NetApp, Inc.

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):

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 offive 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):

Purchased intangible assets, net are summarized below (in millions):

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:

Inventories (in millions):

Property and equipment, net (in millions):

Accrued expenses (in millions):

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:

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):

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):

(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):

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 fortwo 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 wereno 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 pershare 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 thethree months ended July 31, 2026 (in millions, except for per share amounts):

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):

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):

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 inother expense, net on our condensed consolidated statements of income was as follows (in millions):

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):

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:

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):

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):

13. Segment, Geographic, and Significant Customer Information

Our operations are organized intotwo 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):

Hybrid Cloud Segment Net Revenues by Storage Category are as follows (in millions):

Geographical Revenues

Revenues summarized by geographic region are as follows (in millions):

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 thethree 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:

One customer, which is a distributor, accounted for 10% or more of accounts receivable:

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 billionin 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.