• Revenue: $831 million, a 9% year-over-year increase.

• Operating Profit: $167 million, with an operating margin of 20.1%.

• Subscription Services ARR: Grew 22% to $1.57 billion.

• Total Contract Value (TCV) Sales: $96 million for Q3, $253 million for the first nine months of FY25.

• Total Remaining Performance Obligations (RPO): $2.4 billion, a 16% year-over-year growth.

• Gross Margin: Total gross margin at 71.9%; product gross margin at 67.4%; subscription services gross margin at 77.4%.

• Cash and Investments: $1.6 billion at the end of Q3.

• Cash Flow from Operations: $97 million for the quarter.

• Q4 Revenue Guidance: $867 million, reflecting 9.7% year-over-year growth.

• FY25 Revenue Guidance: Raised to $3.15 billion, representing approximately 11.5% year-over-year growth.

• FY25 Operating Profit Guidance: Raised to approximately $540 million, with an operating margin of 17%.

• Warning! GuruFocus has detected 3 Warning Sign with PSTG.

Release Date: December 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pure Storage Inc (NYSE:PSTG) exceeded both revenue and operating income guidance for the third quarter of fiscal 2025.

• The company secured a significant design win with a top four hyperscaler, marking a major milestone in providing flash storage for hyperscale environments.

• Pure Storage Inc (NYSE:PSTG) announced a deepening collaboration with Kioxia to support increased flash demand in the hyperscale industry.

• The company continues to see strong demand for its //E family and FlashArray//C solutions, enabling cost-sensitive workloads to transition to all-flash.

• Subscription services annual recurring revenue grew by 22% to $1.57 billion, demonstrating robust growth in this segment.

Negative Points

• The overall IT spending environment remains muted, with heightened competitive pressures affecting the market.

• There was a shift in Evergreen//One opportunities, with more converting to traditional sales, impacting the expected growth of subscription services.

• Operating margin guidance for fiscal 2026 is expected to remain flat at 17% due to increased investments in scaling operations for hyperscale opportunities.

• The company does not expect meaningful revenue contribution from the hyperscale design win until fiscal 2027.

• Product gross margins are under pressure due to the strategic focus on transitioning cost-sensitive workloads to lower-margin solutions like the //E family and FlashArray//C.

Q & A Highlights

Q: What drove the decision by the hyperscaler to choose Pure Storage over building their own solution, and what is the potential revenue opportunity? A: Charles Giancarlo, CEO, explained that Pure Storage's unmatched reliability, power savings, and price-performance ratio were key factors. The hyperscaler valued Pure's ready-to-deploy technology, which fit well with their architecture. Kevan Krysler, CFO, noted that the hyperscaler market drives 60-70% of all disk sales, indicating significant long-term revenue potential for Pure. However, meaningful revenue contribution is expected in FY27, with no hardware included in the sale.