The News: Pure Storage (NYSE: PSTG), a supplier of data storage technology and services, recently announced its financial results for its fiscal Q3 FY23 quarter that ended on November 6, 2022. The company posted revenue growth of 20% year-over-year. Read the Pure Storage Press Release here.

Pure Storage Q3 FY23 Revenues up 20% YoY

Analyst Take: Pure Storage’s Q3 FY23 20 percent increase in revenue illustrates the importance and critical nature of enterprise storage, which has been one of the key categories having large backlogs in demand like other data center categories such as networking and security. The category itself appears to be much more resilient as more organizations today are starting to elongate product buying cycles, making decisions on other product categories which has impacted other vendors in the market.

Pure Storage Q3 FY23 Numbers:

Revenue $676 million, up 20% YoY
Subscription services revenue $244.8 million, up 30% YoY
Subscription annual recurring revenue (ARR) $1.0 billion, up 30% YoY
Remaining Performance Obligations (RPO) $1.6 billion, up 26% YoY
Non-GAAP gross margins 70.9%
Non-GAAP operating income $107.2 million
Non-GAAP operating margin 15.9%
Operating cash flow $154.7 million; free cash flow $114.8 million
Total cash, cash equivalents, and marketable securities $1.5 billion

From a product perspective, Pure Storage said product revenue grew 15 percent, while subscription services grew 30 percent, with subscription services now representing 36 percent of overall revenues, which should continue into the foreseeable future. In fact, for the first time, the company achieved annual recurring revenue (ARR) growth of 30 percent, surpassing $1 billion in revenue for the first time.

Pure Storage also saw strong growth for its FlashBlade//S, which is its newest offering and its first full quarter of sales. The company said the systems that were sold were well above their plan, coupled with the petabytes sold. From a future demand perspective on the all-flash array segment, during the earnings call, CEO Charles Giancarlo indicated that Pure expects further demand for flash storage as the cost per bit for NAND approaches magnetic disks. In the past, many organizations wanted to harness the power of all-flash but in many cases opted instead for hybrid arrays, which paired flash with magnetic disks so as to lower capital expenditures. However, with the advent of continued price erosion of flash, we see this as the potential to continue to drive unit share for Pure in the future as organizations are seeking solutions that improve speeds in the areas of cloud and analytics, among others.

Pure Storage also provided guidance for Q4 FY23 with revenue of $810 million, up 15 percent year-over-year. Non-GAAP operating margins are expected to be 16 percent.

Wrapping it up, Pure Storage’s Q3 FY23 was excellent as evidenced by its double-digit revenue growth for the quarter, coupled with its thirty percent growth in its annual recurring revenue that surpassed $1 billion for the first time. Despite many IT vendors experiencing headwinds due to economic turmoil, Pure Storage continues to buck the system nicely as organizations want faster IOPs in the areas of analytics, cloud, and back-up and recovery, coupled with power savings. The future looks bright for Pure Storage.

Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy, discussed Pure Storage earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.

Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.