Shares of the Sunnyvale, Calif.-based company were down less than 1% to $41 after falling initially by as much as 3.03% to $40.02.
The company is guiding for third-quarter fiscal year 2014 revenue in the range of $1.575 billion to $1.675 billion, which falls below the average analyst estimate of more than $1.69 billion, according to a Thomson Reuters poll of analysts. Adjusted earnings per share are expected to arrive at between 68 to 73 cents a share compared with the Wall Street consensus target of 73 cents.
Channel checks from Deutsche Bank analysts Chris Whitmore and Joakim Mahlberg suggest that the company's revenue streams may have been experiencing pockets of weakness in federal accounts due to the impact of the recent government shutdown.
"Holding all remaining business lines static, we evaluated Federal results declining between 5% and 20% Y/Y resulting in revs coming in light by $13-53M (or 1-3% of total revs)," they said in a note.
"Outside of the Fed, our checks showed pretty consistent demand, strong win rates and steady pricing which suggests momentum outside this vertical remained healthy," they added.
NetApp reported second-quarter net income of $232 million, or 66 cents a share, increasing from $189 million, or 51 cents a share the same time last year and beating the consensus estimate by three cents, according to a survey of analysts by Thomson Reuters. Gross margins came in at 63.6%, up from 60.59%.
The company missed second-quarter revenue expectations, increasing 1% from the comparable period a year ago to $1.55 billion, and versus the average analyst estimate of $1.6 billion.
NetApp will host a conference call to explain the key drivers behind the data at 5:30 p.m. ET or 2:30 p.m. PT.
--Written by Andrea Tse in New York