Is Pure Storage a Solid Bet in Data Solutions?

Pure Storage, Inc. (PSTG), a data storage and management technologies provider, reported impressive fiscal 2025 first-quarter results. The company posted revenues of $693.48 million and non-GAAP net income of $107.30 million.

Kevan Krysler, Chief Financial Officer, Pure Storage commented, “We are pleased with the strong start to our year as Q1 revenue growth of 18 percent and profitability both outperformed. We are well positioned with our highly differentiated data storage platform for substantial long-term growth.”

During the first quarter, PSTG integrated with NVIDIA to deliver new validated reference architectures for running generative AI use cases, which included a new NVIDIA OVX-ready validated reference architecture. This adds more alternates for customers in addition. With this collaboration, PSTG empowered global customers with a proven framework to manage high-performance data and compute requirements.

Also, the company introduced new self-service capabilities across its Pure1® storage management platform and Evergreen® portfolio to enable customers with higher control over their data storage environment with the help of a single management layer, simplifying end-to-end operations.

Further, it has also announced new capabilities in the Pure Storage platform to transform how IT and business leaders can improve their ability to deploy AI and has made strategic investment in LandingAI, the leading visual AI company.

According to the fiscal year 2025 guidance, PSTG expects revenue of $755 million and non-GAAP operating income of $125 million for the second quarter. Also, the company expects revenue of $3.10 billion, and it expects non-GAAP operating income of $532 million during the full year 2025.

Shares of PSTG have gained 39.8% over the past six months and 51% over the past year to close its last trading session at $56.82.

Let’s look at factors that could influence PSTG’s performance in the upcoming months.

Positive Recent Developments

On June 19, PSTG announced new capabilities in the Pure Storage platform, which will transform how IT and business leaders can improve their ability to deploy AI, improve cyber resilience, and modernize their applications. Innovations announced include first-of-its-kind storage automation, and industry-first generative AI copilot for storage.

On the same day, PSTG announced three new advanced storage as-a-Service (STaaS) service-level agreements for the Pure Storage platform - cyber recovery and resilience and site rebalance which empowers organizations to guarantee outcomes and reduce risk in their critical data infrastructure.

With 10 concurrent SLAs, the industry’s most comprehensive set of service level agreements, PSTG has extended its STaaS leadership.

Also, on June 5, PSTG announced a strategic investment in LandingAI, the leading visual AI company, to advance vision AI technology. This collaboration aims to integrate PSTG’s data storage platform with LandingAI’s Large Vision Model (LVM) solutions, enhancing enterprises’ AI capabilities and lead to significant AI/ML advancements for the customers.

Stable Financials

For the first quarter that ended May 5, 2024, PSTG’s total revenue increased 17.7% year-over-year to $693.48 million. Its non-GAAP gross profit grew 20.4% from the year-ago value to $512.16 million. The company’s non-GAAP operating income of $100.39 million indicates growth of 411.5% year-over-year.

In addition, the company’s non-GAAP net income of $107.30 million and $0.32 per share, indicates increases of 334.7% and 300% from the prior year’s quarter, respectively. Its non-GAAP free cash flow stood at $172.68 million, up 41.7% year-over-year.

Also, the company’s cash and cash equivalents were $900.61 million as of May 5, 2024, compared to $702.54 million as of February 4, 2024.

Impressive Historical Growth

PSTG’s revenue grew at a CAGR of 19.3% over the past three years, while its tangible book value improved at a CAGR of 51.2%. The company’s total assets have increased at a CAGR of 10.3% over the same period while levered free cash flow grew at respective CAGR of 56.9% over the same time frame.

Favorable Analyst Estimates

Analysts expect PSTG’s revenue for the second quarter (ended July 2024) to come in at $756.09 million, indicating an increase of 9.8% year-over-year and the consensus EPS is expected to grow 8.5% year-over-year to $0.37 over the same period. Moreover, the company has topped the consensus revenue and EPS estimates in all of the trailing four quarters.

For the fiscal year (ending January 2025), the company’s EPS is anticipated to grow 14.2% year-over-year to $1.60, while its revenue is expected to increase 10.7% year-over-year to $3.13 billion. In addition, Street expects its revenue and EPS for the fiscal year 2026 to grow 13.4% and 17.4% from the prior year to $3.55 billion and $1.88, respectively.

High Profitability

PSTG’s trailing-12-month gross profit margin of 71.68% is 45.1% higher than the 49.39% industry average. Its trailing-12-month net income margin of 3.19% is higher than the industry average of 3.14%. Likewise, the stock’s trailing-12-month levered FCF margin of 15.55% is 57% higher than the industry average of 9.91%.

Furthermore, the stock’s trailing-12-month ROCE, ROTC and ROTA of 8.22%, 5.86%, and 2.59% are higher than the 4.44%, 2.83%, and 1.85% industry average, respectively.

POWR Ratings Reflect Promise

PSTG’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PSTG has an A grade for Growth, consistent with its impressive historical growth and solid financial performance in the last reported quarter.

In addition, the stock has an A grade for Quality, consistent with its higher-than-industry profitability.

PSTG has topped among the stocks in the A-rated Technology - Storage industry.

Beyond what I have stated above, we have also given PSTG grades for Stability, Sentiment, Momentum, and Value. Get access to all the PSTG ratings here.

Bottom Line

PSTG reported solid financial results in the last reported quarter. Further, the company’s long-term prospects appear robust, driven by solid demand for its wide range of solutions.

Also, the company diversified portfolio of services and solutions, strategic investment to expand its capabilities and market reach, and consistent innovations contribute to the company’s ongoing growth in the competitive market. Given PSTG’s strong financials, accelerating profitability, and robust growth outlook, it could be wise to invest in this stock.

How Does Pure Storage, Inc. (PSTG) Stack Up Against Its Peers?

While PSTG has an overall POWR Rating of B, investors could also check out these other stocks within the industry with A (Strong Buy) or B (Buy) ratings: Leidos Holdings Inc. (LDOS), Dropbox, Inc. (DBX), and Fujitsu Ltd. ADR (FJTSY).

For exploring more A and B-rated tech stocks, click here.

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PSTG shares were trading at $53.82 per share on Friday afternoon, down $3.00 (-5.28%). Year-to-date, PSTG has gained 50.93%, versus a 12.20% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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