You’d think Wall Street prognosticators would learn from their past mistakes. It seems to me that if a company beats estimates 75% of the time over two years, then maybe that model needs to be tweaked. Pure Storage, in its most current earnings, has beaten the odds and over-delivered yet again.
Inside the quarter
Pure Storage pre-announced its top-line $410M in revenue earlier this month when it announced the arrival of its new sales chief Dominick Delfino, so we expected them to beat estimates. The only question was by how much.
Pure gives some credit for its performance to increased demand from enterprise customers, who are beginning to recover from a couple of quarters slowed down by the impact of COVID-19 earlier in the year.
There was strong performance across all of its products, but few bright spots are worth noting.
Pure’s QLC-based FlashArray//C continues to be a stand-out performer. QLC NAND-based arrays make all-flash storage practical beyond just high-performance applications. The FlashArray//C expands Pure’s overall sales opportunity into the hard-drive dominated tier-two storage applications.
Pure Storage has been operating without significant competition in this segment for several quarters now. That’s been very good for Pure. We’re anxious to see how FlashArray//C performs, especially as NetApp rolls out its recently announced QLC-based FAS platform, and IBM continues to blend QLC into its Flash System line.
FlashBlade is another strong performer, driven by dramatically increasing demand for storage solutions to handle unstructured object storage. Pure was there early with FlashBlade, and the company continues to see strong performance there. This is notable, as Pure Storage faces intense competition from both NetApp and Dell Technologies in this space, both aggressively pursuing the unstructured data market.
Pure’s subscription services, including its Pure-as-a-Service, is another healthy area. That business is up 29%, in line with a broader trend within the industry. We’re seeing enterprise customers responding to infrastructure-as-a-service across the board, and it doesn’t surprise us to see Pure benefiting from this.
Pure also touted the performance of its recently acquired Portworx group. CEO Charlie Giancarlo told us that Portworx outperformed its internal targets. Without knowing what those targets are, it’s hard to know just how much that contributed to the quarter, but Charlie seems happy.
The bottom line is that Pure Storage continues to execute. This is a company that cautiously expands its portfolio as the demands of its customers evolve. That includes its Pure-as-a-service, its cloud offerings, and now Portworx.
Pure’s updated as-a-service offering
Cloud computing found success and became part of every enterprise IT infrastructure playbook on the strength of two attributes: flexible consumption-based economics that allows IT buyers to control and predict costs, and easy-to-deploy and manage resources that make building an infrastructure almost as easy as pushing a few buttons.
Cloud computing struggles to bridge the gap between what needs to be on-prem and what can be reliable deployed in an off-site infrastructure. Workloads follow data, and the reality is that everything from application latencies to data transfer costs inhibits the adoption of the public cloud.
The entire industry understands this. The public cloud players address the issue inward from the cloud, providing on-prem solutions such as Amazon’s Outpost. Simultaneously, traditional OEMs are rapidly building cloud-like solutions by marrying traditional product offerings with cloud-like management and consumption-based pricing. These offerings can be deployed wherever it makes sense for the customer, whether on-prem or in a co-location facility. The OEM-driven as-a-service market is booming.
Pure Storage’s Pure-as-a-Service offering isn’t new, but Pure continues to evolve the solution. During its earnings call last week, Pure announced that it is bringing a cloud-like experience to buying its storage as a service.
Pure has streamlined its offering catalog, breaking storage down into manageable tiers. Unified fast file and object storage are split into two tiers, while Pure’s block storage offerings align against four tiers. All offerings have an Ultra and Premium tier, while block storage continues with Performance and Capacity tiers.
Most unique among Pure Storage’s direct competitors, and most like the public cloud players is that Pure is making its list pricing completely transparent. This should make it very easy for IT buyers to comparison shop between Pure’s consumption-based offering and the public cloud. It also shines a bright spotlight on Pure’s competitors, most of whom have opaque pricing, making it difficult to understand the value of what’s being delivered.
While we’re starting to see strong earnings from the IT infrastructure players as calendar third-quarter numbers roll out, the strength generally isn’t coming from the storage groups. Pure Storage has beaten Wall Street expectations and outperformed the overall storage market across the past several quarters. Pure is taking business directly from its competitors.
There’s a lot behind the success of Pure Storage. The company has a simple-to-understand strategy that keeps pace with its customers, giving those customers what they want with as little friction as possible. Pure Storage is all about simplicity, engineering simplicity into everything from the procurement process, to its products’ operation, to its professional services offerings, to its transparent Pure-as-a-Service pricing model. This resonates with buyers. Moor Insights & Strategy founder believes that the winners in the “as a service” infrastructure market will be focused on the overall customer experience and that Pure has shown its experience chops in its software.
At the same time, Charlie Giancarlo and his leadership team are making prudent decisions. The recent acquisition of Portworx was a deliberate and well-thought-out step into the cloud-native container-driven data management space. Pure’s hiring of Dominick Delfino as its new Chief Revenue Officer is another of these steps. Delfino’s expertise in selling enterprise software and subscriptions, well-earned from his time at VMware, is what’s needed at this stage of Pure’s evolution.
Pure is doing the right things, but there’s little room for error. This little company is competing head-to-head with Dell Technologies, Hewlett Packard Enterprise, NetApp, IBM, and a slew of smaller storage-focused start-ups for share of a flat market. At the same time, the storage market is shifting to more competitive cloud models, with every OEM struggling to figure out the right high-value play. That’s a lot of moving pieces.
We like Pure Storage’s strategy. Its leadership team continues to execute without any significant missteps. Pure’s customers are responding to everything Pure is doing, keeping its Net Promotor score hovering in the mid-80’s. At the same time, Pure Storage is competing in one of the most competitive enterprise IT segments. We can only measure and predict success a quarter at a time, but Pure Storage has established a strong track record of beating those quarterly expectations.
Note: Patrick Moorhead contributed to this analysis.