Pure Storage Q2 2024 Earnings

The Six Five Team discusses Pure Storage Q2 2024 earnings.

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Transcript:

Patrick Moorhead: Pure Storage earnings. Another company that by the way is very, very integrated into AI. We knew what they were up to with machine learning. They talked a lot about Meta and how they work with a paralleled workflow inside of the company. But Charlie gave a good overview of how his company is supporting from a storage point of view, what they call the world’s AI projects. They had Meta on there, they had SiriusXM, they had Health 2030 Genome Center, Folding@home, a bunch of pretty big names. Not the big names other than Meta that you might expect, but my guess is a lot of customers don’t really want to talk about that.

Financially, they had a top and a bottom beat. They did talk about winning a big eight figure generative AI deal, which was good. Storage is a service, it’s funny, to all the infrastructure people you say SaaS and it’s like, “Oh, software as a service.” No, storage as a service doubled year over year. That is phenomenal. ARR at 27% and just the fricking eye-popping 70.7% gross margins. Who says that there’s no margin in hardware?

Oh, by the way, fun part is they spent actually more on software than they do on hardware. So are they a hardware company? Are they a software company? I don’t know. They’re like Apple. They’re fully integrated in how they operate. The cool part about their future here that I find is that they finally, if there’s a bingo card of storage, aside from mainframe and very large systems, they play in block storage, file storage, object storage. They’re doing SLC, they’re doing QLC to hit price points and performance. They have a chassis from a sustainability standpoint that you’re not throwing away the entire chassis to get better performance and better capabilities. You essentially, it’s a bladed architecture where you move capabilities in and out, you can pull out and push in systems. They’ve also gotten into the data management space with things like ransomware, duplication, things like that. So company’s on the move. I didn’t get the chance to talk to Charlie this quarter, but hopefully we’ll get to chat with him soon.

Daniel Newman: Yeah, there you go. I mean, look, I feel like quarter after quarter, this is another company that operates well, delivers consistently. It’s in an area that’s somewhat seen as mature as storage, but is trying to really bring innovation to this particular industry. On a macro level, they hit on some very good things. One, their subscription numbers are growing substantially. Mid double-digit growth. Two, they’re seeing their evergreen product grow even faster. Doubling prescriptions to many pharmaceutical-

Patrick Moorhead: You need a subscription, Dan?

Daniel Newman: I need a subscription. Their customer growth, substantial. 12,000 plus customers now. And then of course, Pat, this is something you and I have talked about a lot. They are a customer experience led organization. They’re very focused on delivering best of class customer experience to the industry. 81.4 NPS score, Pat, they post this.

Patrick Moorhead: Isn’t that crazy?

Daniel Newman: Well, they post it because it’s legitimately twice as good as their next best competitor. They are really a wake and serve organization and I like that. And so I actually will have a chance to talk to Charlie this week. I look forward to being able to interact with him a bit more. But I think the company’s doing a good job of balancing innovation, driving towards ARR, and of course keeping the fact that their customer-centric as really what makes their identity unique. You hit on some of their diversification, Pat. I think they’ve done a good job on that. They did slide an AI slide into their deck.

Patrick Moorhead: Which I read.

Daniel Newman: Which do you read the deck or you read the slide?

Patrick Moorhead: I read the slide when I started. Yeah.

Daniel Newman: So Pat, we kind of joke sometimes about you can’t build apps on air. Well, you need somewhere to put all your data as well because that data needs to be accessible. So Pure does legitimately have an opportunity to play in that space. So the guide was like usual, conservative, but positive. Overall, Pat, not a lot to dislike about this quarter’s earnings report.

Patrick Moorhead: Yeah, it’s interesting. I can’t wait to see how VAST Data and Pure collide together, right? Who’s going to be the king of the hill for AI based storage workloads? It’s going to be an interesting one for sure, because every three to five years a new storage upstart kicks off and tries to knock somebody off, but very few of them end up dying, right? I mean, look at NetApp. I mean, NetApp did not have a good quarter and their differentiation seems to be evaporating.

Daniel Newman: The other Kurian, by the way.

Patrick Moorhead: Yeah, exactly. Exactly. And then you’ve got Lenovo really dominating the low-end and the mid-range storage right now.