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Why Is Pure Storage (PSTG) Down 6% Since Last Earnings Report?
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A month has gone by since the last earnings report for Pure Storage (PSTG - Free Report) . Shares have lost about 6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Pure Storage due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Pure Storage Q3 Earnings Beat Estimates
Pure Storage reported third-quarter fiscal 2025 non-GAAP earnings per share (EPS) of 50 cents, which beat the Zacks Consensus Estimate by 16.3%. The company reported non-GAAP EPS of 50 cents in the prior-year quarter.
Quarterly revenues jumped 9% from the year-ago quarter to $831.1 million, beating the Zacks Consensus Estimate by 2%. The top line outperformed management’s guidance owing to higher demand for FlashArray//E, Flashblade//E and FlashArray//C solutions that empower users to transition their cost-sensitive workloads to all-flash storage. Strong growth in renewals of Evergreen subscriptions further fueled the expansion.
One of the major highlights for Pure Storage in the quarter is a transformational design win for its DirectFlash technology with a top-four hyperscaler. This milestone allows it to become the standard for hyperscaler online storage, offering top performance, scalability, lower costs and reduced power use. It also deepened its partnership with Kioxia, a global leader in NAND Flash technology, to accelerate the development of high-performance, scalable storage solutions for the future.
Driven by a surge in Evergreen//One opportunities valued at under $5 million, transitioning to traditional sales, management has raised its revenue forecast for fiscal 2025. It now expects revenues of $3.15 billion, indicating a rise of 11.5% from the year-earlier level compared with the prior guidance of $3.1 billion with 10.5% growth.
The company also increased non-GAAP operating income guidance to $540 million from $532 million projected earlier. It continues to estimate a non-GAAP operating margin of 17%.
Quarter in Detail
Product revenues (contributing 54.7% to total revenues) amounted to $454.7 million, up 0.3% on a year-over-year basis. Subscription services revenues (45.3%) of $376.4 million rose 22%.
Subscription annual recurring revenues (ARR) amounted to nearly $1.6 billion, up 22% on a year-over-year basis. Subscription ARR includes the annualized value of all active subscription contracts as of the last day of the quarter, along with annualized on-demand revenues.
Total revenues in the United States and internationally were $562 million and $269 million, respectively.
Margin Highlights
The non-GAAP gross margin came in at 71.9% compared with 74% in the prior-year quarter.
The non-GAAP product gross margin was 67.4%, down from 73.1% in the prior year. The non-GAAP subscription gross margin was 77.4% compared with 75.4% a year ago.
Non-GAAP operating expenses, as a percentage of total revenues, were 51.8% compared with 51.9% reported in the prior-year quarter.
Pure Storage reported a non-GAAP operating income of $167.3 million compared with $169.1 million in the year-ago quarter. The non-GAAP operating margin was 20.1% compared with 22.2% in the prior-year quarter.
Balance Sheet & Cash Flow
Pure Storage exited the fiscal third quarter, which ended on Nov. 3, with cash and cash equivalents and marketable securities of $1.6 billion, down from $1.8 billion as of Aug. 4, 2023.
Cash flow from operations amounted to $97 million in the fiscal third quarter compared with $158.4 million reported in the prior-year quarter. Free cash flow was $35.2 million compared with $113.4 million in the year-ago quarter.
In the fiscal third quarter, the company returned $182 million to shareholders by repurchasing 3.6 million shares. It has nearly $213 million left under its authorization plan.
The remaining performance obligations at the end of the fiscal third quarter totaled $2.4 billion, up 16% year over year.
Fiscal Q4 Guidance
Pure Storage expects revenues to be $867 million, implying an increase of 9.7% from a year ago level.
The non-GAAP operating income is expected to be $135 million. The non-GAAP operating margin is projected to be 15.6%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -28.74% due to these changes.
VGM Scores
Currently, Pure Storage has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Pure Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Pure Storage (PSTG) Down 6% Since Last Earnings Report?
A month has gone by since the last earnings report for Pure Storage (PSTG - Free Report) . Shares have lost about 6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Pure Storage due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Pure Storage Q3 Earnings Beat Estimates
Pure Storage reported third-quarter fiscal 2025 non-GAAP earnings per share (EPS) of 50 cents, which beat the Zacks Consensus Estimate by 16.3%. The company reported non-GAAP EPS of 50 cents in the prior-year quarter.
Quarterly revenues jumped 9% from the year-ago quarter to $831.1 million, beating the Zacks Consensus Estimate by 2%. The top line outperformed management’s guidance owing to higher demand for FlashArray//E, Flashblade//E and FlashArray//C solutions that empower users to transition their cost-sensitive workloads to all-flash storage. Strong growth in renewals of Evergreen subscriptions further fueled the expansion.
One of the major highlights for Pure Storage in the quarter is a transformational design win for its DirectFlash technology with a top-four hyperscaler. This milestone allows it to become the standard for hyperscaler online storage, offering top performance, scalability, lower costs and reduced power use. It also deepened its partnership with Kioxia, a global leader in NAND Flash technology, to accelerate the development of high-performance, scalable storage solutions for the future.
Driven by a surge in Evergreen//One opportunities valued at under $5 million, transitioning to traditional sales, management has raised its revenue forecast for fiscal 2025. It now expects revenues of $3.15 billion, indicating a rise of 11.5% from the year-earlier level compared with the prior guidance of $3.1 billion with 10.5% growth.
The company also increased non-GAAP operating income guidance to $540 million from $532 million projected earlier. It continues to estimate a non-GAAP operating margin of 17%.
Quarter in Detail
Product revenues (contributing 54.7% to total revenues) amounted to $454.7 million, up 0.3% on a year-over-year basis. Subscription services revenues (45.3%) of $376.4 million rose 22%.
Subscription annual recurring revenues (ARR) amounted to nearly $1.6 billion, up 22% on a year-over-year basis. Subscription ARR includes the annualized value of all active subscription contracts as of the last day of the quarter, along with annualized on-demand revenues.
Total revenues in the United States and internationally were $562 million and $269 million, respectively.
Margin Highlights
The non-GAAP gross margin came in at 71.9% compared with 74% in the prior-year quarter.
The non-GAAP product gross margin was 67.4%, down from 73.1% in the prior year. The non-GAAP subscription gross margin was 77.4% compared with 75.4% a year ago.
Non-GAAP operating expenses, as a percentage of total revenues, were 51.8% compared with 51.9% reported in the prior-year quarter.
Pure Storage reported a non-GAAP operating income of $167.3 million compared with $169.1 million in the year-ago quarter. The non-GAAP operating margin was 20.1% compared with 22.2% in the prior-year quarter.
Balance Sheet & Cash Flow
Pure Storage exited the fiscal third quarter, which ended on Nov. 3, with cash and cash equivalents and marketable securities of $1.6 billion, down from $1.8 billion as of Aug. 4, 2023.
Cash flow from operations amounted to $97 million in the fiscal third quarter compared with $158.4 million reported in the prior-year quarter. Free cash flow was $35.2 million compared with $113.4 million in the year-ago quarter.
In the fiscal third quarter, the company returned $182 million to shareholders by repurchasing 3.6 million shares. It has nearly $213 million left under its authorization plan.
The remaining performance obligations at the end of the fiscal third quarter totaled $2.4 billion, up 16% year over year.
Fiscal Q4 Guidance
Pure Storage expects revenues to be $867 million, implying an increase of 9.7% from a year ago level.
The non-GAAP operating income is expected to be $135 million. The non-GAAP operating margin is projected to be 15.6%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -28.74% due to these changes.
VGM Scores
Currently, Pure Storage has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Pure Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.