NetApp Inc
For the period ended Jul 26, 2024. Filed Aug 28, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 26, 2024 · Filed Aug 28, 2024
NTAP$169.19-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-01-26; filed 2024-02-29.
0000950170-24-023115
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-07-26; filed 2024-08-28.
0000950170-24-101408
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 132 previous paragraphs and 121 current paragraphs.
66 unchanged; 43 reworded; 11 added; 23 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 19 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
NetApp helps customers make their data infrastructure more seamless, more dynamic, and higher performing. We were incorporated in 1992 and are headquartered in San Jose, California. Building on over three decades of innovation, we combine unified data storage, integrated data services, and CloudOps solutions to make data infrastructure intelligent. Our broad portfolio addresses customer priorities: modernizing legacy infrastructure, improving resiliency against ransomware attacks, and building scalable, high-performance data pipelines for artificial intelligence (AI) workloads.
Current report
In prior periods, we presented the hardware and software components of our GAAP product revenues to illustrate the significance and value of the Company’s software. Because our revenue recognition policy under GAAP defines a configured storage system, inclusive of the operating system software essential to its functionality, as a single performance obligation, hardware and software components of our product revenues are considered non-GAAP measures. Effective in fiscal 2025, we are no longer presenting the non-GAAP hardware and software components of our product revenues, as management no longer considers them to be key financial measures. The Company’s current strategy is expected to deliver investor value through growth in total revenues, including product revenues, while maintaining operational discipline to drive earnings leverage. While software continues to be the primary value driver of our products, NetApp is primarily focused on driving growth in total product revenues, through the sale of configured storage systems comprised of both hardware and software, with less focus on the pricing of each component. Additionally, the company is considering potential opportunities to simplify pricing for certain products in the future, which may eliminate the existence of separate prices for hardware and software components and/or impact our ability to allocate between them.
Current report
Professional and other services revenues increased by $5 million in the first quarter of fiscal 2025 compared to the corresponding period of the prior year.
Current report
Materials costs increased by $4 million in the first quarter of fiscal 2025 compared to the corresponding period of the prior year.
Current report
Cost of Public Cloud revenues decreased, and Public Cloud gross margins increased by four percentage points, in the first quarter of fiscal 2025 compared to the corresponding period of fiscal 2024, due to cost optimization that included a decrease in fixed assets depreciation.
Current report
Total compensation costs included in sales and marketing, research and development and general and administrative expenses, totaling $499 million in the first quarter of fiscal 2025, were relatively flat compared to the corresponding period of the prior year.
Current report
Sales and marketing expenses remained relatively flat in the first quarter of fiscal 2025 compared to the corresponding period of the prior year.
Current report
General and administrative expenses remained relatively flat in the first quarter of fiscal 2025 compared to the corresponding period of the prior year.
Current report
In the first quarter of fiscal 2025, management approved and initiated a restructuring plan to redirect resources to highest return activities and reduce costs, which included a reduction of our global workforce by approximately 2%. 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 second quarter of fiscal 2025.
Current report
Acquisition-related expenses decreased by $2 million in the first quarter of fiscal 2025 compared to the corresponding period of the prior year.
Current report
Accrued expenses decreased by $221 million, primarily due to employee compensation payouts related to fiscal year 2024 incentive compensation and commissions plans.
Removed paragraphs (23)
Previous report
NetApp makes data infrastructure intelligent by combining unified data storage, integrated data services, and CloudOps solutions. We create silo-free infrastructure, and harness observability and artificial intelligence to enable seamless data management across environments to help our customers achieve their business priorities. No matter the data type, workload, or environment, with NetApp customers can modernize their data infrastructure to support their business objectives.
Previous report
Global Business Environment
Previous report
Macroeconomic Conditions
Previous report
Continuing global economic uncertainty, political conditions and fiscal challenges in the U.S. and abroad have resulted and may continue to result in adverse macroeconomic conditions, including inflation, rising interest rates, foreign exchange volatility, slower growth and possibly a recession. In particular, during the first nine months of fiscal 2024, and throughout fiscal 2023, we experienced a weakened demand environment, characterized by cloud optimizations and increased budget scrutiny, which resulted in smaller deal sizes, longer selling cycles, and delays of some deals.
Previous report
If these macroeconomic uncertainties persist or worsen during the remainder of fiscal 2024, we may observe a further reduction in customer demand for our offerings, which could impact our operating results.
Previous report
Supply Chain
Previous report
Supply chain constraints, which substantially began to impact us in the first half of fiscal 2023, led to elevated product component and freight costs during the first nine months of fiscal 2023. Comparatively, in the first nine months of fiscal 2024, the supply chain substantially improved, resulting in lower costs.
Previous report
In order to provide visibility into the value created by our software innovation and R&D investment, we disclose the software and hardware components of our product revenues. Software product revenues includes the OS software and optional add-on software solutions attached to our systems across our entire product set, while hardware product revenues include the non-software component of our systems across the entire set. Because our revenue recognition policy under GAAP defines a configured storage system, inclusive of the operating system software essential to its functionality, as a single performance obligation, the hardware and software components of our product revenues are considered non-GAAP measures. The hardware and software components of our product revenues are derived from an estimated fair value allocation of the transaction price of our contracts with customers, down to the level of the product hardware and software components. This allocation is primarily based on the contractual prices at which NetApp has historically billed customers for such respective components.
Previous report
Revenues from the hardware component of product revenues represented 45% and 44% of product revenues in the third quarter and first nine months of fiscal 2024, compared to 43% and 41% of product revenues in the corresponding periods of the prior year. The software component of product revenues represented 55% and 56% of product revenues in the third quarter and first nine months of fiscal 2024, compared to 57% and 59% of product revenues in the corresponding periods of the prior year. The decrease in the software component percentage of product revenues in the third quarter and first nine months of fiscal 2024 was primarily due to the mix of systems sold.
Previous report
Professional and other services revenues remained relatively flat in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year.
Previous report
Materials costs decreased by approximately $94 million and $386 million in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year, reflecting lower component and freight costs as a result of supply chain improvements. Materials costs were also impacted by the increase in product revenues in the third quarter of fiscal 2024, and the decrease in product revenues in the first nine months of fiscal 2024, compared to the corresponding periods of the prior year.
Previous report
Cost of Public Cloud revenues increased in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of fiscal 2023 reflecting the increase in Public Cloud revenues. Public Cloud gross margins decreased by three percentage points in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of fiscal 2023, primarily due to the mix of offerings provided.
Previous report
Sales and marketing, research and development, and general and administrative expenses for the third quarter of fiscal 2024 totaled $769 million, or 48% of net revenues, relatively consistent with the corresponding period of fiscal 2023.
Previous report
Total compensation costs included in sales and marketing, research and development and general and administrative expenses increased by $32 million, or 7%, and $83 million, or 6%, in the third quarter and first nine months of fiscal 2024, respectively, compared to the corresponding periods of the prior year, primarily due to an increase in incentive compensation expense. This increase was partially offset by lower salaries expense, reflecting average headcount decreases of 11% and 8%, respectively.
Previous report
The decrease in commissions expense for the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year was primarily due to lower performance against sales goals.
Previous report
The increase in compensation costs for the third quarter and first nine months of fiscal 2024 compared to the corresponding periods in the prior year was primarily attributable to higher incentive compensation expenses and stock-based compensation, partially offset by lower salaries expense, reflecting decreases in average headcount of 10% and 7%, respectively.
Previous report
The decrease in development projects and outside services for the third quarter and first nine months of fiscal 2024 compared to the corresponding periods in the prior year was primarily due to the lower spending on certain engineering projects.
Previous report
The increases in general and administrative expenses in the third quarter and the first nine months of fiscal 2024 compared to the corresponding periods of the prior year were primarily attributable to increases in all components of compensation costs, but predominantly incentive compensation expenses. Higher spending levels on projects and outside services also contributed to the increases.
Previous report
Acquisition-related expenses for the third quarter and first nine months of fiscal 2024 totaled $3 million and $9 million, respectively, and were primarily related to our integration of previous acquisitions.
Previous report
Other, net for the first nine months of fiscal 2023 includes $21 million of other income for non-refundable, up-front payments from customers in Russia for support contracts, which we were not able to fulfill due to imposed sanctions and for which we have no remaining legal obligation to perform. It also includes a $32 million gain recognized on our sale of a minority equity interest in a privately held company for proceeds of approximately $59 million. The remaining differences in Other, net for the third quarter and first nine months of fiscal 2024 as compared to the corresponding periods of the prior year are partially due to foreign exchange gains and losses year-over-year.
Previous report
During the second quarter of fiscal 2023, we completed an intra-entity asset transfer of certain IP to our international headquarters (the “IP Transfer”). The transaction resulted in a step-up of tax-deductible basis in the transferred assets, and accordingly, created a temporary difference where the tax basis exceeded the financial statement basis of such intangible assets, which resulted in the recognition of a discrete tax benefit and related deferred tax asset of $524 million during the second quarter of fiscal 2023. Management applied significant judgment when determining the fair value of the IP, which serves as the tax basis of the deferred tax asset. With the assistance of third-party valuation specialists, the fair value of the IP was determined principally based on the present value of projected cash flows related to the IP which reflects management’s assumptions regarding projected revenues, expenses and a discount rate. The tax-deductible amortization related to the transferred IP rights will be recognized in future periods and any amortization that is unused in a particular year can be carried forward indefinitely. The deferred tax asset and the tax benefit were measured based on the enacted tax rates expected to apply in the years the asset is expected to be realized. We expect to realize the deferred tax asset resulting from the IP Transfer and will assess the realizability of the deferred tax asset quarterly. Any Organisation for Economic Co-operation and Development’s (“OECD”) actions adopted internationally, could impact our financial results in future periods. The impact of the transaction to net cash provided by or used in operating, investing and financing activities on the condensed consolidated statements of cash flows during the quarter ended October 28, 2022, was not material.
Previous report
During the third quarter of fiscal 2023, the Danish Supreme Court issued a non-appealable ruling on the distributions declared in 2005 and 2006. The Danish Supreme Court ruled the 2005 dividend was subject to at-source dividend withholding tax while the smaller 2006 distribution would not be subject to withholding tax. We recorded $69 million of tax expense, which includes $23 million of withholding tax and $46 million of interest, associated with the Danish Supreme Court ruling as a discrete item during the quarter ended January 27, 2023.
Previous report
Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), which require management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses, and the disclosure of contingent assets and liabilities. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We believe that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates and such differences may be material.
Reworded paragraphs (43)
Previous wording
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. (“we,” “us,” 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 2023 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 28, 2023, and the notes thereto, contained in our 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.
Current wording
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,” 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 26, 2024 ("2024 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 26, 2024, and the notes thereto, contained in our 2024 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.
Previous wording
Our unified data storage delivers flexibility by enabling customers to store any data type and power any workload, simply and consistently on a single storage operating system, optimized for cloud and flash. As the only enterprise-grade storage service natively embedded in the world’s largest clouds, our data storage powers any data across clouds. Our integrated data services enable active data management through superior data security, protection, governance, and sustainability. Our CloudOps solutions enable adaptive operations across infrastructure, applications, and teams.
Current wording
With NetApp, customers can better leverage their data to accelerate innovation, improve operations, and drive competitive advantage. Our unified data storage delivers flexibility to our customers, enabling them to simply and consistently store any data type and power any workload. As the only enterprise-grade storage service natively embedded in the world’s largest clouds, we power data across AWS, Microsoft Azure, and Google Cloud. Our integrated data services enable active data management, security, protection, governance, and sustainability. Finally, our CloudOps solutions enable adaptive operations across infrastructure, applications, and teams.
Previous wording
Hybrid Cloud offers a portfolio of storage management and infrastructure solutions that help customers modernize their data centers with the power of the cloud and modernize applications with a single solution that supports file, block, and object storage. Our Hybrid Cloud portfolio supports structured and unstructured data with unified storage optimized for flash and cloud to handle data-intensive workloads and applications. Hybrid Cloud is composed of software, hardware, and related support, as well as professional and other services.
Current wording
Hybrid Cloud offers a unified data storage portfolio of storage management and infrastructure solutions that help customers modernize their data centers. Our Hybrid Cloud portfolio supports structured and unstructured data with unified storage optimized for flash, disk, and cloud storage to handle data-intensive workloads and applications. Hybrid Cloud is composed of software, hardware, and related support, as well as professional and other services.
Previous wording
Public Cloud offers a portfolio of products delivered primarily as-a-service, including related support. This portfolio includes cloud storage and CloudOps services. As the only provider of enterprise-grade storage service natively embedded in the world’s largest clouds, NetApp helps organizations harness the power of their data and application workloads. NetApp’s CloudOps solutions tap into the power of AI to maximize productivity across infrastructure and applications to boost the productivity of teams and reduce costs of operations. These solutions and services are generally available on the leading public clouds, including Amazon AWS, Microsoft Azure, and Google Cloud Platform.
Current wording
Public Cloud offers a portfolio of products delivered primarily as-a-service, including related support. This portfolio includes cloud storage and CloudOps services. These solutions and services are generally available on the leading public clouds, including Amazon AWS, Microsoft Azure, and Google Cloud Platform.
Previous wording
During the first nine months of fiscal 2024, we repurchased approximately 11 million shares of our common stock at an average price of $76.03 per share, for an aggregate of $800 million. We also declared aggregate cash dividends of $1.50 per share in that period, for which we paid $312 million.
Current wording
During the first three months of fiscal 2025, we repurchased approximately 3 million shares of our common stock at an average price of $120.46 per share, for an aggregate purchase price of $400 million. We also declared aggregate cash dividends of $0.52 per share in that period, for which we paid $107 million.
Previous wording
In the third quarter of fiscal 2024, management approved a restructuring plan to redirect resources to highest return activities and reduce costs. Aggregate charges recorded from restructuring plans in the third quarter and first nine months of fiscal 2024 totaled $13 million and $44 million, respectively.
Current wording
In the first quarter of fiscal 2025, management approved a restructuring plan to redirect resources to highest return activities and reduce costs. Aggregate charges recorded from the restructuring plan in the first three months of fiscal 2025 totaled $17 million.
Previous wording
The increase in net revenues for the third quarter of fiscal 2024 compared to the corresponding period of fiscal 2023 was primarily due to an increase in product revenues and, to a lesser extent, an increase in services revenues. The decrease in net revenues for the first nine months of fiscal 2024 compared to the corresponding period of fiscal 2024 was primarily due to a decrease in product revenues, partially offset by an increase in services revenues. Product revenues as a percentage of net revenues increased by two percentage points and decreased by four percentage points in the third quarter and first nine months of fiscal 2024, respectively, compared to the corresponding periods of fiscal 2023.
Current wording
The increase in net revenues for the first quarter of fiscal 2025 compared to the corresponding period of fiscal 2024 was due to an increase in product revenues and, to a lesser extent, an increase in services revenues. Product revenues as a percentage of net revenues increased by two percentage points in the first quarter of fiscal 2025 compared to the corresponding period of fiscal 2024.
Previous wording
Product revenues are derived through the sale of our Hybrid Cloud solutions and consist of sales of configured all-flash array systems (including All-Flash FAS and QLC-Flash FAS) and hybrid systems, which are bundled hardware and software products, as well as add-on flash, disk and/or hybrid storage and related OS, StorageGrid, OEM products, NetApp HCI and add-on optional software.
Current wording
Product revenues are derived through the sale of our Hybrid Cloud solutions and consist of sales of configured all-flash array systems (including All-Flash FAS A-Series and All-Flash FAS C-Series with capacity flash) and hybrid systems, which are bundled hardware and software products, as well as add-on flash, disk and/or hybrid storage and related OS, StorageGrid, OEM products, NetApp HCI and add-on optional software.
Previous wording
Total product revenues increased in the third quarter of fiscal 2024 compared to the corresponding period of the prior year primarily due to higher sales of QLC-flash array systems. Total product revenues decreased in the first nine months of fiscal 2024 compared to the corresponding period of the prior year primarily due to lower sales of hybrid systems as a result of softer customer demand.
Current wording
Total product revenues increased in the first quarter of fiscal 2025 compared to the corresponding period of the prior year due to higher sales of C-Series all-flash array systems.
Previous wording
Support revenues increased in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year as a result of a higher aggregate support contract value for our installed base.
Current wording
Support revenues increased in the first quarter of fiscal 2025 compared to the corresponding period of the prior year as a result of a higher aggregate support contract value for our installed base.
Previous wording
Public Cloud revenues are derived from the sale of public cloud offerings primarily delivered as-a-service, which include cloud storage and CloudOps services.
Current wording
Public Cloud revenues are derived from the sale of public cloud offerings delivered primarily as-a-service, which include cloud storage and CloudOps services.
Previous wording
Public Cloud revenues increased in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year primarily due to customer demand for NetApp’s diversified cloud offerings, coupled with overall growth in the cloud market.
Current wording
Public Cloud revenues increased in the first quarter of fiscal 2025 compared to the corresponding period of the prior year, due to higher customer demand, driven by NetApp’s diversified cloud offerings and an overall growth in the cloud market.
Previous wording
(1) cost of product revenues, composed of (a) cost of Hybrid Cloud product revenues, which includes the costs of manufacturing and shipping our products, inventory write-downs, and warranty costs, and (b) unallocated cost of product revenues, which includes stock-based compensation and amortization of intangibles, and;
Current wording
(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;
Previous wording
Cost of Hybrid Cloud product revenues represented approximately 37% and 40% of product revenues for the third quarter and first nine months of fiscal 2024 compared to 54% and 51% for the corresponding periods of fiscal 2023. Materials costs represented 89% and 88% of cost of Hybrid Cloud product revenues for the third quarter and first nine months of fiscal 2024, compared to 94% for the corresponding periods of fiscal 2023.
Current wording
Cost of Hybrid Cloud product revenues represented approximately 40% of product revenues for the first quarter of fiscal 2025 compared to 45% for the corresponding period of fiscal 2024. Materials costs represented 88% of cost of Hybrid Cloud product revenues for both the first quarter of fiscal 2025 and for the corresponding period of fiscal 2024.
Previous wording
Hybrid Cloud product gross margins increased by approximately sixteen percentage points and eleven percentage points in the third quarter and first nine months of fiscal 2024, compared to the corresponding periods of the prior year, primarily due to lower component and freight costs.
Current wording
Hybrid Cloud product gross margins increased by approximately five percentage points in the first quarter of fiscal 2025 compared to the corresponding period of the prior year, due to lower component and freight costs.
Previous wording
Unallocated cost of product revenues were relatively flat in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year.
Current wording
Unallocated cost of product revenues were relatively flat in the first quarter of fiscal 2025 compared to the corresponding period of the prior year.
Previous wording
Cost of Hybrid Cloud services revenues, which are composed of the costs of support and professional and other services, increased in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of fiscal 2023. Cost of Hybrid Cloud services revenues represented approximately 15% of Hybrid Cloud services revenues in the third quarter and first nine months of fiscal 2024, compared to 14% for the corresponding periods of fiscal 2023.
Current wording
Cost of Hybrid Cloud services revenues, which are composed of the costs of support and professional and other services, increased in the first quarter of fiscal 2025 compared to the corresponding period of fiscal 2024. Cost of Hybrid Cloud services revenues represented approximately 16% of Hybrid Cloud services revenues in the first quarter of fiscal 2025 compared to 15% for the corresponding period of fiscal 2024.
Previous wording
Hybrid Cloud support gross margins decreased by less than one percentage point in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year. Hybrid Cloud professional and other services gross margins decreased by approximately eleven percentage points and eight percentage points in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of fiscal 2023, due to the mix of services provided.
Current wording
Hybrid Cloud support gross margins were relatively flat in the first quarter of fiscal 2025 compared to the corresponding period of the prior year. Hybrid Cloud professional and other services gross margins decreased by approximately three percentage points in the first quarter of fiscal 2025 compared to the corresponding period of fiscal 2024 due to the mix of services provided.
Previous wording
Unallocated cost of services revenues decreased in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year due to certain intangible assets becoming fully amortized during the first quarter of fiscal 2024.
Current wording
Unallocated cost of services revenues decreased in the first quarter of fiscal 2025 compared to the corresponding period of the prior year due to certain intangible assets becoming fully amortized during the first quarter of fiscal 2024.
Previous wording
Sales and marketing, research and development, and general and administrative expenses for the first nine months of fiscal 2024 totaled $2,356 million, or 51% of net revenues, respectively, reflecting an increase of three percentage points, compared to the corresponding periods of fiscal 2023, primarily due to the decrease in net revenues.
Current wording
Sales and marketing, research and development, and general and administrative expenses for the first quarter of fiscal 2025 totaled $798 million, or 52% of net revenues, reflecting a decrease of three percentage points, compared to the corresponding period of fiscal 2024, due to the increase in net revenues.
Previous wording
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 changes in sales and marketing expenses consisted of the following (in percentage points of the total change):
Current wording
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.
Previous wording
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. Changes in research and development expenses consisted of the following (in percentage points of the total change):
Current wording
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.
Previous wording
In each of the first and third quarters of fiscal 2024, management approved a restructuring plan to redirect resources to highest return activities and reduce costs. Each plan included a global workforce reduction of approximately 1% for which restructuring charges, comprised of employee severance related expenses, were recorded during the first nine months of fiscal 2024. The plan initiated during the first quarter also included optimization of our global office space for our hybrid work model. In connection with that plan, we terminated certain real estate leases in various countries during the first nine months of fiscal 2024, resulting in restructuring charges primarily comprised of lease termination charges. The activities under these plans are expected to be substantially complete by the end of fiscal 2024..
Current wording
In the first quarter of fiscal 2024, management approved and initiated a restructuring plan to redirect resources to highest return activities, and to optimize our global office space for our hybrid work model. In connection with the plan, we reduced our global workforce by approximately 1% and terminated certain real estate leases in various countries, resulting in restructuring charges comprised primarily of employee severance-related expenses and lease termination charges. The workforce-related activities under the plan were substantially completed by the end of fiscal 2024.
Previous wording
Interest income increased in the third quarter and first nine months of fiscal 2024 compared to the corresponding periods of the prior year primarily due to higher yields earned on our cash and investments. Interest expense was relatively flat in the third quarter of fiscal 2024 compared to the corresponding period of fiscal 2023, while it decreased in the first nine months of fiscal 2024 compared to the corresponding period of fiscal 2023 due to the extinguishment of certain senior notes in the second quarter of fiscal 2023.
Current wording
Interest income increased in the first quarter of fiscal 2025 compared to the corresponding periods of the prior year, primarily due to higher yields earned on our cash and investments. Interest expense was relatively flat in the first quarter of fiscal 2025 compared to the corresponding period of fiscal 2024.
Previous wording
Our effective tax rate for the three and nine months ended January 26, 2024 includes a benefit for increased fiscal 2024 foreign tax credits, partially offset by an increase in stock compensation for which no tax benefit is recorded. The effective tax rate for the three months ended January 27, 2023, includes a discrete tax expense recorded as a result of the Danish Supreme Court ruling received on January 9, 2023. The effective tax rate for the nine months ended January 27, 2023, includes a discrete tax expense recorded as a result of the Danish Supreme Court ruling that was fully offset by a discrete tax benefit resulting from an intra-entity asset transfer of certain intellectual property (“IP”).
Current wording
Our effective tax rate for the three months ended July 26, 2024 includes an increase in discrete tax benefits related to stock compensation compared to the corresponding period of the prior year. Our effective tax rate for the three months ended July 28, 2023 included a benefit for increased fiscal 2023 foreign tax credits resulting from new IRS guidance released during the first quarter of fiscal 2024, partially offset by an increase in stock compensation for which no tax benefit is recorded.
Previous wording
As of January 26, 2024, we had $225 million of gross unrecognized tax benefits. Inclusive of penalties, interest and certain income tax benefits, $152 million would affect our provision for income taxes if recognized. Net unrecognized tax benefits of $152 million have been recorded in other long-term liabilities.
Current wording
As of July 26, 2024, we had $221 million of gross unrecognized tax benefits. Inclusive of penalties, interest and certain income tax benefits, $158 million would affect our provision for income taxes if recognized. Net unrecognized tax benefits of $157 million have been recorded in other long-term liabilities.
Previous wording
As of January 26, 2024, our cash, cash equivalents and short-term investments were $2.9 billion, which represents a decrease of $153 million during the first nine months of fiscal 2024. The decrease was primarily due to $800 million used for the repurchase of our common stock, $312 million used for the payment of dividends and $109 million used for purchases of property and equipment, partially offset by $1.1 billion provided by operating activities. Net working capital was $562 million as of January 26, 2024, a reduction of $651 million when compared to April 28, 2023, primarily due to the decrease in cash, cash equivalents and short-term investments discussed above and the reclassification of $400 million principal amount of our senior notes from long-term to current liabilities.
Current wording
As of July 26, 2024, our cash, cash equivalents and short-term investments were $3.0 billion, which represents a decrease of $235 million during the first three months of fiscal 2025. The decrease was primarily due to $400 million used for the repurchase of our common stock, $107 million used for the payment of dividends and $41 million used for purchases of property and equipment, partially offset by $341 million provided by operating activities. Our net working capital deficit was $191 million as of July 26, 2024, a reduction of $982 million when compared to April 26, 2024, primarily due to the decrease in cash, cash equivalents and short-term investments discussed above and the reclassification of $750 million principal amount of our senior notes from long-term to current liabilities.
Previous wording
During the first nine months of fiscal 2024, we generated cash from operating activities of $1.1 billion, reflecting net income of $695 million which was increased by non-cash depreciation and amortization expense of $191 million and non-cash stock-based compensation expense of $269 million, compared to $872 million of cash generated from operating activities during the first nine months of fiscal 2023.
Current wording
During the first three months of fiscal 2025, we generated cash from operating activities of $341 million, reflecting net income of $248 million which was increased by non-cash depreciation and amortization expense of $63 million and non-cash stock-based compensation expense of $85 million, compared to $453 million of cash generated from operating activities during the first three months of fiscal 2024.
Previous wording
Significant changes in assets and liabilities in the first nine months of fiscal 2024 included the following:
Current wording
Significant changes in assets and liabilities in the first three months of fiscal 2025 included the following:
Previous wording
Accounts receivable decreased $195 million, reflecting lower billings and more favorable invoicing linearity in the first nine months of fiscal 2024 compared to the last nine months of fiscal 2023.
Current wording
Accounts receivable decreased $335 million, reflecting lower billings and more favorable invoicing linearity in the first three months of fiscal 2025 compared to the last three months of fiscal 2024.
Previous wording
Deferred revenue and financed unearned services revenue decreased by $160 million, primarily due to a decrease in deferred revenue for software and hardware support contracts.
Current wording
Deferred revenue and financed unearned services revenue decreased by $92 million, due to a decrease in deferred revenue for software and hardware support contracts.
Previous wording
During the first nine months of fiscal 2024, we used $329 million for the purchases of investments, net of maturities and sales and paid $109 million for capital expenditures, as compared to the same period of fiscal 2023, in which we used $474 million for the purchases of investments, net of maturities and sales, and paid $200 million for capital expenditures. During the first nine months of fiscal 2023, we paid approximately $491 million, net of cash acquired, for a privately-held company, and received proceeds of $59 million from the sale of one of our minority investments.
Current wording
During the first three months of fiscal 2025, we used $10 million for the purchases of investments, net of maturities and sales, and paid $41 million for capital expenditures, as compared to the same period of fiscal 2024, in which we used $192 million for the purchases of investments, net of maturities and sales, and paid $35 million for capital expenditures.
Previous wording
During the first nine months of fiscal 2024, cash flows used in financing activities totaled $1.1 billion and included $800 million for the repurchase of approximately 11 million shares of common stock and $312 million for the payment of dividends. During the first nine months of fiscal 2023, cash flows used in financing activities totaled $1.2 billion and included $700 million for the repurchase of approximately ten million shares of common stock, $326 million for the payment of dividends and $250 million to redeem our Senior Notes due in December 2022.
Current wording
During the first three months of fiscal 2025, cash flows used in financing activities totaled $548 million and included $400 million for the repurchase of approximately 3 million shares of common stock and $107 million for the payment of dividends. During the first three months of fiscal 2024, cash flows used in financing activities totaled $521 million and included $400 million for the repurchase of approximately 5 million shares of common stock and $106 million for the payment of dividends.
Previous wording
As of January 26, 2024 and April 28, 2023, $2.3 billion and $2.2 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 $0.6 billion and $0.9 billion, respectively, were available in the U.S.
Current wording
As of July 26, 2024 and April 26, 2024, $2.3 billion and $2.1 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 $0.7 billion and $1.2 billion, respectively, were available in the U.S.
Previous wording
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.
Current wording
Interest on the Senior Notes is payable semi-annually. For further information on the underlying terms, see Note 6 – Financing Arrangements of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Previous wording
In connection with the Program, we have a senior unsecured credit agreement with a syndicated group of lenders. The credit agreement, which was amended in May 2023 primarily to replace the London Interbank Offered Rate (LIBOR) with the Secured Overnight Financing Rate (SOFR) as the basis for establishing the interest rate applicable to certain borrowings under the agreement, 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 January 22, 2026, 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 January 26, 2024, we were compliant with all associated covenants in the agreement. No amounts were drawn against this credit facility during any of the periods presented.
Current wording
In connection with the Program, we have a senior unsecured credit agreement with a syndicated group of lenders. The credit agreement, which was amended in May 2023, 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 January 22, 2026, 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 26, 2024, we were compliant with all associated covenants in the agreement. No amounts were drawn against this credit facility during any of the periods presented.
Previous wording
We expect to fund our capital expenditures, including our commitments related to facilities, equipment, operating leases and internal-use software development projects over the next few years 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 network storage industry, hiring plans and our decisions related to the financing of our facilities and equipment requirements. We anticipate capital expenditures for the remainder of fiscal 2024 to be between $25 million and $75 million.
Current wording
We expect to fund our capital expenditures, including our commitments related to facilities, equipment, operating leases and internal-use software development projects over the next few years 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 network storage industry, hiring plans and our decisions related to the financing of our facilities and equipment requirements. We anticipate capital expenditures for the remainder of fiscal 2025 to be between $100 million and $150 million.
Previous wording
On February 22, 2024, we declared a cash dividend of $0.50 per share of common stock, payable on April 24, 2024, to holders of record as of the close of business on April 5, 2024.
Current wording
On August 22, 2024, we declared a cash dividend of $0.52 per share of common stock, payable on October 23, 2024, to holders of record as of the close of business on October 4, 2024.
Previous wording
As of January 26, 2024, our Board of Directors had authorized the repurchase of up to $16.1 billion of our common stock under our stock repurchase program. Under this program, 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 stock repurchase program may be suspended or discontinued at any time. Since the May 13, 2003 inception of this program through January 26, 2024, we repurchased a total of 371 million shares of our common stock at an average price of $41.89 per share, for an aggregate purchase price of $15.5 billion. As of January 26, 2024, the remaining authorized amount for stock repurchases under this program was $0.6 billion.
Current wording
As of July 26, 2024, our Board of Directors had authorized the repurchase of up to $17.1 billion of our common stock under our stock repurchase program. Under this program, 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 stock repurchase program may be suspended or discontinued at any time. Since the May 13, 2003 inception of this program through July 26, 2024, we repurchased a total of 375 million shares of our common stock at an average price of $42.73 per share, for an aggregate purchase price of $16 billion. As of July 26, 2024, the remaining authorized amount for stock repurchases under this program was $1.1 billion.
Previous wording
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 approximately $0.8 billion at January 26, 2024.
Current wording
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 approximately $1.1 billion at July 26, 2024.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The increase in Research and Development expenses consisted of the following (in percentage points of the total change):