Shares of NetApp (NASDAQ:NTAP) surged 15% in premarket trading Friday after the company reported better-than-expected Q3 top and bottom lines, as well as impressive operating margin growth.
Earnings per share (EPS) were reported at $1.94, exceeding the analysts' expectations of $1.69. Revenue for the quarter came in at $1.61 billion, surpassing the consensus projection of $1.59 billion.
The company posted billings of $1.69 billion, an increase from $1.57 billion in the same quarter of the previous fiscal year, marking a 7% year-over-year growth.
NetApp also said it achieved record non-GAAP consolidated gross margins of 73% and record non-GAAP operating margins of 30%.
Looking ahead, NetApp provided guidance for the fourth quarter of 2024, expecting EPS to be between $1.73 and $1.83, compared to $1.73 expected by analysts.
The intelligent data infrastructure firm anticipates Q4 revenue to be in the range of $1.59 billion to $1.74 billion, compared to the consensus estimate of $1.64 billion.
Notably, forecasts for the full-year 2024 adjusted EPS have been hiked to range from $6.40 to $6.50, an increase from the previously projected range of $6.05 to $6.25.
“Persistence of gross margins continues to be impressive, but we do think as some of the more attractive contracts roll off next year, gross margins will compress slightly, challenging meaningful EPS growth, which is not reflected in after hours 15x+ P/E valuation,” analysts at Morgan Stanley said in their note on the report.
“While we do think there is an AI story here, deserving of a higher multiple, we think valuation has started to become too dislocated from ~13x historical average over the last 10 years, particularly with risk of margin compression in the next year off record highs,” they added.