NetApp Inc's quarterly profit and revenue beat Wall Street expectations as the data storage equipment maker slashed manufacturing costs and benefited from what it said was improving business sentiment.

The company's forecast for current-quarter revenue also topped analysts' estimates, though its profit outlook for the third quarter was just in line. Shares rose 4.3 percent in after-hours trading.

We are seeing some stabilizing in the market, Chief Executive Tom Georgens told Reuters in an interview after the results on Wednesday. Customer sentiment is better.

He said companies are budgeting more for data storage equipment than they were six months ago.

NetApp posted a record gross margin of 67.5 percent, nearly a 4 percentage point increase from the first quarter.

Jefferies & Co analyst Bill Choi said that the margins were buoyed by an increase in sales of highly profitable software, increased discounting from suppliers and less discounting of NetApp's products.

It was a supersonic quarter, Choi said.

NetApp reported profit, excluding items, of 37 cents per share for its fiscal second quarter ended October 30, handily beating the average analyst forecast of 30 cents, according to Thomson Reuters.

I/B/E/S.

Revenue at the company, whose chief rivals are EMC Corp and Dell Inc , was flat at $910 million, beating the average analyst forecast of $882 million.

NetApp forecast third-quarter profit, excluding items, of 36 to 37 cents per share, in line with the average forecast of 36 percent. It projected third-quarter revenue of $935 million to $955 million, beating expectations of $922 million.

Georgens said he is more optimistic about his company's outlook than he was six months ago because businesses are now pulling together budgets to replace aging computers, including server and hardware to store data.

People are talking about the next-generation architecture. People are talking about where they want to go from here, he said.

Wedbush Securities analyst Kaushik Roy said that businesses are motivated to buy storage systems from companies like NetApp because they help them comply with government and industry regulations to secure and archive data.

If a company has a little bit of a budget flush, who is going to get the first dollar? It's storage, Roy said.

Fiscal second-quarter net profit more than doubled to $96 million, or 27 cents per share, from $43 million, or 13 cents a share, a year earlier.

The Sunnyvale, California-based company's shares rose to $30.90 in extended trading, after falling 0.3 percent to $29.62 in regular Nasdaq trading.

NetApp is the biggest player in the market for mid-range storage equipment, an area that is growing faster than high-end equipment, which EMC and IBM dominate.

(Reporting by Jim Finkle; Editing by Andre Grenon, Phil Berlowitz)

Electronics Dell