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Pure Storage (PSTG) Q3 Earnings and Revenues Beat Estimates

Zacks

Pure Storage Inc. PSTG reported non-GAAP loss of 1 cent per share in the third quarter of fiscal 2018, which was narrower than the Zacks Consensus Estimate of a loss of 3 cents. The figure was also much narrower than the year-ago loss of 10 cents per share.

Total revenues were $277.7 million, up 41% year over year and ahead of the Zacks Consensus Estimate of $272 million. Revenues surpassed the upper end of the guided range.

Management noted that the company is on track to cross the $1 billion mark in annual revenues for fiscal 2018. The ongoing quarter is expected to be its first profitable quarter.

Pure Storage stock has gained 68.2% year to date, outperforming the 26.7% rally of the industry it belongs to.



Quarter Details

In the third quarter, Product revenues of $223.2 million surged 39% on a year-over-year basis, primarily driven by “strong repeat purchases” by existing customers and an expanding customer base.

The company’s cloud customers contributed around 25% to its business while existing customers contributed 70%. The company’s strong product portfolio with the likes of FlashArray and FlashBlade business segments was a top-line booster. Additionally, the company’s data platform for cloud is gaining traction

Support revenues of $54.5 million increased a massive 50% on a year-over-year basis on the back of the company’s ongoing support contracts.

During the quarter, Pure Storage added more than 300 new customers, bringing the total base to 4000 organizations and reflecting an increase of 54% from the year-ago quarter.

Management is optimistic about its scalable storage solutions in an era when the world is typically being driven by big-data, artificial intelligence (AI) and data analytics based information. The company is currently focusing on three major aspects, namely increasing its cloud customer base, solidifying the position of its next generation workload related core data infrastructure and tapping large enterprises as they “cloudify” their on-premise IT infrastructure.

However, the company continues to face intensifying competition due to the presence of major players such as Amazon’s AMZN Web Services and Microsoft’s MSFT Azure in cloud storage.

Nevertheless, management is positive about the company’s partner ecosystem, which assisted the company in winning a multimillion dollar deal with a prominent financial services institution.

Management stated that the storage market for AI is likely to witness CAGR of 78% over the next five years. Pure Storage is well poised to grab the opportunity. The company’s partnership with NVIDIA NVDA, which is a dominant player in AI related computation, is anticipated to be a further positive.

Management was optimistic on top-line growth positively impacting operating leverage. Non-GAAP operating margin increased 910 basis points (bps) to (0.7%), primarily due to the company’s focus on improving operational efficiency.

Pure Storage, Inc. Price, Consensus and EPS Surprise


Pure Storage, Inc. Price, Consensus and EPS Surprise | Pure Storage, Inc. Quote

Guidance

Pure Storage expects fourth-quarter fiscal 2018 revenues in the range of $327–$335 million. Non-GAAP gross margin is anticipated to be in the range of 63.5% to 66.5%. Non-GAAP operating margin is projected to be in the range of 3% to 7%. The next quarter is expected to be first profitable quarter for the company since it went public.

For fiscal 2018, management expects revenues to be in the range of $1.012 billion to $1.02 billion. Non-GAAP gross margin is expected to be in the range of 66.6% to 66.5%. Non-GAAP operating margin is anticipated to be in the range of (3.5%) to (4.9%).

Zacks Rank and Key Picks

Pure Storage has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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