Pure Storage, Inc. Q2 FY2026 earnings call

• Pure Storage delivered strong Q2 results with double-digit revenue growth, underpinned by enterprise performance and momentum in software and service offerings like Evergreen One, Cloud Block Store, and Portworx. • Collaboration with Meta continues on track, with the first volume deployment initiated and revenue recognized in Q2. • Customers like a global IT consulting firm and a leading financial institution are adopting Pure's technology for enterprise data cloud and modernization efforts. • Product launches included FlashBlade Exa, FlashArray XL R5, and FlashArray ST at the Accelerate conference. • Strong execution and thoughtful planning have kept Pure ahead of the curve despite macro uncertainties.

In Q2 FY 2026, Pure Storage reported revenue of $861 million, growing 13% year over year. Subscription services revenue reached $415 million, up 15% year over year and accounting for 48% of total revenue. ARR grew 18% to $1.8 billion, and total remaining performance obligations (RPO) grew 22% to $2.8 billion. US revenue was $577 million, growing 7%, while international revenue was $284 million, growing 26% year over year. Total gross margin was 72.1%, with subscription services gross margin at 76.5% and product gross margin at 68%.

• For fiscal year 2026, revenue is anticipated to be in the range of $3.6 billion to $3.63 billion, representing 14% year over year growth at the midpoint, a 300 basis points increase from previous guidance. • Operating profit is expected to be in the range of $65 million to $625 million, approximately a 10% year over year increase at the midpoint. • For Q3, revenue is anticipated to be in the range of $950 to $960 million, representing approximately a 15% year over year increase at the midpoint. • Operating profit for Q3 is expected to be in the range of $185 million to $195 million, approximately a 14% year over year increase at the midpoint.

• Forward-looking statements are subject to various risks and uncertainties, including those related to financial outlook, operations, strategy, technology, product offerings, and competitive industry and economic trends. • Actual results may differ materially from forecasted results, as discussed in Pure Storage's filings with the SEC.

Q: Good afternoon, everyone, and congrats on some impressive numbers here. Charlie, your guide implies that growth in the back half of your fiscal year will be mid-teens. Can you help us appreciate what is really enabling this looks like a very sizable acceleration of growth?

A: Thanks, Amit. We're seeing broad-based strength in our overall product line and offerings. We're halfway through the year, have a better sense of the pipeline, and have strong company momentum based on product introductions and the architectural shift in our enterprise data cloud with Fusion. Also, the macro economy is holding up.

Q: How maybe that's evolved. Have you gotten some visibility into the procurement cycle of Meta? And are we still kind of confident in the progression of that relationship to double-digit exabyte shift into the next fiscal year? And any thoughts on kind of the margin profile of that opportunity at this point?

A: The relationship with Meta continues apace. It's along the lines we forecasted. We don't have very detailed visibility into the procurement cycle, but we're confident in the progression. The income from Meta is based on royalty or software revenue, with almost 100% margin except for the service element.

Q: Based on what you just said about the Meta deal being a high margin, essentially royalty revenue, I guess for you or for Tarek, how much of the sequential gross margin improvement versus Q1 was a result of the Meta shipment that, as you just said, carries significantly higher gross margin?

A: If you look at our product gross margin improvement of four points in the quarter, it comes from three factors: revenue mix between product and software, product mix as customers go for higher-end solutions, and pricing discipline. The number of Meta shipments in the quarter was not material to the overall results and not in the proportions highlighted. Most improvements come from those three factors.

Q: Aside from introducing a guidance range, how have you in any way changed the guidance philosophy? Or taken a different approach to how guidance is constructed?

A: My personal philosophy doesn't have any bearing on the way we guide. We guide based on the numbers, and our guidance is really based on what the numbers are telling us and read down the fairway of what we believe the realities are. Introducing a range aligns with the industry and gives us flexibility to capture growth opportunities. Our RPO gives comfort around our guidance.

Q: Can you just talk about whether the partnership with Nutanix is a significant partnership? What some of the kind of the buzz out there in the field from customers that are aware of this and maybe interested in pursuing a hypervisor switch while continuing to use Pure arrays?

A: There's strong interest by customers in looking at alternatives for their virtualization environment. Nutanix is a strong player, and we're excited about the partnership. Customers are excited as it integrates into our enterprise data cloud, giving greater scalability. We're oversubscribed in early field trials and plan to be general availability by the end of the year.

Q: I have a question on the early engagements with other type hyperscalers you highlighted. My understanding is this has been going on for a while now. And I wonder if you can share how these engagements evolved over the last three months?

A: The progress with our first hyperscaler customer has accelerated engagements with other prospects. Early-stage engagements are progressing well with multiple proofs of concept underway. The process is a co-engineering motion with phases like technology assessment, testing, design win, and validation. Our status with next customers is early in the stage.

Q: I wanted to get a better understanding of your longer-term expectations for Meta. Clearly, it sounds like it's nicely accretive to margin. And I did hear that you highlighted that it wasn't a big factor this quarter. So how are you thinking about the Meta contribution to the financial model in October? And then how should we think about it over a longer term?

A: We're expecting to go down the path of one to two exabytes this year and continue to believe we can be in the double digits next year. The relationship with Meta is as forecasted. We don't expect revenue from hyperscalers to be material to Pure this year, but we're confident in the progression and will update as we execute on Q3 and Q4.

Q: I guess if I can just go back to the engagement you have with the hyperscalers outside of Meta. Gave a fair amount of details there. But in terms of any sort of high indications you're getting from them of what a ramp would look like once you convert that into a win. Is it going to look very similar to what the Meta is, like, one to two going to double-digit exabytes? Or do you have a sense if that's going to be more solid ramp in terms of deployments just given that you'll have more of a test bed already with the existing hyperscaler?

A: At this point, we're focused on making our existing customer successful. It's early to comment on ramp expectations with other customers. We'll have more visibility as we get closer to design win with future customers.

Q: I was just wondering if you could, Tarek, kind of mentioned it earlier, but it's great to see the deployments for Meta this quarter. I'd love if you could maybe just double click on when you say the potential for possibly more than one to two exabytes for Meta this year. Like, what exactly does that mean, and what exactly influences that comment?

A: The use of 'possibly more' means we're confident about the one to two range for FY 2026. We're still working with Meta and have to take it one step at a time. We'll update on the ramp as we execute on Q3 and Q4.

Q: Can you talk about the strength of FlashBlade E in the quarter and did that impact product gross margins? And Charlie, you've talked about a higher level of investment that you need to make this year because of growth with hyperscalers. Does that in any way impact your density roadmap for DFM modules? And is that impacting gross product gross margins?

A: We saw broad-based strength across the board, including FlashBlade E. Gross margin strength is attributed to broad-based strength, good mix across product and software portfolio, and sales teams' discounting discipline. The roadmap for density on direct flash modules affects gross margins, along with software enhancements like enhanced data reduction.

Q: I wanted to follow-up on one of your comments regarding Q3 highlights with the early-stage engagements with the hyperscalers. I can see the, you know, looking to replace the hard disk side of their legacy investments, but the SSD-based investments, your comment that you're looking to replace those SSD-based investments, does that mean they are kind of rip and replace with direct flash, or is that they're kind of hold with what they've got and they'll operate in kind of a multi-vendor environment for Flash?

A: Hyperscalers generally don't do rip and replace. It's about new builds. We provide better performance, reliability, and durability with our direct flash technology, applicable to both hard disk and SSD tiers of storage.

Q: Based on your guide, how we think about the split between product versus subscriptions, you know, and related to that, not just on the revenue side, but thinking about gross margins as well, should we expect continued momentum here in gross margin? Above and beyond where it was last year on the subscription gross margins?

A: You have to evaluate the pace at which product revenue growth materializes. There's a mix effect from royalty revenue, product mix, and pricing. Product revenue is growing, and subscription revenue is also growing. Subscription gross margin is higher, and we intend to grow both product and subscription revenue to maximize margins.

Q: VaaS is going and hiring reps and hyperscalers. What are you seeing competitively from them and other players in the space around the hyperscalers and neo clouds?

A: We compete well in the AI space, including enterprise and hyperscaler markets. We have a breadth of portfolio to meet enterprise and Neo Cloud storage needs. We see other competitors in some deals, but our broad portfolio gives us an advantage in serving various needs, including GPU as a service providers.

Q: So Charlie and Tarek, I think you both separately kind of referenced strength in the quarter. Both from a clouds clearing perspective. And I think Tarek mentioned, Chris, more was helped by product mix. Can you kind of help us understand kind of the demand drivers in the quarter? And what I mean by that is how did the macro progress as you walk through the quarter? Did demand strengthen? And maybe can you touch on some of the different verticals where you saw strengthening demand throughout the quarter to get a sense for how we should think about the second half of the year?

A: The quarter was fairly steady with above-typical linearity. There was strength throughout the quarter, indicating strong macro and increased pipeline of large deals. We're seeing expansion opportunities across various verticals, indicating both secular and macro strength.