NetApp Agreed to Break Out All-Flash Revenue After SEC Pressure
The company promised clearer storage-category revenue and profit disclosures, defending its accounting treatment and declining to quantify an immaterial product-mix effect on costs.
NetApp (NTAP) agreed to separate all-flash revenue from its other Hybrid Cloud storage revenue after the SEC pressed for greater visibility into product lines that management promoted to investors. The company committed to adding the breakdown to its financial-statement notes and management discussion beginning with fiscal 2026 reporting, giving investors a clearer measure of its shift toward all-flash storage.
The commitment marked a change from NetApp’s responses in 2023, when it defended grouping storage products together. In its April 2026 response, NetApp maintained that the products remained similar under accounting rules, then agreed to provide supplemental revenue categories because they could help investors evaluate the business. Its proposed presentation put all-flash revenue at 64% of Hybrid Cloud revenue in fiscal 2025, up from 58% a year earlier. Those figures included related services as well as products.
The SEC’s challenge centered on the distance between NetApp’s broad accounting categories and the distinctions management made when discussing customers and growth. Staff cited the company’s emphasis on all-flash systems for AI-ready infrastructure and its description of hybrid-flash arrays as suitable for price-sensitive workloads. Staff requested revenue for each Hybrid Cloud product line, quantified changes in product mix and a fuller explanation of their effects on revenue and costs.
NetApp had faced the underlying question three years earlier. After an initial request for product and service revenue detail, staff pressed again, pointing to the company’s discussion of all-flash growth and the higher support dollars associated with those systems. NetApp answered that its principal all-flash and hybrid-flash products shared operating software, manufacturing processes, customers and distribution methods. All-flash systems typically cost more and sold at higher prices; support pricing followed product list prices. The company maintained that the shared characteristics justified its existing groupings.
In 2026, NetApp preserved that accounting position and offered two supplemental categories: all-flash, and hybrid-flash and other. It attributed the rising all-flash share to customer demand and expansion of that market. The proposed disclosure would help readers track the revenue shift, with several other storage offerings remaining combined in the second category.
NetApp held its position on the requested cost analysis. It said product-mix changes had not materially affected costs or gross margins during fiscal 2025 or fiscal 2026 through January 23. It therefore considered additional quantification unnecessary and promised to monitor whether mix became material enough to warrant more disclosure.
Staff also pressed NetApp to connect segment performance to companywide earnings. NetApp agreed to add a reconciliation from total segment gross profit to consolidated pretax income. Its fiscal 2025 example bridged $4.671 billion of segment gross profit to $1.383 billion of pretax income through unallocated costs, operating expenses and other income. NetApp said its chief operating decision maker received no significant expense categories within the reported cost-of-revenue lines that required further separate disclosure.
Another request left a narrower information gap. Staff sought quantified U.S. government revenue and public-sector revenue. NetApp promised public-sector figures in its risk factors and management discussion, identifying that business as 11% of revenue in each of fiscal 2023 through fiscal 2025. That category included federal, state, local and education customers; NetApp supplied no separate federal-government figure.
The company also promised more concrete discussion of component inflation and supply constraints. Its proposed language said higher memory and other component costs had affected gross margins, and tight supplies had challenged its ability to meet demand beginning in the second half of fiscal 2026. NetApp had raised prices in the fourth quarter and anticipated further adjustments as needed. It acknowledged that customers needed time to absorb those increases, making the timing of cost recovery a practical issue for future margin disclosures.
Source: NetApp correspondence dated April 2, 2026; March 10, 2023; and February 2, 2023.