Pure Storage earnings were a mixed bag this week. The flash storage vendor said revenues grew 28% last quarter, but it cut revenue guidance for the second consecutive call, blaming imbalanced NAND pricing as the main culprit.
The latest number comes on the heels of disappointing Pure Storage revenue for the preceding quarter, which barely hit the low end of its guidance.
In a related matter, Pure Storage CFO Timothy Ritters is voluntarily stepping down after five years. Ritter said he is staying on to aid the search for his replacement.
For the quarter that ended July 31, Pure Storage revenue totaled $396.3 million, up 28% year on year and slightly higher than analysts’ expectations. The revenue for the quarter roughly hit Pure’s midpoint guidance.
The lion’s share came from flash sales of $301 million, up 24%. Subscription revenue from Pure’s SaaS-based Evergreen Storage jumped 42% to $962 million. Year to date, Pure said its overall deferred revenue is $607.4 million, a 47% increase from a year ago.
“The strong deferred revenue performance was driven by three ongoing key trends: meaningful year-on-year renewals growth, longer initial subscription agreement purchases, and the early traction” of Evergreen, Ritter said.
Pure’s non-GAAP earnings came in at a penny a share, beating Wall Street’s prediction of a loss of 4 cents a share.
The next quarter is one to watch. Pure Storage issued revenue guidance between $434 million and $446 million. The Wall Street consensus for Pure Storage revenue was $466 million. For January 2020 fiscal year, Pure Storage guided to a revenue range of $1.65 billion and $1.71 billion. Although lower than Pure’s original FY20 guidance of $1.70 billion to $1.77 billion, the revised midpoint would represent a 23.5 % improvement from the $1.36 billion Pure generated last year.
No macroeconomic impact
By contrast, NetApp earlier this month substantially revised its annual revenue guidance, citing execution missteps in sales and global economic pressures. NetApp had been projecting single-digit revenue growth, but now said it is bracing for revenues to drop as much as 10%.
Cisco also referenced macroeconomic issues during its recent earnings call, while Dell EMC and IBM Storage also had recent disappointing quarters.
“Looking at the market as a whole, Pure is clearly out-executing our traditional competitors, some of whom have expressed concerns around the macro economy. We do not believe the macro environment has affected us this past quarter,” said Pure Storage CEO Charles Giancarlo.
Global demand may be softening, Giancarlo said, but Pure is steeled against it by continuing to invest in fast storage architecture for AI, cloud and data recovery. Pure earlier this year launched its ObjectEngine inline deduplication appliance and struck public cloud partnerships with Amazon Web Services and Rackspace.
The Pure Storage ObectEngine hardware target enables rapid restore to AWS of data on Pure Storage FlashBlade NAS. The appliance is based on deduplication technology Pure picked up when it acquired startup StorReduce.
Cloud Block Store, still in beta, is an alliance of Pure Storage and Amazon Web Services. It allows customers to run Pure arrays in AWS and shuttle data between multiple clouds and physical locations.
The Rackspace partnership allows customers to consume Pure’s NVMe-based FlashArray//X block storage via the Rackspace public cloud.
“When you’re an innovator and a share-taker, I think the macro trends to have less of an impact on you,” Giancarlo said.
Instead, he said the Pure Storage revenue revision reflects “a significant transitory NAND supply-demand imbalance” that affected component pricing across the storage industry.
“We expect this situation to continue to affect us for the balance of the year, given the natural lag between component costs and storage market pricing. However, we are already seeing NAND pricing rise in the spot market, and suppliers are delaying additional fab capacity. We believe these signals point to an improving market next year.”
In general, higher NAND prices are a favorable development for storage customers. It means they can buy the same storage capacity for less money, with storage vendors absorbing a hit on margins.
David Hatfield, Pure Storage’s president, said the all-flash array vendor signed up 450 new customers last quarter, or an average of seven new customers per working day. That included a “couple of deals for seven and eight figures.” The vendor now has about 6,600 paying customers. Hatfield said
“We were particularly pleased with the progress in our enterprise and public-sector segments, as both outpaced the growth of our overall business.”
It will bear watching how Pure Storage uses its sizable cash on hand, which ballooned to $1.18 billion. That’s a $16 million increase from the previous quarter, including investments and cash equivalents.
Ritter said the increase is due to strong cash flow of $19.9 million, with $5.7 million coming from stock repurchases.
Pure said its board has authorized additional stock buybacks up to an additional $150 million.
Ritter joined Pure Storage as CTO in 2014 and helped usher the company through its initial public offering. Giancarlo said an executive committee at Pure has started the search for Ritter’s replacement.