The Six Five team discusses Pure Storage Q2FY25 Earnings
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Transcript:
Daniel Newman: As we head in, I don’t think this is just an AI play here with Pure Storage. This one was interesting. It was a narrow beat on the bottom and a narrow miss on the top. So, it was one of those really close company got battered in the wake of its announcement. And let me tell everybody why that happened because I think a lot of times people go, okay, you barely missed. But they pulled back on their TCV estimates as it relates to their SaaS growth. So, they had about a $600 million annual SaaS estimate. They pulled that number back to $500 million. So, I think that was where a lot of the reticent about the name came. They’ve been making this pivot to subscription, to ARR. And so, showing a bit of a conservatism there I think was met with a bit of a hesitation. Look, I put out my note, a really brief note, and I said, here’s what I really like about the company. One is very focused on power. So, right now as the big what’s at stake for this AI build out is going to be power consumption.
Pure is showing meaningful efficiencies gain versus other tier storage. And that’s a huge thing to be watching for against other modalities. And the other thing I said, and I’ll lean into this and I feel like I have to lean into every quarter, is this is a company that’s obsessed with happy customers. And the highest NPS score in the industry has remained that way for years on end.
And so, they’re executing by being really customer-centric, having very low attrition rates, high growth rates, which serves them well in this pivot that they’re making from where they are as a storage company to a full on SaaS ARR company across their Evergreen portfolio. They’re adding customers at scale, they’re growing double digits. Pat, it’s a little slower at 11%, but they did see 24% growth of their subscription business.
So, although they did pull back a bit on TCV on cloud, they are still growing mid double digits, solid backlog. The company is in a good position overall. Pat, I think this company wants to make attachments to AI and I think they’re doing some other things pretty interestingly well in terms of different types of storage that can be leveraged more efficiently for scale up, scale out and direct to flash. They play in that sort of cloud native space. People don’t talk about what they’re doing there, but the Portworx acquisition was material. And then, of course they play in the SaaS space. So, you put all these things together, they address, block, file object, and they’re able to basically help customers reduce power. I don’t know, I think the number is like two to five.
They have a TCO. I’d love to do this in our lab because that’s what I like to do, but they’re showing 50% total cost of ownership reductions versus typical configurations. Now, again, that’s why I’d like to do in our lab because I want to know exactly what that is, but lower cost to operate, higher reliability, Pat, that’s the things that they focus on. And I like that they’re so outcome driven. But the bottom line is this, they’ve told a SaaS story, they slowed their SaaS estimates, market reacted to it that way, but I still think there’s a lot of optimism that should be around this company. It’s well positioned. And of course, expanding too even into areas like cyber resiliency.
Patrick Moorhead: Yeah. So, let me add onto that. So, first of all, talking about the TCV target, this is all about Evergreen//One and subscriptions. They did reduce it by about $100 million from $600 to $500. But there was a lot of discussion that these deals just take longer. They’re big, they take longer to close, but they have not shifted to CapEx purchases. On the Hyperscaler piece, I’d love to know which ones they are. Unfortunately, we didn’t get to talk to Charlie this quarter, but when we attended their Big Tent event in Vegas a while back, he actually talked through that opportunity and floated that on the calls. It’s interesting. I’m going to have to drill down. Hey, is a hyperscaler at the top five or are they tier two CSPs? This XAI deal, I believe that they were very much engaged with that, with this split deal between Dell and Supermicro. The company has the right strategy. Whether it’s on-prem, whether it’s in a colo or if you want to have, I like to call them basically, hybrid cloud connectors. You can do that and you can have one management plane across all of your storage. That’s just the right strategy. That’s the future. And if anybody doesn’t have that, you’re not going to be successful in storage.
On the competitive front, there were some questions about QLC and NAND pricing. They were one of the first in with QLC. This direct flash is definitely a differentiator in my opinion, in some of these price-sensitive workloads. So, hopefully, we’ll get to talk to Charlie next quarter, but it was hopefully you appreciated that analysis.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
