NetApp, Inc. (NASDAQ:NTAP) Q3 2023 Earnings Call Transcript

Meta Marshall: On the CloudOps portfolio, you guys have spoken to kind of a more aligned or sharpened go-to-market motion. I just wanted to get a sense of some of the integrations of that product portfolio that was going to happen and just whether that’s a part of that kind of refined go-to-market and where we are on that. And then the second kind of piece of that question is just on the cloud storage piece. You guys have had a little bit less of visibility into kind of that customer set, just getting a sense of, are some of these sharpening go-to-market motions kind of overlay sales? Just anything that’s happening on the cloud storage to increase visibility there. Thanks.

George Kurian: Yes. I think first, Meta, on the CloudOps piece, we brought together the sales teams for Instaclustr, CloudCheckr and Spot into one unified CloudOps selling motion. And we’ve seen good momentum with the integrated team. I think, particularly Spot and Instaclustr, there’s good synergy in terms of customer buyer and buying motions that we hope to exploit over the next few quarters. It’s too early to call it a success yet. In terms of the product portfolio, we brought some of the functionality of CloudCheckr into Spot already for compliance, and you should see us bringing more of those capabilities into Spot. With regard to cloud storage, listen, I think the most important work that we’re doing is to be closely aligned with the hyperscalers, hyperscaler cloud providers and some of the key application motions that are going on, SAP or chip design or VMware.

And I think that what we are going to do as we head into FY24 is even more closely align our hyperscaling — hyperscale sales resources with those buying motions. I think that that will give us a better understanding of customer behavior. We’ve seen good adoption of our customer success capabilities in our subscription cloud storage business, but we are yet to see the full impact from doing so in the consumption cloud business. And that’s work ahead of us.

Operator: Next question will come from Shannon Cross with Credit Suisse. Please go ahead.

Shannon Cross: I’m wondering, how should we think about the impact of your 8% headcount reduction on your top line? I know you mentioned a couple of areas you’ve invested, but can you provide some more details on where the cuts were made? And how much of it was, I don’t know, the proverbial back office versus revenue-focused headcount? And then, I have a follow-up. Thank you.

George Kurian: I think that those cuts were — are factored into our guidance for this quarter. And when we guide next year, you should expect us to factor those into the guidance. Broadly speaking, we focused our resources on the biggest market opportunities, and the places that we impacted were less significant contributors to revenue for us. I think in the cloud portfolio as well as in CloudOps, we’ve made some decisions that will have impact to ARR going forward. But I think that those are in the spirit of let’s focus on the best markets and the best opportunities. Our guidance for the quarter envisages those changes. Mike, do you want to add anything?

Mike Berry: No, no. I think that’s a great answer. It’s all baked in. And we did it across the board. We tried to focus where we didn’t have productivity or revenue issues, as George said, a little bit of ARR. Outside of that, we feel good that we focused on the right areas.

Shannon Cross: I guess, were there any cuts in Hybrid Cloud? And then my second question is, what drove the year-over-year increase in stock-based comp given all of the pressures you’re seeing? Thank you.