NetApp Beat HP Through Earnings Growth, but Its Premium Is Wide
NetApp outpaced HP through stronger earnings growth and wider margins, not valuation alone. Its latest quarter extended that lead, but weaker cash conversion and a much higher multiple raise the execution bar.
NetApp's five-year stock lead over HP came mainly from stronger earnings growth and wider margins, not simply from investors assigning it a higher valuation. That distinction matters because the two companies now face very different operating tests: NetApp must justify a premium multiple, while HP must prove that fast revenue growth can translate into better PC economics.
Trefis calculates that NetApp delivered a 173.6% total return over the five years through October 26, 2026, compared with 36.6% for HP. The comparison includes dividends. NetApp's average annual sales growth over the last three years was 6.1%, versus 2.8% for HP, and its revenue increased 25.3% from 2021 through 2026 while HP's declined 4.7%.
Profit per share created the larger gap. Trefis estimates that NetApp's earnings per share rose 89.1% from 2021 to 2026, while HP's fell 18.6%. NetApp widened its operating margin by 8.1 percentage points over that period, while HP's margin narrowed by 2.0 points. Those changes explain more of the performance difference than multiple expansion alone.
The comparison is useful, but it is not perfectly like for like. NetApp sells enterprise storage systems, software and cloud services. HP depends heavily on personal computers and printing, businesses with different replacement cycles, pricing power and capital requirements. Both sit within technology hardware, storage and peripherals, yet their revenue mix makes margin comparisons more informative than raw sales growth alone.
NetApp's latest quarter strengthened the operating case: revenue rose 30% to $2.03 billion and GAAP operating margin reached 23.9%. Hybrid Cloud revenue increased 30%, Public Cloud revenue rose 28%, and the company raised full-year fiscal 2027 revenue guidance to $7.98 billion to $8.23 billion. NetApp also guided to a full-year GAAP operating margin of 24.3% to 25.3%.
Cash flow provides counterevidence to the clean growth story. NetApp generated $401 million of free cash flow in fiscal Q1 2027, down 35% from a year earlier, even as earnings and revenue rose sharply. Operating cash flow fell 25%. Investors therefore need to separate better accounting results from quarterly cash conversion and watch whether working-capital needs normalize.
HP's Personal Systems revenue increased 18% in fiscal Q3, but unit shipments fell 16% and segment operating margin slipped to 4.6%. Commercial revenue rose 22% and consumer revenue increased 10%, showing that pricing and mix drove growth while volumes contracted. Printing revenue fell 2%, although its 18.1% segment margin remained far above the PC business.
HP still produced $1.6 billion of free cash flow in the quarter and raised its fiscal 2026 free-cash-flow outlook to $3.0 billion to $3.2 billion. Its earnings also benefited from tariff refunds worth $0.11 per share in the quarter, so part of the improvement was not a repeatable operating gain.
The valuation gap now asks investors to accept different risks. Trefis put NetApp at 30.7 times trailing earnings and HP at 12.8 times as of October 26. NetApp's premium reflects faster earnings growth, stronger margins and exposure to enterprise data infrastructure. HP's discount reflects low PC margins, falling units and sensitivity to input costs, even though its cash generation remains substantial.
The next evidence should come from cash conversion and margin durability. NetApp must turn its higher revenue and earnings into stronger free cash flow, while HP must stabilize Personal Systems margins without relying on tariff refunds. NetApp earned its historical lead, but the current multiple leaves less room for execution mistakes.