Mike Berry
Executive Vice President and Chief Financial Officer at NetApp
Thank you, George. Good afternoon, everyone, and thank you for joining us. As a reminder, I'll be referring to non-GAAP numbers unless otherwise noted.
As we look back on fiscal '22, I am incredibly proud of the results the team delivered in an environment with such fluid and complex supply chain challenges. We delivered billings of $6.7 billion, an increase of 13% year-over-year, and grew revenue 10% to $6.3 billion. Within our Hybrid Cloud segment, all flash revenue grew 20% and object storage revenue grew 49%.
We finished fiscal '22 with $505 million in Public Cloud ARR with Public Cloud revenue growing 99% for the full year. We balanced strong growth in our key strategic areas with another year of disciplined investment, delivering record operating margin of 23.7%, up more than three points from last year, with an all-time high EPS of $5.28, up 30% year-over-year.
In Q4, despite supply constrained shipments, elevated freight and logistical expense and component cost headwinds, we delivered solid revenue with both gross margin and operating margin coming in above guidance. Strong execution yielded Q4 billings of $2 billion, up 16% year-over-year. Revenue came in at $1.68 billion, up 8% year-over-year including a two point headwind from FX. Our solid Q4 results were driven by continued strong demand for our all flash and object storage solutions. Our cloud portfolio continues to positively impact the overall growth profile of NetApp, delivering 3.5 of the 8 points in revenue growth.
Hybrid Cloud segment revenue of $1.56 billion was up 5% year-over-year. Within Hybrid Cloud, we delivered product revenue growth for the fifth consecutive quarter and expect this momentum to continue into fiscal '23. Product revenue of $894 million increased 6% year-over-year. Software product revenue of $530 million increased 10% year-over-year, driven by the ongoing mix shift towards our all flash portfolio. Total Q4 recurring support revenue of $590 million increased 2% year-over-year, highlighting the health of our installed base. Public Cloud ARR exited Q4 at $505 million, up 68% year-over-year, driven by strength in Cloud Storage, led by Azure NetApp Files.
Public Cloud revenue recognized in the quarter was $120 million, up 82% year-over-year and 9% sequentially. We didn't end the year as expected for Cloud ARR, but are confident that we remain well positioned to deliver on the long-term Public Cloud opportunity. While it is not unusual for hyper growth assets to hit air pockets along their journey, we are using this moment to learn and continue to improve the operational rigor across the CloudOps products. Towards this goal, we are laser-focused on using fiscal '23 to strengthen our field and customer success go-to-market motions, while integrating our CloudOps product portfolio. Recurring support and Public Cloud revenue of $710 million, was up 11% year-over-year, constituting 42% of total revenue.
We ended Q4 with a record $4.2 billion in deferred revenue, an increase of 6% year-over-year. Q4 marks the 17th consecutive quarter of year-over-year deferred revenue growth, which is the best leading indicator for recurring revenue growth.
Total gross margin was 66% and came in solidly ahead of our guidance, reflecting better than expected product margins. Total Hybrid Cloud gross margin was 65% in Q4. Within our Hybrid Cloud segment, product gross margin was 51%, as the supply chain team did an amazing job of mitigating a portion of the component cost headwinds, and our sales team was very focused on capturing our recent price increases. Our growing recurring support business continues to be very profitable with gross margin of 93%.
Public Cloud gross margin of 68% was again accretive to the overall corporate average. The sequential decline in Public Cloud gross margin was driven by lower than expected cloud revenue and incremental capex investment for Azure NetApp Files, which is a healthy leading demand signal. We remain confident in our long-term Public Cloud gross margin goal of 75% to 80%, as we continue to drive scale in Cloud Storage and an increasing percentage of our Public Cloud business being built on software solutions.
Q4 highlighted the strong leverage in our operating model with operating margin of 23% despite the ongoing supply chain headwinds. EPS of $1.42 was up 21% year-over-year and even excluding a onetime tax benefit of $0.12, represents a new Q4 record for the Company.
Cash flow from operations was $411 million and free cash flow was $343 million. The ongoing supply constraints resulted in shipments being pushed to the end of the quarter leading to the highest ever accounts receivable balance of $1.2 billion exiting the year, an increase of $431 million from Q3. As a result, we expect healthy cash collections in the first half of fiscal '23, which will be a tailwind to operating cash flow for the full year.
During Q4, we repurchased $250 million in stock and paid out $111 million in cash dividends. In total, we returned $361 million to shareholders, representing 105% of free cash flow. We closed Q4 with $4.1 billion in cash and short-term investments.
Now to guidance. In fiscal '23, we are guiding revenues to grow 6% to 8% year-over-year, which includes a two percentage point headwind from FX. In fiscal '23, we anticipate sustained demand for and continued share gain momentum in both our all flash and object storage solutions, which we expect to drive product revenue growth in the mid-single digits. We will also continue to grow and invest in our Public Cloud business.
We expect to exit fiscal '23 with Public Cloud ARR of $780 million to $820 million, which includes approximately $40 million from our recently closed acquisition of Instaclustr. At the ARR midpoint, we expect our Public Cloud segment to drive four points of total Company revenue growth in fiscal '23. As George noted, we remain confident in our ability to deliver $2 billion in Public Cloud ARR exiting fiscal '26.
In fiscal '23, we expect gross margin to range between 66% and 67% as elevated component costs and logistical expenses from supply constraints continue to weigh on product margins. We expect first half product margins to be roughly consistent with Q4 levels. As we have previously disclosed, we believe these cost headwinds are temporary in nature, and we believe that Q4 '22 is the trough for product margins.
As you all know, the timing of getting completely through these supply chain challenges remains fluid, but we do expect cost improvements coupled with our recent price increases to be a modest tailwind to product margins, as we head into the back half of fiscal '23.
We anticipate operating margin to range between 23% to 24% for the full year, as we continue to invest in our growth initiatives, while maintaining a disciplined approach to spending. Our commitment is to, again, grow revenue faster than operating expenses in fiscal '23.
Moving down the P&L, we expect net interest expense to be approximately $30 million and our effective tax rate to be in the range of 21% to 22%. Despite the considerable headwind to earnings, as a result of the higher tax rate, we are committed to delivering $5.40 to $5.60 in fiscal '23 EPS.
We expect to generate greater than $1.4 billion in operating cash flow in fiscal '23, as we continue to drive incremental profitability in our Hybrid Cloud segment to fund the growth in our Public Cloud business.
Free cash flow is expected to exceed $1.1 billion for the full year. Factored into the year-over-year free cash flow growth is a step-up in capex to approximately $250 million to $300 million. The higher capex forecast is being driven by three key items, one, additional capacity deployments in Azure and GCP; two, higher cloud software capitalization; and three, growing pipeline for our Keystone offering. As we've discussed before, additional capacity deployments within Azure and GCP are a healthy leading indicator for Cloud Storage demand.
Generating over $1.1 billion in free cash flow will allow us to continue to deliver on our shareholder return commitments, while also investing in our key strategic areas. From a capital allocation perspective, we expect to hit pause on CloudOps acquisitions for the first half of fiscal '23, as we focus on strengthening our field and customer success go-to-market motions, while integrating our CloudOps product portfolio. As a result, we plan to return 100% of fiscal '23 free cash flow to investors through dividends and share repurchases.
We expect our quarterly dividend to remain at $0.50 per share throughout fiscal '23, with the remainder of free cash flow allocated to share repurchases. We plan to front-end load these share repurchases with $500 million coming in the first half of the year, which will reduce share count by 2% to 3%, as we go through fiscal '23.
Now on to Q1 guidance, we expect Q1 net revenues to range between $1.475 billion and $1.625 billion, which at the midpoint implies a 6% increase year-over-year. We expect consolidated gross margin to be approximately 67% and operating margin to be approximately 21%. We anticipate our tax rate to be between 21% and 22%. And we expect earnings per share for Q1 to range between $1.05 and $1.15 per share. Assumed in our Q1 guidance is net interest expense of $10 million to $15 million and a share count of approximately 224 [Phonetic] million.
In closing, I want to thank the entire NetApp team for the outstanding dedication, focus and hustle in delivering strong fiscal '22 results in a very fluid environment. We remain disciplined and committed to the long-term thesis we shared with you, as we continue to navigate the dynamic supply challenges to meet as much customer demand as possible. We are confident, enthusiastic and incredibly focused on our long-term strategic priorities and the tremendous growth opportunity we see over the next several years.
I'll now hand the call back to Kris to open the call for Q&A. Kris?
