Pure Storage and NetApp beat expectations and their stock jumps

Shares of the data storage pioneers Pure Storage Inc. and NetApp Inc. were trending higher in extended trading today after posting solid financial results that surpassed Wall Street’s expectations.

Pure Storage reported a first quarter net loss of $67.4 million, rising from a loss of just $11.5 million a year earlier. However, its earnings before certain costs such as stock compensation came to 8 cents per share, ahead of the analysts’ consensus estimate of 4 cents. Revenue declined 5% to $589.3 million, but still came in well ahead of the $559.8 million forecast.

Pure Storage is a leading provider of enterprise-grade flash-based data storage hardware and software that’s designed to replace traditional hard drives. The company sells flash-based capacity storage, entry-level storage, and file and object storage systems. In addition, it offers cloud-based storage-as-a-service, as well as software for managing data storage.

Charles Giancarlo (pictured), chairman and chief executive of Pure Storage, oozed confidence as he insisted that his company is now the “clear leader in data storage”, with a portfolio that can address the vast majority of enterprises’ storage needs. “The superior economics, performance, and operational and environmental efficiencies of Pure’s product portfolio over both hard disk and SSD-based, all-flash competitive offerings are now undeniable,” he stated.

The company revealed a string of impressive numbers that seem to back up those claims, with subscription services revenue rising 28% from a year earlier to $280.3 million, subscription-based annual recurring revenue rising 29% to $1.2 billion, and remaining performance obligations up 26% to $1.8 billion.

Looking to the second quarter, Pure Storage forecast $680 million in revenue, well above the analyst’s target of $658 million. It also said it expects to see “mid-to-high single-digit sales growth” for the full fiscal year.

Investors liked what they saw, as Pure Storage’s stock climbed more than 6% in extended trading.

NetApp offers positive long-term outlook

It was a similar story at NetApp, with the company’s stock ticking up more than 7% after-hours. NetApp reported a fourth quarter net income of $245 million, down slightly from a profit of $259 million one year ago. Its earnings, excluding stock-based compensation expenses and other items, came to $1.54 per share, while revenue dropped 6% to $1.58 billion.

They were strong numbers, as Wall Street had been targeting earnings of just $1.35 per share on sales of $1.54 billion.

NetApp also reported its full year fiscal 2023 results, posting revenue of $6.36 billion, up about a single percentage point from the $6.32 billion in sales it generated one year ago.

Like Pure Storage, NetApp is a provider of high-end enterprise-grade storage systems. Once upon a time the company was strictly focused on storage hardware, but these days it sees itself as more of a hybrid cloud data services and management player, with the bulk of its sales derived from the public cloud. NetApp works closely with public cloud infrastructure players such as Amazon Web Services, Google Cloud and Microsoft Azure, and also sells NetApp Ontap file storage software as a managed cloud service.

NetApp CEO George Kurian (pictured, right) said the company’s ongoing success is due to the fact that digital transformation projects involving business analytics, artificial intelligence and application modernization remain a top priority for enterprises. The implication is that NetApp’s storage services play a key role in that digital transformation.

“We deliver significant value to customers on their transformation journeys with a modern approach to hybrid, multicloud infrastructure and data management,” Kurian said. “We are entering FY24 with substantial new innovations and a more focused operating model to better address the areas of priority spending.”

NetApp’s investors are clearly buying into that argument, for not even a conservative forecast for the coming quarter would put them off. For the first quarter of fiscal 2024, NetApp said it’s expecting earnings of between $1 and $1.10 per share on sales of between $1.33 billion and $1.48 billion. Wall Street is targeting earnings of $1.20 per share on sales of $1.47 billion.

The full-year picture is looking a little better though. NetApp forecast fiscal 2024 earnings of between $5.65 and $5.85 per share and a low-to-mid single-digit revenue decline. That compares to Wall Street’s forecast of $5.58 per share in earnings on revenue of $6.22 billion, which would represent a decline of about 2% from fiscal 2023.

Photos: SiliconANGLE