Pure Storage reported Q3 2025 revenues rising 9 percent to $831 million, revealing that a top-four hyperscaler licensing deal for its Purity OS and Direct Flash Module (DFM) technology is set to bring in cash from fiscal 2027.
The top four hyperscalers are AWS, Azure, Google, and Meta, the latter of which is reckoned to be the fourth largest. Pure said it has been negotiating this deal for 12 months. CEO Charlie Giancarlo said in the earnings call: ”This is the first-ever design win to provide flash for standard hyperscaler storage and it is the vanguard for flash storage providing all online storage in major hyperscale environments in the future. For reference, the hyperscale market is responsible today for 60-70 percent of all hard disk drives purchased globally.”
He added: ”In addition to providing cost-effective data storage, this top-four hyperscaler’s use of Pure technology is expected to free up significant amounts of power and space in their datacenters. It is also expected to significantly reduce the failure rates and maintenance costs associated with legacy disk storage, while doubling the expected lifetime of their storage infrastructure.”
“Our design win signals that Pure’s DirectFlash technology is now ready to replace hard disks everywhere, and NAND vendors are taking notice and planning their opportunity to address this 700-exabyte-per-year market.”
CFO Kevan Krysler said: “The commercial framework for this design win involves licensing our technology and delivering support services. Hardware will not be included as part of our sale to the hyperscaler.” This means Pure will make significantly less from the deal than if it sold the hardware as well.
Giancarlo said: “Pure optimized the design of Purity and our DirectFlash technology to fit smoothly into their compute and storage architectures, and optimized the economics to fit their financial targets.”
CTO Rob Lee said: “It was really the introduction of the 75 TB [DirectFlash] modules that really got this particular customer to really pay attention.” The 150 TB DFMs, which are now shipping, strengthened Pure’s density, performance, and power saving credentials further.
Electrical power savings was a key aspect of the deal. “As power limitations increasingly hinder datacenter growth, Pure Storage is the only company that can simultaneously enable hyperscalers to cost-effectively upgrade their data storage while simultaneously freeing vast amounts of electrical power and datacenter space for other applications, such as AI.”
Answering an analyst’s question, Lee said: “We have between a 5:1 and 10:1 improvement … that is less power than hard disk environments. At that level, you see our datacenters saving perhaps 20 percent of their total power.”
Hardware reliability was another. Giancarlo again: “We are pressing it to 0.15 percent failure rate per year. That’s unbelievably low. That compares to failure rates five to ten times higher for SSDs and for hard disks. And that reduces overall labor costs and outage costs.”
We should think about Pure getting three income streams from the deal. Giancarlo said: “We’re effectively licensing … the two parts of the technology; that is the software as well as the hardware design. The customer will be buying … the hardware … from their integrator … So for us, it comes in largely as licensing fees, software fees and support fees.”
This opens up the idea of Pure possibly replicating the deal with its large enterprise customers as well, licensing its technology for use on certified hardware bought from an integrator. That is similar to how VAST Data sells its technology.
The hyperscaler will add Pure’s software technology as it builds new datacenter systems. Giancarlo discussed the timing: “We expect early field trial buildouts next year, with large full production deployments, on the order of double-digit exabytes, expected in calendar 2026, which corresponds with our fiscal ’27.”
He said that hyperscalers “only have a small handful of storage environments, segmented only by price-performance levels – low, medium and high, for instance. All data from all workloads and customers utilize the same storage environments. This makes data access far easier. Different storage capabilities are enabled by software, not dedicated hardware.”
There is virtual storage tiering, not physical tiering. By providing a single physical tier of high-capacity flash with its DFM technology, Pure is enabling virtual tiers to be layered on top of it.
Pure will “continue in our dialogues with other major hyperscalers as well,” and anticipates “increased investment in our hyperscale line of business over the next year.” This top-four hyperscaler win comes after Pure’s CoreWeave GPU server farm deal, about which Giancarlo said: “We had announced a double-digit GPU cloud win about …three quarters ago. That was CoreWeave. We were not at that point in time able to use their name, but that was the deal.”
Some other all-flash storage system vendors will almost certainly be canvassing hyperscalers for disk drive replacement business as well now – VAST Data comes to mind at once.
Pure’s revenue number
Now, we’ll look at its revenue story for the latest quarter, which ended November 3, 2024. The $831 million revenues beat its $815 million outlook from its last quarter, and generated a $63.64 million profit, 9.6 percent down year-on-year. Pure’s subscription annual recurring revenue (ARR) was up 22 percent to $1.6 billion. There was $445 million in product sales, up 0.4 percent, and $376.4 million in subscription services, up 22 percent.
Quarterly financial summary:
- Gross margin: 71.9 percent, down from 74 percent a year ago
- Free cash flow: $35.2 million vs $113.4 million a year ago
- Operating cash flow: $97 million vs $158 million a year ago
- Total cash, cash equivalents, and marketable securities: $1.6 billion vs $1.35 billion a year ago
- Remaining Performance Obligations: $2.38 billion, up 16 percent year-on-year
Krysler said the year-over-year operating cash flow decrease was due to “a large upfront payment for new software technology that we licensed.” We don’t know what that technology is or who supplied it.
Pure gained around 430 new customers in the quarter. Its total customer count is now well past 13,000 and includes 62 percent of the Fortune 500, up from 60 percent a year ago.
Pure announced a deeper collaboration with Kioxia, saying: “Kioxia has been a steadfast partner in our engagement with the hyperscale community.” A Pure spokesperson, referencing the hyperscaler deal, said: “We co-designed a solution with Kioxia and there are a number of advancements in BiCS8 which have contributed to the announcement we’ve made.” BiCS8 is Kioxia’s 218-layer 3D NAND technology.
The DFM controllers manage and monitor the onboard flash chips to optimize wear rates and, we understand, power consumption. All this will depend upon information from the NAND chips, with Pure and Kioxia focusing on this.
Pure has announced the availability of Pure Fusion as a non-disruptive free upgrade to all existing Pure block storage arrays, as standard in all new Pure block products and storage service offerings.
Next quarter’s outlook is for $867 million in revenues, up 9.7 percent year-over-year, with a revised full-year outlook of $3.15 billion, up from the prior $3.1 billion. Pure expects 11.5 percent growth annually.
