintenance of liquidity. We attempt to mitigate default risk by investing in high-quality investment grade securities, limiting the time to maturity and monitoring the counterparties and underlying obligors closely. We believe our cash equivalents and short-term investments are liquid and accessible. We are not aware of any significant deterioration in the fair value of our cash equivalents or investments from the values reported as of July 31, 2026.
Our investment portfolio has been and will continue to be exposed to market risk due to trends in the credit and capital markets. We continue to closely monitor current economic and market events to minimize the market risk of our investment portfolio. We routinely monitor our financial exposure to both sovereign and non-sovereign borrowers and counterparties. We utilize a variety of planning and financing strategies in an effort to ensure our worldwide cash is available when and where it is needed. We also have an automatic shelf registration statement on file with the U.S. Securities and Exchange Commission (SEC). We may in the future offer an additional unspecified amount of debt, equity and other securities.
Senior Notes
The following table summarizes the principal amount of our Senior Notes as of July 31, 2026 (in millions):
|
|
|
|
|
|
|
Amount |
|
2.375% Senior Notes Due June 2027 |
|
$ |
550 |
|
2.70% Senior Notes Due June 2030 |
|
|
700 |
|
5.50% Senior Notes Due March 2032 |
|
|
625 |
|
5.70% Senior Notes Due March 2035 |
|
|
625 |
|
Total |
|
$ |
2,500 |
|
Interest on the Senior Notes is payable semi-annually. For further information on the underlying terms, see Note 7 – Financing Arrangements of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Credit Facility and Commercial Paper Program
We have a senior unsecured credit agreement with a syndicated group of lenders. The credit agreement, which was amended in March 2025, provides for a $1.0 billion revolving unsecured credit facility, with a sublimit of $50 million available for the issuance of letters of credit on our behalf. The credit facility matures on March 5, 2030, with an option for us to extend the maturity date for two additional 1-year periods, subject to certain conditions. The proceeds of the loans may be used by us for general corporate purposes and as liquidity support for our existing commercial paper program. As of July 31, 2026, we were compliant with all associated covenants in the agreement. No amounts were drawn against this credit facility during any of the periods presented.
We also have a commercial paper program (the “Program”), under which we may issue unsecured commercial paper notes. Amounts available under the Program may be borrowed, repaid and re-borrowed, with the aggregate face or principal amount of the notes outstanding under the Program at any time not to exceed $1.0 billion. The maturities of the notes can vary, but may not exceed 397 days from the date of issue. The notes are sold under customary terms in the commercial paper market and may be issued at a discount from par or, alternatively, may be sold at par and bear interest at rates dictated by market conditions at the time of their issuance. The proceeds from the issuance of the notes are used for general corporate purposes. No commercial paper notes were outstanding as of July 31, 2026.
Material Capital Expenditure Requirements
We expect to fund our capital expenditures, including our commitments related to facilities, equipment, operating leases and internal-use software development projects for at least the next 12 months through existing cash, cash equivalents, investments and cash generated from operations. The timing and amount of our capital requirements cannot be precisely determined and will depend on a number of factors, including future demand for products, changes in the enterprise storage and data management industry, hiring plans and our decisions related to the financing of our facilities and equipment requirements.
Dividends and Stock Repurchase Program
On August 27, 2026, we declared a cash dividend of $0.52 per share of common stock, payable on October 28, 2026, to shareholders of record as of the close of business on October 9, 2026.
Under our common stock repurchase program, which we may suspend or discontinue at any time, we may purchase shares of our outstanding common stock through solicited or unsolicited transactions in the open market, in privately negotiated transactions, through accelerated share repurchase programs, pursuant to a Rule 10b5-1 plan or in such other manner as deemed appropriate by our management. On May 21, 2026, our Board of Directors authorized the repurchase of an additional $1.0 billion of our common stock under our stock repurchase program. As of July 31, 2026, the remaining authorized amount for stock repurchases under this program was $1.3 billion.
Purchase Commitments
In the ordinary course of business, we make commitments to third-party contract manufacturers and component suppliers to manage manufacturer lead times and meet product forecasts, and to other parties, to purchase various key components used in the manufacture of our products. In addition, we have open purchase orders and contractual obligations associated with our ordinary course of business for which we have not yet received goods or services. These off-balance sheet purchase commitments totaled $2.3 billion as of July 31, 2026, of which $2.1 billion is due in the next twelve months, with the remainder due thereafter.
Legal Contingencies
We are subject to various legal proceedings and claims which arise in the normal course of business. See further details on such matters in Note 14 – Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates as described in our 2026 Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in our market risk exposures for the three months ended July 31, 2026, as compared to those discussed in our Annual Report on Form 10-K for the year ended April 24, 2026.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The phrase “disclosure controls and procedures” refers to controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act), such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission (SEC). Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of July 31, 2026, the end of the fiscal period covered by this Quarterly Report on Form 10-Q (the Evaluation Date). Based on this evaluation, our CEO and CFO concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information required to be disclosed in our SEC reports (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with our evaluation that occurred during the first quarter of fiscal 2027 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
For a discussion of legal proceedings, see Note 14 – Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Item 1A. Risk Factors.
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, 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.
Risks Related to Our Operations
We often incur expenses before receiving related benefits and make purchase commitments based on forecasted demand. It may be difficult to reduce expenses or adjust commitments quickly, or at all, if demand declines, and we may be committed to purchasing components at prices that exceed prevailing market prices.
We base our expense levels and purchase commitments partly on future revenue expectations, and a significant portion of our expenses are fixed. Reducing these fixed costs and purchase commitments quickly, or at all, can be challenging, and if our revenue falls below expectations, our operating results could be adversely impacted. During periods of uneven growth or decline, we may incur costs before realizing the anticipated benefits, which could also harm our operating results.
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 condition, and cash flows.
A significant portion of our reported purchase commitments consists of firm, non-cancelable, and unconditional commitments with contract manufacturers and component suppliers. These commitments may require us to purchase materials and components at prices established in advance of delivery. If market prices for such materials or components decline, we could be obligated to acquire inventory at costs that exceed prevailing market prices, which could adversely affect our gross margins, inventory valuations, operating results, cash flows, and competitiveness. In addition, if demand for our products is lower than anticipated, we may experience excess or obsolete inventory and incur additional charges related to these commitments.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered sales of equity securities
On July 16, 2026, we issued 28,706 shares of our common stock to a former holder of shares of DataPelago in connection with the acquisition of DataPelago, which closed on July 16, 2026, in reliance on an exemption from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder.
Purchases of equity securities
The following table provides information with respect to the shares of common stock repurchased by us during the three months ended July 31, 2026:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of Shares |
|
|
Approximate Dollar Value |
|
|
|
Total Number |
|
|
Average |
|
|
Purchased as Part of |
|
|
of Shares That May Yet |
|
|
|
of Shares |
|
|
Price Paid |
|
|
Publicly Announced |
|
|
Be Purchased Under The |
|
Period |
|
Purchased |
|
|
per Share |
|
|
Program |
|
|
Repurchase Program |
|
|
|
(Shares in thousands) |
|
|
|
|
|
(Shares in thousands) |
|
|
(Dollars in millions) (1) |
|
April 25, 2026 - May 22, 2026 |
|
|
901 |
|
|
$ |
115.00 |
|
|
|
391,691 |
|
|
$ |
1,398 |
|
May 23, 2026 - June 26, 2026 |
|
|
495 |
|
|
$ |
160.14 |
|
|
|
392,186 |
|
|
$ |
1,319 |
|
June 27, 2026 - July 31, 2026 |
|
|
104 |
|
|
$ |
164.44 |
|
|
|
392,290 |
|
|
$ |
1,302 |
|
Total |
|
|
1,500 |
|
|
$ |
133.32 |
|
|
|
|
|
|
|
(1) In May 2003, our Board of Directors approved a common stock repurchase program. Under this program, which we may suspend or discontinue at any time, we may purchase shares of our outstanding common stock through solicited or unsolicited transactions in the open market, in privately negotiated transactions, through accelerated share repurchase programs, pursuant to a Rule 10b5-1 plan or in such other manner as deemed appropriate by our management. For further information, see Note 8 – Stockholders' Equity of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
Insider Adoption or Termination of Trading Arrangements
On June 15, 2026, George Kurian, Chief Executive Officer of the Company, entered into a Rule 10b5-1 trading arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) promulgated under the Exchange Act. The trading arrangement will expire on June 15, 2027, and may be terminated earlier in the limited circumstances defined in the trading arrangement. An aggregate of up to 150,000 shares may be sold pursuant to the trading arrangement.
On June 15, 2026, Deepak Ahuja, Chair of the Company's Audit Committee, entered into a Rule 10b5-1 trading arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) promulgated under the Exchange Act. The trading arrangement will expire on June 15, 2027, and may be terminated earlier in the limited circumstances defined in the trading arrangement. An aggregate of up to 11,683 shares may be sold pursuant to the trading arrangement.
No other directors or executive officers of the Company adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K), during the quarterly period covered by this report.
Amended Change of Control Severance Agreements
On August 28, 2026, the Company entered into Change of Control Severance Agreements (the Change of Control Agreements) with George Kurian, Cesar Cernuda, Syam Nair, Beth O’Callahan and Wissam Jabre. The Change of Control Agreements amend and replace the prior Change of Control Severance Agreements between the Company and each such executive officer.
The Change of Control Agreements provide certain payments and benefits in the event of a termination of the executive's employment by the Company without “Cause” or by the executive for “Good Reason” within the twenty-four-month period following a “Change of Control” (as those terms are defined in the Change of Control Agreements). In such event, the executive would be entitled to receive (i) a lump sum payment equal to 150% (or, in the case of the Chief Executive Officer, 200%) of the executive's annual base salary plus the applicable percentage of the executive’s target annual bonus, based on the greater of the rate in effect immediately prior to termination or immediately prior to the Change of Control; (ii) a pro-rated lump sum payment equal to the greater of the executive's target annual bonus or the bonus based on actual performance accrued at the time of termination; (iii) accelerated vesting of the executive’s outstanding equity awards with performance-based equity awards vesting at target unless the award agreement provides otherwise; and (iv) Company-paid COBRA continuation coverage for up to 18 months (or, in the case of the Chief Executive Officer, 24 months) following termination.
The payments and benefits under each Change of Control Agreement are contingent on the executive signing and not revoking a release of claims.
The foregoing description of the Change of Control Agreements is qualified in its entirety by reference to the full text of the form of Change of Control Severance Agreement, which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and incorporated by reference herein.
Item 6. Exhibits.
The following documents are filed as exhibits to this report.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
NETAPP, INC. |
(Registrant) |
|
/s/ WISSAM JABRE |
Wissam Jabre |
Executive Vice President and Chief Financial Officer |
Date: September 2, 2026
EX-10.1
2
ntap-ex10_1.htm
EX-10.1
EX-10.1
Exhibit 10.1
NETAPP, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and between _____________ (“Executive”) and NetApp, Inc. (the “Company”), effective as of ____________________ (the “Effective Date”).
RECITALS
1.It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Compensation Committee of the Board of Directors of the Company (the “Committee”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Committee has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.
2.The Committee believes that it is in the best interests of the Company and its stockholders to provide Executive with an incentive to continue his or her employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.
3.The Committee believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.
4.Certain capitalized terms used in the Agreement are defined in Section 6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:
1.
Term of Agreement. This Agreement will have an initial term of three (3) years commencing on the Effective Date (the “Initial Term”). On the third (3rd) anniversary of the Effective Date, this Agreement will renew automatically for additional, one (1) year terms (each, an “Additional Term” and together with the Initial Term, the “Term”), unless either party provides the other party with written notice of nonrenewal at least twelve (12) months prior to the date of automatic renewal. Notwithstanding the foregoing provisions of this paragraph, (a) if a Change of Control occurs at any time during the Term and there are fewer than twenty-four (24) months
remaining in the Term, the term of this Agreement will extend automatically through the date that is twenty-four (24) months following the effective date of the Change of Control, or (b) if an initial occurrence of an act or omission by the Company constituting the grounds for “Good Reason” in accordance with Section 6(e) hereof has occurred (the “Initial Grounds”), and the expiration date of the Company cure period (as such term is used in Section 6(e)) with respect to such Initial Grounds could occur following the expiration of the Term, the term of this Agreement will extend automatically through the date that is ninety (90) days following the expiration of such cure period, but such extension of the term will only apply with respect to the Initial Grounds. If Executive becomes entitled to severance benefits under Section 3 during the term of this Agreement, the Agreement will not terminate until all of the obligations of the parties hereto with respect to this Agreement have been satisfied.
2.
At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will, as defined under applicable law. As an at-will employee, either the Company or Executive may terminate the employment relationship at any time, with or without Cause.
(a)
Termination without Cause or Resignation for Good Reason in Connection with a Change of Control. If the Company terminates Executive’s employment with the Company without Cause (and not by reason of Executive’s death or Disability) or if Executive resigns from such employment for Good Reason, and such termination occurs during the period that is on or within twenty-four (24) months after the first Change of Control that occurs after the Effective Date (the “Change of Control Period”), and Executive signs and does not revoke a separation agreement and release of claims with the Company (in substantially the form attached hereto as Exhibit A (the “Release”)), then, subject to Section 3(b), Executive will receive the following from the Company:
(i)
Salary Severance Payment. Executive will receive a lump sum severance payment equal to the sum of (A) [For the CEO 200%; for the other executives 150%] of Executive’s annual base salary as in effect immediately prior to Executive’s termination date or (if greater) at the level in effect immediately prior to the Change of Control, and (B) [For the CEO 200%; for the other executives 150%] of Executive’s target annual bonus as in effect immediately prior to Executive’s termination date or (if greater) at the level in effect immediately prior to the Change of Control.
(ii)
Bonus Severance Payment. A single, lump sum, cash payment equal to the greater of (A) Executive’s annual target bonus in effect for the fiscal year in which the termination occurs, or (if greater) at the level in effect immediately prior to the Change of Control, or (B) the bonus Executive would receive for the fiscal year during which the termination occurs based on actual performance being accrued for financial accounting purposes at the time of termination against the performance goals applicable to Executive’s bonus arrangement in effect
immediately prior to Executive’s termination date, in either case, which will be pro-rated for the period during the fiscal year Executive was employed by the Company.
(iii)
Equity Awards. All outstanding Equity Awards subject to time-based vesting will vest as to that portion of the Equity Award that would have vested through the forty-eight (48) month period from Executive’s termination date had Executive remained employed through such period. Additionally, unless otherwise provided in the applicable award agreement, Executive will be entitled to accelerated vesting as to an additional 100% of the then unvested portion of all of Executive’s outstanding Equity Awards that are scheduled to vest pursuant to performance-based criteria, if any. Executive will have one (1) year following the date of his or her termination in which to exercise any outstanding stock options or other similar rights to acquire Company common stock; provided, however, that such post-termination exercise period will not extend beyond the original maximum term of the stock option or other similar right to acquire Company common stock.
(iv)
Continued Employee Benefits. If Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for Executive and Executive’s eligible dependents, within the time period prescribed pursuant to COBRA, the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of [twenty-four (24) months for the CEO; eighteen (18) months for the other executives] from the last date of employment of Executive with the Company, (B) the date upon which Executive and/or Executive’s eligible dependents becomes covered under similar plans, or (C) the date upon which Executive ceases to be eligible for coverage under COBRA. COBRA reimbursements will be made by the Company to Executive consistent with the Company’s normal expense reimbursement policy. Notwithstanding the first sentence of this Section 3(a)(iv), if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to Executive a taxable lump-sum payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), multiplied by [twenty-four (24) for the CEO; eighteen (18) for the other executives], which payment will be made regardless of whether Executive elects COBRA continuation coverage. For the avoidance of doubt, the taxable payment in lieu of COBRA reimbursements may be used for any purpose, including, but not limited to continuation coverage under COBRA.
(b)
Timing of Severance Payments. The receipt of any severance payments or benefits pursuant to this Agreement is subject to Executive signing and not revoking the Release, which must become effective and irrevocable no later than the sixtieth (60th) day following the day on which the termination occurs (the “Release Deadline Date”). Any severance payments or benefits
under this Agreement will be paid on, or, in the case of installments, will not commence until, the tenth (10th) day following the date the Release becomes effective and irrevocable (the “Release Effective Date”) (provided, however, that if such sixty (60)-day period spans two taxable years of Executive, such benefits will not be paid or commence before the first business day of the second taxable year) or, if later, such time as required by Section 3(e)(i), except that the acceleration of vesting of Equity Awards will become effective on the Release Effective Date and settled in accordance with the applicable award agreement. Except as required by Section 3(e)(i), any lump sum or installment payments that would have been made to Executive during the period between the date of Executive’s separation from service and the tenth (10th) day following the Release Effective Date but for the preceding sentence will be paid to Executive on the tenth (10th) day following the Release Effective Date, and the remaining payments will be made as provided in this Agreement. If the Release does not become effective and irrevocable by the Release Deadline Date, Executive will forfeit any right to severance payments or benefits under this Agreement. If Executive should die before all of the severance amounts have been paid, such unpaid amounts will be paid in a lump sum payment promptly following such event to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate. In no event will severance payments or benefits be paid or provided until the Release actually becomes effective and irrevocable.
(c)
Voluntary Resignation; Termination for Cause; Disability; Death. If Executive’s employment with the Company terminates (i) voluntarily by Executive (other than for Good Reason during the Change of Control Period), (ii) for Cause by the Company, (iii) as a result of Executive’s Disability or due to Executive’s death, or (iv) for any reason other than as provided in Section 3(a), then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing severance and benefits plans and practices or pursuant to other written agreements with the Company in accordance with the terms and conditions of such plans, practices or agreements.
(d)
Exclusive Remedy. In the event of a termination of Executive’s employment as set forth in Section 3(a), the provisions of Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement (other than as set forth in Section 4). Executive will be entitled to no benefits, compensation or other payments or rights upon termination of employment following a Change of Control other than those benefits expressly set forth in this Section 3. If Executive becomes entitled to any cash severance, continued health coverage benefits, or vesting acceleration of any Equity Awards (other than under this Agreement) by operation of applicable law, then the corresponding severance payments and benefits under this Agreement will be reduced by the amount of such other benefits paid or provided to Executive.
(i)Notwithstanding anything to the contrary in this Agreement, if (A) Executive is a “specified employee” within the meaning of Section 409A of the Code and the final regulations and any guidance promulgated thereunder (“Section 409A”) at the time of Executive’s termination (other than due to death), and (B) the severance payable to Executive, if any, pursuant to this Agreement, together with any other severance payments or separation benefits payable to Executive, are considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”), then the Deferred Compensation Separation Benefits that are payable within the first six (6) months following Executive’s separation from service will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following his or her termination but prior to the six (6) month anniversary of his or her separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. Notwithstanding anything to the contrary in this Agreement, no Deferred Compensation Separation Benefits will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.
(ii)Any amount paid under the Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations shall not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.
(iii)Any amount paid under the Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that do not exceed the Section 409A Limit shall not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.
(iv)Notwithstanding any other provision of this Agreement to the contrary, solely for the purpose of determining the timing of payment or distribution of any compensation or benefit that constitutes “nonqualified deferred compensation” within the meaning of Section 409A (and not the right to vest in or be entitled to receive any such payment or benefit) that may only be made or changed (including a change in the form of payment) upon an event described in Section 409A(a)(2)(A)(v) of the Code and the regulations thereunder, such payment
shall only be made or timing or form changed if the Change of Control also constitutes an event described in Section 409A(a)(2)(A)(v) of the Code.
(v)The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.
4.
Accrued Compensation. Upon a termination of employment for any reason, the Company will pay or provide to Executive all accrued but unpaid vacation (if applicable), expense reimbursements, wages, and other benefits due to Executive under any Company-provided plans, policies, and arrangements and applicable law.
5.
Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) but for this Section 5, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits under Section 3(a) will be either:
(b)delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting “parachute payments” is necessary so that severance and other benefits are delivered to a lesser extent, reduction will occur in the following order: (i) reduction of cash payments in reverse chronological order (that is, the cash payment owed on the latest date following the occurrence of the event triggering the excise tax will be the first cash payment to be reduced); (ii) cancellation of Equity Awards that were granted “contingent on a change in ownership or control” within the meaning of Section 280G of the Code (if two or more Equity Awards are granted on the same date, each award will be reduced on a pro-rata basis); (iii) reduction of the accelerated vesting of Equity Awards in the reverse order of date of grant of the awards (i.e., the vesting of the most recently granted Equity Awards will be cancelled first and if more than one Equity Award was made to Executive on the same date of grant, all such awards will have their acceleration of vesting reduced pro rata); and (iv) reduction of employee benefits in reverse chronological order (i.e., the benefit owed on the latest date following the occurrence
of the event triggering the excise tax will be the first benefit to be reduced). In no event will Executive have any discretion with respect to the ordering of payment reductions.
Unless the Company and Executive otherwise agree in writing, any determination required under this Section 5 will be made in writing by a nationally recognized certified public accounting firm or other professional organization that is a certified public accounting firm recognized as an expert in determinations and calculations for purposes of Section 280G of the Code that is selected by the Company prior to a Change of Control for purposes of making the applicable determinations hereunder and is reasonably acceptable to Executive, which firm shall not, without Executive’s consent, be a firm serving as accountant or auditor for the individual, entity or group effecting the Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 5, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 5. The Company will bear all costs the Accountants may incur in connection with any calculations contemplated by this Section 5.
6.
Definition of Terms. The following terms referred to in this Agreement will have the following meanings:
(a)
Cause. “Cause” will mean:
(i)Executive’s conviction of, or plea of nolo contendere to, a felony that the Board of Directors of the Company (the “Board”) reasonably believes has had or will have a material detrimental effect on the Company’s reputation or business; or
(ii)Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against, and causing material harm to, the Company or its respective successors or assigns, as applicable. Executive will receive notice and an opportunity to be heard before the Board with Executive’s own attorney before any termination for Cause is deemed effective. Notwithstanding anything to the contrary, the Board may immediately place Executive on administrative leave (with full pay and benefits to the extent legally permissible) but will allow reasonable access to Company information, employees and business should Executive wish to avail himself or herself and prepare for his or her opportunity to be heard before the Board prior to the Board’s termination for Cause. If Executive avails himself or herself of his or her opportunity to be heard before the Board, and then fails to make himself or herself available to the Board within thirty (30) days of such request to be heard, the Board may thereafter cancel the administrative leave and terminate Executive for Cause. Likewise, if the Board fails to make itself available to Executive and his or her counsel within thirty (30) days of Executive’s request to be heard, Executive will be entitled to terminate his or her employment with the Company and such termination will be treated as a resignation by Executive for Good Reason.
(b)
Change of Control. “Change of Control” will mean the occurrence of any of the following events:
(i)
Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection (a), the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change of Control. Further, if the stockholders of the Company immediately before such change in ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately prior to the change in ownership, direct or indirect beneficial ownership of fifty percent (50%) or more of the total voting power of the stock of the Company or of the ultimate parent entity of the Company, such event will not be considered a Change of Control under this subsection (i). For this purpose, indirect beneficial ownership will include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities; or
(ii)
Change in Effective Control of the Company. A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change of Control; or
(iii)
Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total
value or voting power of all the outstanding stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this definition, persons will be considered to be acting as a group under the rules, regulations and guidance set forth by the U.S. Securities and Exchange Commission.
Further and for the avoidance of doubt, a transaction will not constitute a Change of Control if: (x) its primary purpose is to change the jurisdiction of the Company’s incorporation, or (y) its primary purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
(c)
Disability. “Disability” will mean that Executive has been unable to perform his or her Company duties as the result of his or her incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement or 180 days in any consecutive twelve (12) month period, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that the Executive resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate will automatically be deemed to have been revoked.
(d)
Equity Awards. “Equity Awards” will mean Executive’s outstanding stock options, stock appreciation rights, restricted stock units, performance shares, performance stock units and any other Company equity or equity-based compensation awards.
(e)
Good Reason. “Good Reason” will mean Executive’s termination of employment within ninety (90) days following the expiration of any cure period (discussed below) following the occurrence of one or more of the following, without Executive’s consent:
(i)A material reduction of Executive’s authority or responsibilities, relative to Executive’s authority or responsibilities in effect immediately prior to such reduction, or a change in Executive’s reporting position such that Executive no longer reports directly to the officer position or its functional equivalent to which Executive was reporting immediately prior to such change in reporting position (unless Executive is reporting to the comparable officer position of the parent corporation in a group of controlled corporations following a Change of Control) [or for the Chief Executive Officer: A material reduction of Executive’s authority or responsibilities, relative to Executive’s authority or responsibilities in effect immediately prior to such reduction;
provided, however, that a reduction of authority or responsibilities that occurs solely as a necessary and direct consequence of the Company undergoing a Change of Control and being made part of a larger entity will not be considered material (as, for example, when the Chief Executive Officer of the Company remains the Chief Executive Officer of the Company, or the business unit comprising the Company, following a Change of Control even though he or she is not made the Chief Executive Officer of the acquiring corporation). Notwithstanding the foregoing, (x) any change which results in Executive ceasing to have the same functional supervisory authority and responsibility (such as but not limited to the sales, engineering, operations and all general and administrative (including, but not limited to, finance) functions) for the Company, or the business unit comprising the Company, following a Change of Control as Executive performed for the Company prior to the Change of Control, or (y) a change in Executive’s reporting position such that Executive no longer reports directly to the Chief Executive Officer or the Board of Directors of the parent corporation in a group of controlled corporations following a Change of Control, will be deemed to constitute a material reduction in Executive’s authority and responsibilities constituting grounds for a Good Reason termination];
(ii)A material reduction in Executive’s base salary or target annual incentive (“Base Compensation”) as in effect immediately prior to such reduction, unless the Company (or Executive’s employer or the parent corporation in a group of controlled corporations following a Change of Control) also similarly reduces the Base Compensation of all other employees of the Company (or Executive’s employer or the parent corporation in a group of controlled corporations following a Change of Control) with positions, duties and responsibilities comparable to Executive’s;
(iii)A material change in the geographic location at which Executive must perform services (in other words, the relocation of Executive to a facility that is more than thirty-five (35) miles from Executive’s current location);
(iv)Any purported termination of Executive’s employment for “Cause” without first satisfying the procedural protections, as applicable, required by the definition of “Cause” set forth in that definition; or
(v)The failure of the Company to obtain the assumption of the Agreement by a successor and/or acquirer and an agreement that Executive will retain substantially similar responsibilities in the acquirer or the merged or surviving company as he or she had prior to the transaction.
The notification and placement of Executive on administrative leave pending a potential determination by the Board that Executive may be terminated for Cause will not constitute Good Reason.
Executive will not resign for Good Reason without first providing the Company with written notice within sixty (60) days of the event that Executive believes constitutes “Good
Reason” specifically identifying the acts or omissions constituting the grounds for Good Reason and a reasonable cure period of not less than thirty (30) days following the date of such notice.
(f)
Section 409A Limit. “Section 409A Limit” will mean the lesser of two (2) times: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during Executive’s taxable year preceding Executive’s taxable year of Executive’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment is terminated.
(a)
The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) or to all or substantially all of the Company’s business and/or assets will assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b)
Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(a)The Company and Executive each agree that any and all disputes arising out of the terms of this Agreement, Executive’s employment by the Company, Executive’s service as an officer or director of the Company, or Executive’s compensation and benefits, their interpretation and any of the matters herein released, will be subject to binding arbitration under the arbitration rules set forth in California Code of Civil Procedure Sections 1280 through 1294.2, including Section 1281.8 (the “Act”), and pursuant to California law. Disputes that the Company and Executive agree to arbitrate, and thereby agree to waive any right to a trial by jury, include any statutory claims under local, state, or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes-Oxley Act, the Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the California Family Rights
Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutory or common law claims. The Company and Executive further understand that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive. Notwithstanding the foregoing, to the extent required by the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, this agreement to arbitrate shall not apply to any dispute constituting a “sexual assault dispute” or “sexual harassment dispute” as defined therein.
(b)
Procedure. The Company and Executive agree that any arbitration will be administered by Judicial Arbitration & Mediation Services, Inc. (“JAMS”), pursuant to its Employment Arbitration Rules & Procedures (the “JAMS Rules”). The Arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitration hearing. The Arbitrator will have the power to award any remedies available under applicable law, and the Arbitrator will award attorneys’ fees and costs to the prevailing party, except as prohibited by law. The Company will pay for any administrative or hearing fees charged by the Arbitrator or JAMS except that Executive will pay any filing fees associated with any arbitration that Executive initiates, but only so much of the filing fees as Executive would have instead paid had he or she filed a complaint in a court of law. The Arbitrator will administer and conduct any arbitration in accordance with California law, including the California Code of Civil Procedure, and the Arbitrator will apply substantive and procedural California law to any dispute or claim, without reference to rules of conflict of law. To the extent that the JAMS Rules conflict with California law, California law will take precedence. The decision of the Arbitrator will be in writing. Any arbitration under this Agreement will be conducted in Santa Clara County, California.
(c)
Remedy. Except as provided by the Act and this Agreement, arbitration will be the sole, exclusive, and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Act and this Agreement, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration.
(d)
Administrative Relief. Executive understands that this Agreement does not prohibit him or her from pursuing any administrative claim with a local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, including, but not limited to, the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the National Labor Relations Board, or the Workers’ Compensation Board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim, except as permitted by law. Notwithstanding, the Arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the Arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.
(e)
Voluntary Nature of Agreement. Each of the Company and Executive acknowledges and agrees that such party is executing this Agreement voluntarily and without any duress or undue influence by anyone. Executive further acknowledges and agrees that he or she has carefully read this Agreement and has asked any questions needed for him or her to understand the terms, consequences, and binding effect of this Agreement and fully understand it, including that Executive is waiving his or her right to a jury trial. Finally, Executive agrees that he or she has been provided an opportunity to seek the advice of an attorney of his or her choice before signing this Agreement.
(a)
General. All notices and other communications required or permitted under this Agreement shall be in writing and will be effectively given (i) upon actual delivery to the party to be notified, (ii) upon transmission by email, (iii) twenty-four (24) hours after confirmed facsimile transmission, (iv) one (1) business day after deposit with a recognized overnight courier, or (v) three (3) business days after deposit with the U.S. Postal Service by first class certified or registered mail, return receipt requested, postage prepaid. In the case of Executive, notices will be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its Corporate Secretary.
(b)
Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason will be communicated by a notice of termination to the other party hereto given in accordance with Section 9(a) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the giving of such notice). The failure by Executive to include in the notice any fact or circumstance which contributes to a showing of Good Reason will not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing his or her rights hereunder.
10.
Resignation. The termination of Executive’s employment for any reason will also constitute, without any further required action by Executive, Executive’s voluntary resignation from all officer and/or director positions held at the Company or any of its subsidiaries, and at the Board’s request, Executive will execute any documents reasonably necessary to reflect the resignations.
11.
Miscellaneous Provisions.
(a)
No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.
(b)
Other Requirements. Executive’s receipt of any payments or benefits under Section 3 will be subject to Executive continuing to comply with the terms of any confidential information and/or other restrictive covenant agreement executed by Executive in favor of the Company and the provisions of this Agreement.
(c)
Waiver; Amendment. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(d)
Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
(e)
Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and, except as provided herein, supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof.
(f)
Choice of Law. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions). Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether or not arising under this Agreement) will be commenced or maintained in any state or federal court located in the jurisdiction where Executive resides, and Executive and the Company hereby submit to the jurisdiction and venue of any such court.
(g)
Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.
(h)
Withholding. All payments and benefits under this Agreement will be paid less applicable withholding taxes. The Company is authorized to withhold from any payments or benefits all federal, state, local, and/or foreign taxes required to be withheld from the payments or benefits and make any other required payroll deductions. The Company will not pay Executive’s taxes arising from or relating to any payments or benefits under this Agreement.
(i)
Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.
COMPANY
NETAPP, INC.
By:
Title:
Date:
EXECUTIVE
By:
Title:____________________________________
Date:
Exhibit A
Separation Agreement and Release of Claims
[NETAPP LETTERHEAD]
[DATE]
[NAME]
[Street Address at termination]
[City, State & Zip at termination]
Dear [NAME]:
This letter confirms the agreement between NetApp, Inc., (the “Company” or “NetApp”) and you regarding the terms of your separation from the Company as of [insert date] ________ (your “Termination Date”).
1.
Severance Benefits. In consideration for your signing this agreement, you will receive the severance benefits set forth in Section 3 of the Change of Control Severance Agreement between you and the Company effective as of __________ (the “Change of Control Severance Agreement”), subject to the conditions set forth herein and the Change of Control Severance Agreement.
2.
Return of Company Property. You have returned to the Company all Company property in your possession.
3.
Maintaining Confidential Information. You agree not to disclose any confidential information you acquired, while an employee of the Company, to any other person or use such information in any manner that is detrimental to the Company’s interests, per NetApp’s Proprietary Information and Inventions Agreement (the “Proprietary Information Agreement”), which you signed when you were hired and you further agree to honor the terms of that agreement, including those terms which survive your employment with the Company.
4.
Acknowledgement of Payment of Wages. Except for any severance benefits set forth in Section 1, by your last day worked you will have received your final paycheck which will include a final payment for wages through your Termination Date, salary, bonuses, if any, employee stock purchase plan reimbursement, accrued but unused vacation pay and any similar payments due from NetApp, less applicable taxes and 401(k) deduction, if applicable, as of the Termination Date. You acknowledge and agree that NetApp does not owe you any other amounts, except any valid un-reimbursed business expenses that you will submit to the Company.
5.
General Release of the Company. You understand that by agreeing to this release you are agreeing not to sue, or otherwise file any claim against, the Company or any of its employees or
other agents for any reason whatsoever based on anything that has occurred as of the date you sign this agreement.
a)On behalf of yourself and your heirs and assigns, you hereby release and forever discharge the “Releasees” hereunder, consisting of the Company, and each of its owners, shareholders, affiliates, divisions, predecessors, successors, assigns, agents, directors, officers, partners, employees, and insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, loss, cost or expense, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “Claims”), which you now have or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof, including, without limiting the generality of the foregoing, any Claims arising out of, based upon, or relating to your hire, employment, remuneration or resignation by the Releasees, or any of them, including any Claims arising under Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act, as amended; the Equal Pay Act, as amended; the Fair Labor Standards Act, as amended; the Employee Retirement Income Security Act, as amended; the California Fair Employment and Housing Act, as amended; the California Labor Code; the Worker Adjustment and Retraining Notification Act; and/or any other local, state or federal law governing discrimination in employment and/or the payment of wages and benefits.
Notwithstanding the generality of the foregoing, you do not release the following claims:
(i)Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;
(ii)Claims for workers’ compensation insurance benefits under the terms of any workers’ compensation insurance policy or fund of the Company;
(iii)Claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of the federal law known as COBRA;
(iv)Claims to any benefit entitlements vested as the date of your employment termination, pursuant to written terms of any Company employee benefit plan;
(v)Claims as the holder or beneficial owner of securities (or other rights relating to securities, including equity awards);
(vi)Claims to any severance benefits due and owing pursuant to Section 1;
(vii)Claims that cannot be released as a matter of law, including, but not limited to: (1) your right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that any such filing or participation does not give you the right
to recover any monetary damages against the Company; your release of claims herein bars you from recovering such monetary relief from the Company); (2) claims under Division 3, Article 2 of the California Labor Code (which includes California Labor Code section 2802 regarding indemnity for necessary expenditures or losses by employee); and (3) claims prohibited from release as set forth in California Labor Code section 206.5 (specifically “any claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of such wages has been made”); and
(viii)Claims under the terms of any indemnification agreement entered into between you and the Company or under the Company’s bylaws or charter or any insurance policy providing for directors’ and officers’ liability coverage.
b)YOU ACKNOWLEDGE THAT YOU ARE FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT IF KNOWN BY HIM OR HER WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
BEING AWARE OF SAID CODE SECTION, YOU HEREBY EXPRESSLY WAIVE ANY RIGHTS YOU MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
c)You acknowledge that you are waiving and releasing any rights you may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. You and the Company agree that this waiver and release does not apply to any rights or claims that may arise under ADEA after the effective date of this agreement. You acknowledge that the consideration given for this release is in addition to anything of value to which you were already entitled. You further acknowledge that you have been advised by this agreement that (a) you should consult with an attorney before signing this agreement; (b) you have up to twenty-one (21) days within which to consider this agreement (or, in the event that your termination occurs in connection with an exit incentive or other employment termination program offered to a group or class of employees, forty-five (45) days within which to consider this agreement); (c) you have seven (7) days following your signing this agreement to revoke it; (d) this release will not be effective until the revocation period has expired; and (e) nothing in this agreement prevents or precludes you from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law. In the event you sign this agreement and return it to the Company in less than the applicable consideration period identified
above, you hereby acknowledge that you have freely and voluntarily chosen to waive the time period allotted for considering this agreement.
6.
Severability. The provisions of this agreement are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision.
7.
Choice of Law/Venue. This agreement will be governed by the laws of the State of California, without regard for choice-of-law provisions. You consent to personal and exclusive jurisdiction and venue in the State of California.
8.
Voluntary and Knowing Agreement. You represent that you have thoroughly read and considered all aspects of this agreement, that you understand all its provisions and that you are voluntarily entering into this agreement.
9.
Effective Date. You have seven (7) days after you sign this agreement to revoke it. This agreement will become effective on the eighth (8th) day after you sign this agreement, so long as it has been signed by both parties and has not been revoked by you before that date.
10.
Entire Agreement; Amendment. This agreement, together with the Change of Control Severance Agreement, the Proprietary Information Agreement, and agreements relating to your equity incentive awards, set forth the entire agreement between you and the Company and supersedes any and all prior oral or written agreements or understanding between you and the Company concerning the subject matter. This agreement may not be altered, amended or modified, except by a further written document signed by you and the Company.
If the above accurately reflects your understanding, please date and sign the enclosed copy of this letter in the places indicated below and return it to Human Resources.
Respectfully,
_________________________
[Name]
[Job Title]
Accepted and agreed to on ___________________________.
(Date)
[NAME]
_________________________________________________________________________
Current Mailing Address (Severance check(s) will be mailed to this address and NetApp will update your records to reflect this address if it is different than the address on file).
Encl.
EX-31.1
3
ntap-ex31_1.htm
EX-31.1
EX-31.1
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302(a)
OF THE SARBANES-OXLEY ACT OF 2002
I, George Kurian, certify that:
1) I have reviewed this Quarterly Report on Form 10-Q of NetApp, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ GEORGE KURIAN
|
George Kurian |
Chief Executive Officer and Director |
(Principal Executive Officer and Principal Operating Officer) |
Date: September 2, 2026
EX-31.2
4
ntap-ex31_2.htm
EX-31.2
EX-31.2
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302(a)
OF THE SARBANES-OXLEY ACT OF 2002
I, Wissam Jabre, certify that:
1) I have reviewed this Quarterly Report on Form 10-Q of NetApp, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ WISSAM JABRE |
Wissam Jabre |
Executive Vice President and Chief Financial Officer |
(Principal Financial Officer) |
Date: September 2, 2026
EX-32.1
5
ntap-ex32_1.htm
EX-32.1
EX-32.1
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, George Kurian, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of NetApp, Inc., on Form 10-Q for the quarterly period ended July 31, 2026 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of NetApp, Inc.
|
/s/ GEORGE KURIAN |
George Kurian |
Chief Executive Officer and Director |
(Principal Executive Officer and Principal Operating Officer) |
Date: September 2, 2026
EX-32.2
6
ntap-ex32_2.htm
EX-32.2
EX-32.2
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Wissam Jabre, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of NetApp, Inc., on Form 10-Q for the quarterly period ended July 31, 2026 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of NetApp, Inc.
|
/s/ WISSAM JABRE |
Wissam Jabre |
Executive Vice President and Chief Financial Officer |
(Principal Financial Officer) |
Date: September 2, 2026
