Pure Storage (PSTG) recently held its fourth-quarter and full-year fiscal 2025 earnings call, reflecting on a year of strategic progress and evolving market dynamics.
Fusion v2: Transforming Enterprise Data Management
A key highlight was the introduction of Pure Storage’s Fusion v2 software. This platform represents a significant leap in enterprise data management, enabling organizations to manage various storage arrays as a unified system rather than separate silos. According to Chairman & CEO Charles Giancarlo, Fusion allows companies to manage all their data storage on a workflow basis, similar to the cloud. Giancarlo hailed the platform’s potential to redefine enterprise storage and data management standards.
Early adoption of Fusion v2 has been promising, with dozens of companies already implementing the platform since its release. Giancarlo noted the network effect created by using Pure Storage arrays under Fusion, thereby encouraging customers to add only those arrays that are part of the same ecosystem.
Record Subscription Growth, Despite Mixed Annual Performance
While overall subscription performance showed some challenges in fiscal 2025, the fourth quarter witnessed strong gains in key metrics. The company closed the year with record quarterly Total Contract Value (TCV) sales of Evergreen//One, reaching $140 million, a 20% increase, as stated by CFO Kevan Krysler. For the full fiscal year, TCV sales for Evergreen//One and other service-based offerings totaled $393 million, a slight 3% decline.
Subscription services annual recurring revenue also grew substantially, increasing by 21% to $1.7 billion.
Hyperscaler Opportunities: Progressing as Expected
The previously announced hyperscaler design win continues to evolve, with testing and deployment planning advancing as expected. Management indicated that discussions with other hyperscalers are progressing rapidly. CTO Robert Lee commented on the company’s progress, with advanced stages of implementation planning and detailed testing leading to further field testing and scaling.
Pure Storage anticipates revenue contributions from hyperscalers to begin in fiscal 2027. Current investments are focused on scaling operations and qualifying additional suppliers.
Product Mix Shift and Margin Impacts
The company’s E family of products is gaining traction, competing effectively against traditional disk storage systems. However, this success has temporarily influenced margins. CFO Kevan Krysler attributed this to record sales of the E family, alongside higher QLC flash costs and relatively stable hard disk pricing, which resulted in lower product gross margins of 62.9% in Q4. Management expects product gross margins to recover to the mid-60s range in fiscal 2026 as QLC flash pricing stabilizes and the company continues to displace disk storage solutions.
Artificial Intelligence Driving Multifaceted Opportunities
AI is emerging as a significant driver that is reshaping customers’ data storage strategies, particularly for real-time analysis and inference environments. Pure Storage is observing an increase in the use of its high-performance storage solutions in machine learning and training environments. CEO Giancarlo noted that AI is a major catalyst for customers to rethink their data storage architecture to enable real-time analysis, especially in inference environments.
The company plans to announce new AI-focused capabilities at the upcoming NVIDIA GPU Technology Conference in March 2025, particularly centered on unstructured data management for AI workloads.
Looking Ahead
Management expressed a measured optimism about fiscal 2026, projecting an 11% revenue growth to over $3.5 billion. They’re actively investing to scale operations for upcoming hyperscale deployments starting in fiscal 2027. Management also emphasized the company’s increasing activity in the AI space, as customers continue to adopt high-performance storage solutions to enhance their AI infrastructure.
