Pure Storage Announces Q1 FY2024 Results

Pure Storage Inc. has announced financial results for the first quarter of FY2024. With a 5% drop in revenue year-on-year, how will the recent announcements from Accelerate 2023 help drive growth during the remainder of 2023 and beyond?

Background

Pure Storage revenue for the first quarter of 2024 (Q1 FY2024) was $589.3 million, 5% down on the same quarter in FY2023. Subscription revenue was up 28% at $280.3 million, while gross margin was up slightly at 70%.

Figure 1 – Pure Storage Quarterly Revenue

The drop in revenue represents a trend experienced across the wider on-premises infrastructure sector. Dell reported an 11% drop for storage (24% for servers and networking), HPE a 5% drop, and NetApp a 6% drop in the final quarter of FY2023. Pure Storage also had a strong 2023 (particularly Q4), which obviously impacts equivalent period reporting.

Figure 2 – Pure Storage Revenue by Quarter

Subscriptions

Putting the total numbers aside for a moment, the more interesting information is shown in the subscription data. Figures 3 and 4 show subscriptions as a percentage of revenue, with a trend curve and bar chart. From the data available (Q3 FY2016 to the latest period), we can see subscription revenue has increased from around 14% to just under 50%. This transformation is vital to highlight as it demonstrates how customers want to consume on-premises infrastructure.

Figure 4 – Pure Storage Subscriptions Percentage

Accelerate

We recently covered the announcements from Pure Accelerate 2023, but to summarise, the breadth and depth of FlashArray products were increased with a new FlashArray//E and upgrades to FlashArray//X and FlashArray//C. You can listen to our podcast (embedded below) for the details.

Delivering increased revenue will come (in part) from increasing the total available market for FlashBlade and FlashArray solutions. The tipping point for customers that need to decide on whether to move away from hybrid or all-HDD systems and use all-flash is inexorably moving in a direction that makes the justification of all-flash easier. The change is being driven by multiple factors:

TCO of flash is improving compared to HDD systems when considering power draw and the extended lifetime of platforms that can easily be in place for half a decade.
HDD media capacities are not increasing in line with media in all-flash systems.
“Capacity optimised” all-flash solutions have the capability to deliver high performance I/O compared to all-HDD systems and can therefore be used to justify a purchase because the possible use cases for data applications are increased.

In terms of execution ability, Pure Storage is hitting all the right buttons to ensure customers see predictable and reducing costs while addressing the operational challenges of managing infrastructure at scale. We believe that the company is meeting what today’s customers want to see in on-premises storage infrastructure and, as a result, will continue to see revenue growth as long as these goals stay consistent.

As an example, one SLA recently introduced into Evergreen//One is the Ransomware Recovery SLA. This guarantees the shipping of replacement hardware within 24 hours and deployment within 48 hours where existing hardware is unavailable due to post-attack forensic investigation. This kind of guarantee is much more practical than some other recovery SLAs we’ve seen in the market that aim to mitigate the issues of ransomware.

Diversity

What about the rest of the business? The core hardware platforms generally get more news coverage than other parts of the portfolio, such as AIRI or Portworx. We believe that these areas of the business need to see more visibility, and we’d like to understand their impact on the bottom line.

The Architect’s View®

The Q1 numbers look steady in a challenging market for all infrastructure vendors. However, to stand still in a competitive area like on-premises storage is to effectively go backwards. Pure Storage needs and continues to advance the FlashArray and FlashBlade platforms at a pace that beats the competition.

For the Portworx platform, we don’t have separate reporting, while the company straddles being an independent entity and part of the Cloud business unit. We’ll come back next month and review the latest Portworx features as part of our Essential Features of Container-Native Storage 2023 report.

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