Key Stats for Pure Storage Stock
- Pre-market Price Change for Pure Storage stock: -11%
- $PSTG Share Price as of Dec. 2: $95
- 52-Week High: $101
- $PSTG Stock Price Target: $92
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What Happened?
Pure Storage (PSTG) stock is down over 11% in pre-market despite reporting third-quarter results that beat Wall Street expectations. The data storage company posted adjusted earnings of $0.58 per share, matching analyst estimates, while revenue of $964.5 million was 16% higher than last year and exceeded the $956 million expected.
Operating profit hit a company record at $196 million, representing a 20.3% operating margin. Pure Storage also delivered strong cash generation with $53 million in free cash flow for the quarter.
The company raised its full-year revenue guidance to $3.63-$3.64 billion, reflecting 14.7% year-over-year growth at the midpoint. That’s up from the previous guidance of 14% growth. Management also significantly boosted operating profit expectations, increasing the outlook by over 330 basis points.
So why did PSTG stock get hit so hard? The sell-off appears tied to concerns about future profitability rather than current performance.
Management indicated it plans to increase investments in research and development and sales and marketing in fiscal 2027 to capitalize on growth opportunities in both the enterprise and hyperscale markets.
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What the Market Is Telling Us About PSTG Stock
The market’s adverse reaction to PSTG stock suggests investors are worried about margin compression next year.
While management reaffirmed its commitment to year-over-year operating margin expansion, the emphasis on increased spending raised red flags for some investors who had gotten used to strong margin improvement.
Pure Storage also announced it’s exploring different business models for its hyperscale customers, which could change the gross margin profile of that revenue stream in fiscal 2027.
The company has already exceeded its full-year target of 1-2 exabytes of hyperscale shipments through the third quarter and expects more shipments in the fourth quarter.
Management noted rising memory and component costs across the industry but said Pure Storage’s dynamic pricing model should allow it to pass through higher costs without significantly impacting gross margins.
PSTG increased inventory by 76% sequentially to secure key components and mitigate supply chain risks.
Despite the guidance uncertainty, PSTG stock fundamentals remain solid. It grew its customer base by 258 new customers in the quarter and now serves 63% of the Fortune 500.
Annual recurring revenue increased 17% to $1.8 billion, while total remaining performance obligations jumped 24% to $2.9 billion.
Pure Storage’s Enterprise Data Cloud strategy is gaining traction with customers looking to modernize their data infrastructure for AI workloads.
The company launched Pure Storage Cloud for Azure during the quarter, enabling seamless migration from on-premises VMware environments to the cloud.
While PSTG stock took a hit on investment concerns, the company’s strong market position in enterprise storage and growing presence in hyperscale deployments suggest the business trajectory remains positive.
Investors will be looking for more clarity on fiscal 2027 margins when the company reports fourth-quarter results.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
