NetApp · 10-Q · Item 2 MD&A

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.

T1NetApp'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

T2Inflationary 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:

•

T3We 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

T4During 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

T5In 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

Revenues:

Product

%

%

Services

Net revenues

Cost of revenues:

Cost of product

Cost of services

8

Gross profit

Operating expenses:

Sales and marketing

Research and development

General and administrative

5

5

Restructuring charges

3

—

Total operating expenses

Income from operations

Other expense, net

—

—

Income before income taxes

Provision for income taxes

5

5

Net income

%

%

Percentages may not add due to rounding

Discussion and Analysis of Results of Operations

Net Revenues (in millions, except percentages):

Three Months Ended

% Change

Net revenues

$

$

%

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

% Change

Product revenues

$

$

%

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.

T6Total 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

% Change

Services revenues

$

$

%

Support

%

Professional and other services

%

Public cloud

%

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

Hybrid Cloud segment net revenues

$

$

All-flash revenues as a percentage of Hybrid Cloud segment net revenues

%

%

Hybrid-flash and other revenues as a percentage of Hybrid Cloud segment net revenues

%

%

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

United States, Canada and Latin America (Americas)

%

%

Americas Commercial

%

%

U.S. Public Sector

%

%

Europe, Middle East and Africa (EMEA)

%

%

Asia Pacific (APAC)

%

%

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

% Change

Cost of product revenues

$

$

%

Hybrid Cloud

%

Unallocated

2

1

%

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

% Change

Cost of services revenues

$

$

(2

)%

Support

(2

)%

Professional and other services

4

%

Public cloud

)%

Unallocated

8

9

)%

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

% Change

Sales and marketing expenses

$

$

%

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

% Change

Research and development expenses

$

$

%

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

% Change

General and administrative expenses

$

$

%

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

% Change

Restructuring charges

$

$

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

% Change

Interest income

$

$

(8

)%

Interest expense

)

)

—

%

Other, net

(4

)

)

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

% Change

Provision for income taxes

$

$

%

Effective tax rate

%

%

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)

Cash, cash equivalents and short-term investments

$

$

Principal amount of debt

$

$

The following is a summary of our cash flow activities:

Three Months Ended

(In millions)

Net cash provided by operating activities

$

$

Net cash used in investing activities

)

)

Net cash used in financing activities

)

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(6

)

7

Net change in cash, cash equivalents and restricted cash

$

)

$

)

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):

Cash and cash equivalents

$

$

Short-term investments

Total

$

$

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

$

Total

$

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.