Pure Storage revenue boost puts it on ‘march to profit’

Pure Storage hit a home run in its first quarter under CEO Charlie Giancarlo.

Pure Storage revenue of $278 million last month exceeded the high point of its  guidance and increased 41% from last year. The all-flash pioneer reported positive cash flow for the first time and it remains on track to break the $1 billion revenue mark for the full year. Its executives also predict non-GAAP profitability for the current quarter, which would be a first for Pure.

“Pure has exceeded my initial expectations and I could not be more excited and thrilled about all the opportunity in front of us,” Giancarlo said on Pure’s earnings call Tuesday night.

The Pure Storage revenue results don’t represent a great turnaround in Giancarlo’s first quarter since replacing Scott Dietzen, who remains Pure’s chairman. When Dietzen handed the CEO job off to Cisco veteran Giancarlo last August, he predicted Pure Storage revenue of $1 billion for the full year and profits just around the corner. However, the Pure Storage revenue growth outpaced even Dietzen’s optimistic view.

The Pure Storage revenue forecast of $327 million to $335 million this quarter also beat Wall Street expectations. The low end would bring its full-year revenue to $1.012 billion. Pure claims more than 300 new customers last quarter, bringing its total to more than 4,000.

Pure Storage revenue also continues to outpace the storage industry growth. IDC puts all external storage growth at 4.1% for the third quarter, with total storage — include capacities in servers — at 14%. Over the past month, NetApp (up 6%), Hewlett Packard Enterprise (up 5%) and IBM (up 4%) reported year-over-year storage growth but none in the ballpark with Pure’s.

Pure cut its non-GAAP loss to $1.9 million, down from $20 million a year ago and $24 million in the previous quarter – although it lost $42 million (compared to $79 last year) under GAAP rules. Pure CFO Tim Riiters predicted a small GAAP profit for this quarter, which is usually the biggest revenue quarter for storage companies. That profit may be short-lived when seasonality reduces revenue the first quarter of next year, but Pure will have a profitable 2018 calendar year if it continues its steady revenue growth.

Pure finished last quarter with $551 million in cash and investments, up $28 million from the previous quarter.

 “Our march is to profitability,” Riiters said.

Pure’s product revenue of $232 million last quarter increased 39% year over year. Most of that came from its flagship FlashArray block storage platform. Pure Storage revenue growth from its newer FlashBlade unstructured data system slowed slightly from when it doubled in the previous quarter, but Giancarlo said he remains optimistic about the system. He said early customer reaction to FlashBlade has been strong.

“If anything, we are even more optimistic and more pleased with FlashBlade than when we first introduced it,” Giancarlo said.

Giancarlo laid out three growth areas for Pure to chase: cloud customers, next-generation applications such as machine learning, artificial intelligence and analytics, and large enterprises.

“Each of these growth areas is a large opportunity on its own. Together, they represent a huge market opportunity for Pure,” Giancarlo said.

Pure executives said FlashBlade brings it into more competitive deals with NetApp. FlashBlade targets next-generation AI, machine learning and real-time analytics as well as legacy file and object storage.

“This is actually taking the fight to NetApp where we haven’t focused on their file-based world,” Pure president David Hatfield said.