Can NetApp Maintain Its Free Cash Flow Growth to Support Shareholder Returns?

NetApp's Strong Financial Performance and Shareholder Value

NetApp (NTAP) posted impressive results for its fiscal third quarter, demonstrating robust profitability and healthy cash flow. These factors have enabled the company to maintain consistent returns for its shareholders. Although revenue growth was moderate, NetApp's disciplined management and strong margins resulted in solid free cash flow, which has supported both share repurchases and dividend payments.

During the most recent quarter, NetApp generated $317 million in operating cash flow and $271 million in free cash flow. The company reported $1.71 billion in revenue, marking a 4% increase compared to the previous year. Non-GAAP operating income reached $533 million, up 8.3% year over year, while the operating margin improved to 31.1% from 30%. Adjusted earnings per share came in at $2.12, surpassing the Zacks Consensus Estimate by 2.4% and representing an 11% annual increase.

As of January 23, 2026, NetApp held $3 billion in cash, cash equivalents, and investments, with long-term debt totaling $2.486 billion.

In this period, NetApp returned $303 million to shareholders, including $103 million in dividends and $200 million in share buybacks. The company also declared a dividend of $0.52 per share, scheduled for payment on April 22, 2026, to shareholders of record as of April 3.

NetApp's outlook for future cash flows has strengthened, with deferred revenues rising 12% year over year to $4.63 billion and remaining performance obligations (RPO) increasing 14% to $5.11 billion. Unbilled RPO, a key metric for future Keystone revenue, jumped 38% year over year, while Keystone revenues themselves soared 65% in the third quarter.

The company continues to balance capital returns with investments in emerging areas such as AI, cloud, and All-Flash solutions. NetApp is actively pursuing growth in the AI sector, closing approximately 300 deals related to AI infrastructure and data modernization during the quarter.

Looking ahead, NetApp anticipates fiscal fourth-quarter revenue of $1.87 billion (plus or minus $75 million), which would represent 8% growth at the midpoint compared to the prior year. The company believes that ongoing revenue growth, operational discipline, and strong free cash flow will continue to support shareholder returns, though it remains cautious about the broader economic environment and rising memory costs.

Shareholder Returns Among Industry Peers

Western Digital (WDC)

Western Digital (WDC) recently expanded its share repurchase authorization by $4 billion, reflecting strong business momentum and robust cash generation. The company maintains an active capital return program, with $484 million still available under its current buyback plan.

Fueled by the surge in AI-driven data storage demand, Western Digital achieved $3.02 billion in revenue and $653 million in free cash flow during its fiscal second quarter. Management returned more than 100% of free cash flow to shareholders through buybacks and dividends, repurchasing about 3.8 million shares for $615 million and distributing $48 million in dividends. Since initiating its capital return program in the fourth quarter of fiscal 2025, Western Digital has returned $1.4 billion to shareholders.

Seagate Technology Holdings (STX)

Seagate Technology Holdings (STX) has resumed share repurchases after a pause, signaling a shift in its approach to capital allocation.

In the second quarter of fiscal 2026, Seagate reported $723 million in operating cash flow and $607 million in free cash flow. During the December quarter, the company returned $154 million to shareholders via dividends and retired $500 million in exchangeable senior notes due in 2028, reducing potential dilution and preserving flexibility for future buybacks. Seagate expects free cash flow to rise further in the March quarter, driven by strong demand, operational improvements, and prudent capital spending, supporting ongoing cash generation.

Pure Storage (PSTG)

Pure Storage (PSTG), a provider of all-flash storage solutions, is prioritizing shareholder returns as its operating performance and cash flow visibility improve. In December 2025, the company announced its largest-ever share repurchase authorization of $400 million, reflecting growing confidence in its business outlook and financial stability.

In its fiscal fourth quarter of 2026, Pure Storage reported a 20% year-over-year increase in revenue to $1.1 billion. Free cash flow reached $201.5 million, up from $152.4 million a year earlier. The company returned $127 million to shareholders by repurchasing 1.7 million shares during the quarter, and $343 million for the full fiscal year by buying back 5.6 million shares. As of the end of the fiscal year, $329 million remained under its current repurchase plan, with 56% of free cash flow allocated to buybacks in 2026.

The Next Phase of AI Investment

The rapid growth of artificial intelligence has already created significant wealth, but the most well-known companies may not offer the highest returns going forward. Lesser-known AI firms addressing major global challenges could present more lucrative opportunities in the near future.