Pure Storage’s first quarter revenues rose in double digits with no signs of order pull-ins from tariff uncertainity.
Revenues grew 12 percent year-on-year to $778.5 million in the quarter ended May 4, beating the $770 million outlook. Pure reported a net loss of $13.9 million, better than the year-ago $35 million loss. This is in line with seasonal trends – Pure has made a loss in its Q1 for three consecutive years while making profits in the other quarters, as the below chart indicates:
CEO Charlie Giancarlo said the business experienced “steady growth”.
”Pure delivered solid performance in Q1, delivering double digit growth within a dynamic macro environment.” There were: “very strong Evergreen//One and Evergreen//Forever sales” in the quarter. Evergreen//One is a storage-as-a-service while Evergreen//Forever is a traditional storage offering with continuous HW and SW upgrades via subscription.
Financial summary:
- Gross margin: 68.9 percent, down from 73.9 percent a year ago
- Free cash flow: $211.6 million vs $173 million a year ago
- Operating cash flow: $283.9 million vs $221.5 million a year ago
- Total cash, cash equivalents, and marketable securities: $1.6 billion vs $1.72 billion a year ago
- Remaining Performance Obligations: $2.69 billion, up 17 percent year-on-year
The hyperscale business is progressing but not delivering revenue increases yet. Giancarlo said in the earnings call: “Our hyperscale collaboration with Meta continues to advance. Production validation testing is on schedule with strong progress in certifying our solutions across multiple performance tiers. We remain on track to deliver our anticipated 1-2 exabytes of this solution in the second half of the year, as planned.”
This would be revenue on a license fee model, not on full product sales. Getting revenues from these projects takes time, Giancarlo said: ”The reason is because it’s not the testing of our product specifically that’s taking a long time. It is their design cycle of their next-generation data center, which goes well beyond just the storage components of it.”
He added: “It generally takes us somewhere between 18-months and two years to design a new product here at Pure. It’s the same for these hyperscalers who are designing their next-generation data center.” It’s a co-engineering process.
Giancarlo said Pure is working well with the other hyperscalers: “We’re making steady progress there [at] about the pace that we expected. Hard to predict when one of those would turn into what we would call a fully validated design win. We are in some POCs [proof of concept] that should be an indicator. …we think we’re on track, but there’s still more work to be done before we can declare victory.”
Pure confirmed CFO Kevan Krysler is leaving for a new opportunity, and will stay in place until a new CFO is appointed.
New customer additions in the quarter totalled 235, the lowest increase for seven years.
Next quarter’s outlook is for $845 million in revenues, a 10.6 percent year-on-year rise, with a $3.5 billion full year revenue forecasted, equating to a rise of 11 percent. Giancarlo said: ”Our near-term view for the year remains largely unchanged, although we are navigating increased uncertainty.” Overall: “We are confident in our continued momentum to grow market share and strengthen our leadership in data storage and management.”
Pure will announce a new products at its forthcoming Accelerate conference – June 17 – 19, Las Vegas – to enable customers “to create their own enterprise data cloud, allowing them to focus more on their business outcomes rather than their infrastructure.”
Analyst Jason Ader told subscribers: “We believe that Pure Storage will steadily take share in the roughly $35+ billion enterpise storage market based on: 1) clear product differentiation (as evidenced by industry-leading gross margins); 2) strong GTM organization and deep channel partnerships; 3) secular trend toward all-flash arrays (AFAs), in which Pure has been a pioneer; and 4) Pure’s leverage to robust spending areas, including SaaS data centers, HPC, and AI/ML use-cases.”
