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Pure Storage (PSTG) Q3 Earnings & Revenues Beat, Rise Y/Y

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Pure Storage (PSTG - Free Report) reported non-GAAP earnings of 31 cents per share in third-quarter fiscal 2023, which beat the Zacks Consensus Estimate by 19.1% and increased 40.9% on a year-over-year basis.

Total revenues increased 20% from the year-ago reported quarter to $676.1 million. Moreover, the top line surpassed the Zacks Consensus Estimate by 0.6%.

The upside can be attributed to the momentum in Product and Subscription services and revenue growth in the domestic and international businesses. Considerable revenues from sales to Meta also acted as tailwinds.

Following the announcement, shares are up 1.5% in the pre-market trading on Dec 1. The stock has lost 4.7% of its value in the past year against the sub-industry’s decline of 23.2%.

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Image Source: Zacks Investment Research

Quarter in Detail

Product revenues (contributing 64% to total revenues) amounted to $431.3 million, up 15% on a year-over-year basis.

Subscription services revenues (36%) of $244.8 million rose 30% on a year-over-year basis. The upside can be attributed to ongoing support contracts and the robust adoption of Evergreen subscription services and synergies from Portworx acquisition.

Subscription annual recurring revenues (ARR) amounted to more than $1 billion, up 30% on a year-over-year basis. Subscription ARR includes the annualized value of all active subscription contracts as of the last day of the quarter plus annualized on-demand revenues.

Total revenues in the United States moved up 21% and the same in International increased 19% year over year. International revenues were significantly affected by forex volatility.

Pure Storage has also been gaining from its growing clout of FlashArray, FlashArray//C, and FlashBlade, cost-effective storage array solutions. The said solutions provide customers higher performance capabilities and enable them to run complex cloud workloads on a single platform.

Pure Storage added more than 390 customers in the reported quarter. The company’s customer base has more than 11,000 customers and represents 58% of Fortune 500 companies.

Pure Storage, Inc. Price, Consensus and EPS Surprise

Pure Storage, Inc. Price, Consensus and EPS Surprise

Pure Storage, Inc. price-consensus-eps-surprise-chart | Pure Storage, Inc. Quote

Margin Highlights

The non-GAAP gross margin expanded 240 basis points (bps) from the year-ago reported quarter to 70.9%.

The non-GAAP Product gross margin expanded 340 bps from the year-ago reported quarter to 70.1%. The non-GAAP Subscription gross margin was 72.3%, which expanded 30 bps on a year-over-year basis.

Non-GAAP operating expenses, as a percentage of total revenues, were 55% compared with 56.2% reported in the prior-year quarter.

Pure Storage reported a non-GAAP operating profit of $107.2 million compared with the non-GAAP income of $69.5 million reported in the year-ago quarter. The non-GAAP operating margin stood was 15.9% compared with 12.3% reported in the prior-year quarter.

Balance Sheet & Cash Flow

Pure Storage exited the quarter ended Nov 6, with cash and cash equivalents and marketable securities of $1.5 billion compared with $1.4 billion as of Aug 7.

Cash flow from operations amounted to $154.7 million compared with $127.1 million in the prior-year reported quarter. Free cash flow was $114.8 million compared with $101.3 million reported in the previous-year quarter.

In the fiscal third quarter, the company returned $24.5 million to shareholders by repurchasing of 0.9 million shares. The company has approximately $100 million remaining under the $250 million share-repurchase plan.

Deferred revenues increased 31.3% to $1.248 billion in the quarter under review.

The remaining performance obligations at the end of the fiscal third quarter totaled $1.575 billion, up 26% year over year. The metric represents total committed non-cancellable future revenues.

Guidance

Pure Storage expects revenues of $810 million for fourth-quarter fiscal 2023, indicating growth of 14% from the year-ago reported figure. The Zacks Consensus Estimate is pegged at $812.5 million, suggesting year-over-year growth of 14.7%.

The non-GAAP operating income for the fiscal fourth quarter is expected to be $130 million. The non-GAAP operating margin is expected to be 16%.

For fiscal 2023, Pure Storage expects revenues of $2.75 billion, indicating year-over-year growth of 26%. The Zacks Consensus Estimate is pegged at $2.75 billion, suggesting year-over-year growth of 26.2%.

The non-GAAP operating income is expected to be $430 million and the non-GAAP operating margin is expected to be 15.6%. Earlier, the non-GAAP operating income was expected to be $390 million and the non-GAAP operating margin to be 14%.

Zacks Rank and Stocks to Consider

Pure Storage currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology space are Arista Networks (ANET - Free Report) , Blackbaud (BLKB - Free Report) and Plexus (PLXS - Free Report) . Arista Networks and Plexus currently sport a Zacks Rank #1 (Strong Buy), while Blackbaud carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Arista Networks’ 2022 earnings is pegged at $4.37 per share, up 8.2% in the past 60 days. The long-term earnings growth rate is anticipated at 17.5%.

Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 12.7%. Shares of ANET have increased 14.8% in the past year.

The Zacks Consensus Estimate for Blackbaud’s 2022 earnings is pegged at $2.59 per share, up 1.6% in the past 60 days. The long-term earnings growth rate is anticipated at 4%.

Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.9%. Shares of BLKB have declined 17.4% in the past year.

The Zacks Consensus Estimate for Plexus’ fiscal 2023 earnings is pegged at $5.98 per share, up 8.9% in the past 60 days.

Plexus’ earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 17.5%. Shares of PLXS have increased 27.7% in the past year.


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