Pure Storage’s revenues grew 23 per cent year-over-year in its its latest quarter and it expects a growth acceleration next quarter, with an eight-figure hyperscaler deal and the COVID recovery gathering pace.
Revenues were $498.8 million in the quarter ended 1 August 2021, with a loss of $45.3 million, compared to the year-ago loss of $65 million. It was the highest second-quarter revenue in Pure’s history, as product and subscription sales both accelerated.
Chairman and CEO Charles Giancarlo sounded ecstatic in his prepared remarks: “Pure had an outstanding Q2! As a growing, share-taking company, we expect every quarter to be record breaking, but this quarter was extraordinary. Sales, revenue and profitability were well above expectations [and] we had the highest Q2 operating profit in our history.”
He was keen to tell investors that Pure had made the right choices: “We predicted that Pure’s growth would accelerate as businesses adjusted to the COVID environment. We believe that our growth will be even stronger as businesses return to an in-office environment. We estimated that this would start this past Q2, and we are obviously very pleased with the results.”
He believes that “the current environment enables us to return to our historical double-digit growth rates, with increasing profitability,” but he didn’t forecast when Pure would make a profit. He expects “continued improvements quarter by quarter in our operating profit margins.”
The numbers
On a year-over-year basis:
- Pure-as-a-Service revenues tripled;
- Portworx revenues tripled;
- Total subscription sales and bookings grew 50 per cent and are approaching half of Pure’s total sales;
- Subscription services revenue of $171.9M, up 31 per cent year-over-year and 35 per cent of revenues;
- FlashArray//C sales tripled and it is the fastest growing new product in Pure’s history;
- FlashBlade sales established a new record high for Q2;
- Product revenue had its highest year-over-year growth rate in eight quarters.
Pure gained 380 new customers in the quarter, ten per cent year-over-year growth, taking its total customer count, we calculate, to 9647. Sales to large enterprises were more than 50 per cent of sales with the top ten customers spending more than $100 million in the quarter.
Financial highlights and outlook
- GAAP gross margin 68.4 per cent;
- Operating cash flow $123.4M, a record high;
- Free cash flow $95.7M;
- Total cash and investments $1.3B;
- Deferred revenue $909.8M, up 26 per cent year-over-year.
The outlook for Q3 is $530 million, 29 per cent higher than a year ago. This guidance includes revenue Pure expects to recognise in connection with a more than $10 million sale of the QLC flash-based FlashArray//C to one of the top ten hyper-scalers. Full fiscal 2022 year revenue is forecast to be $2.04 billion, up 21 per cent.
Pure feels comfortable it can grow revenues at more than 20 per cent for the foreseeable future.
Hyperscaler disk bastion
In the earnings call Giancarlo said that the hyperscaler FlashArray//C sale “was won against traditional magnetic disk based on our high performance, small space and power footprint and superior total cost of ownership.“
Answering about the prospects of this win he said: “It’’s a part of their overall operations. … we do feel that this is sustainable both in the sense of continuing with this customer, as well as we think it’s the beginning of seeing other similarly situated hyperscale customers starting to look at flash as a real alternative.
“As you may know, most of the hyperscalers, the vast majority of what they store, they store on disk. They may have a little bit of flash in their servers, but for the most part, all storage is on disk. And we think this is the beginning of breaking that structure. We finally have the kind of price performance that can really compete within the disk market.”
He added: “the last bastion of mostly disk data centre right now is actually in the cloud. And so it represents a great opportunity for us.”
CTO Rob Lee (see below) said: “FlashArray//C [is] very price competitive … up to 30 per cent price advantage in some cases … price is one element of the equation but all of the other attributes and benefits we are able to bring from flash, such as the performance, such as power, cooling savings, footprint savings, those are all very meaningful across the board. But at the hyperscale, they become super, super meaningful, right? And so, as we look at, for example, this customer, FlashArray//C was the only product that can meet their needs, without them having to go build new data centres.”
Giancarlo commented in the outlook: “We are very pleased with what we’re seeing in terms of the Q3 outlook and the idea that, we’re driving almost 30 per cent growth next year, with the opportunity we highlighted on FlashArray//C.”
This hyperscaler FlashArray//C sale was not the first to a hyperscaler customer, just a very big single sale. Giancarlo also said “it is something that’s easily transferable to other hyperscalers.”
Overlapping visions
Rob Lee becomes Pure’s CTO with the previous incumbent, co-founder John Colgrove, becoming Chief Visionary Officer — a full time role, with Lee reporting to him. According to the company’s leadership web page, Colgrove is “responsible for developing and executing Pure’s global technical strategy” while Lee, in an apparently overlapping role, looks at “global technology strategy, and identifying new innovation (sic) and market expansion opportunities for Pure” That sounds like two people mostly doing the same thing.
