Pure’s blowout first fiscal 2023 quarter

Pure beat its first fiscal 2023 quarter guidance by $100 million with 50 percent year-on-year growth as several enterprise customers brought order shipments forward. There were supply chain issues but Pure virtually snuffed them out.

Revenues in the quarter ended May 8 were $620.4 million compared to $412.7 million a year ago. There was a net loss of $11.5 million, better than the year-ago loss of $84.2 million. Dell’s most recent quarter was good too, with 16 percent revenue growth overall and storage growing at 9 percent to $4.2 billion. Pure grew its storage revenues more than five times faster.

CEO and chairman Charlie Giancarlo said in the earnings call: “We drove 50 percent year-over-year revenue growth with exceptional performance in both US and international markets.” This was higher than the 41 percent revenue growth in the previous quarter. He said: “FlashArray, FlashArray//C, and FlashBlade all saw strong growth during the quarter, setting multiple individual records. … Despite pandemic, war, and market turmoil, Pure has thrived and grown.” Revenue growth was good both in the US, where revenues grew 55 percent, and internationally, including Europe where IT budgets remain strong despite the Ukraine war.

Pure added 360 new customers in the quarter, rather less than the 470 least quarter, bringing its total customer count to 10,822, including 54 percent of the Fortune 500. It said it managed to mitigate component supply chain issues, partly because its products have fewer components than competing products.

Giancarlo believes Pure has opened up a second phase of growth. In its early days, he said, Pure had technically advanced products that beat competitors products easily – “It was the only product of its type, and therefore, allowed us very, very rapid early growth.” But competitors “were able to use their larger sales forces and their greater portfolio to compete with us more effectively and so our growth slowed a bit.”

Giancarlo said: “Our competitors play a commodity game. … They’ve been marketing storage as a commodity. The customers should only care about price and nothing else. And we’re playing a high technology game. We invest in it like it’s high technology. It’s an entirely different business strategy, and it’s going to be very difficult, I think, for them to respond.”

The commodity-based competitors he is referring to will be, we understand, Dell, HPE, Hitachi Vantara and NetApp.

Pure has made investments in R&D and in “broadening out our sales focus and capabilities, sales, and support such that we could support enterprise customers with a larger portfolio. … we’re seeing the fruits of that bear out. And so the second phase of growth is the fact that we can penetrate more into larger customers with an expanded and superior portfolio, and that’s going to give us a runway, a pretty long runway to continue what I believe is going to be a second phase of growth.”

He is convinced Pure is gaining market share.

A chart of revenues by fiscal year by quarter supports this view, showing accelerated growth in recent quarters:

Pure has exhibited accelerated growth rates in the most recent three quarters.

 Financial summary

  • Subscription services revenue $219.2 million, up 35 percent year-over-year;
  • Subscription Annual Recurring Revenue (ARR) $899.8 million, up 29 percent year-over-year;
  • Remaining Performance Obligations (RPO) $1.4 billion, up 26 percent year-over-year;
  • Gross margin 68.7 percent;
  • Operating cash flow $220.1 million;
  • Free cash flow $187.3 million;
  • Total cash, cash equivalents, and investments $1.3 billion.

Guidance for next quarter is for revenues of approximately $635 million – 28 percent year-on-year growth – with the full fiscal 2023 revenue guide being approximately $2.66 billion, indicating 22 percent annual growth. The lower growth next quarter (Q2) than the 50 percent recorded in Q1 is due to customers pulling shipments forward to Q1.