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01/10 23:29
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary shows strong revenue and operating profit guidance, significant subscription services growth, and positive feedback on new product offerings. The Q&A section highlights strategic engagements with hyperscalers and potential growth in high-margin areas. Despite some uncertainties, the overall sentiment is positive, with increased guidance and optimistic future growth prospects.
Revenue Revenue of $964 million grew 16% year-over-year. The growth was driven by sustained demand for differentiated data storage and management offerings, strong sales across the portfolio, and ongoing strength in the enterprise and hyperscaler business.
Operating Profit Operating profit grew 17% year-over-year to $196 million, resulting in an operating margin of 20.3%. This was positively impacted by revenue strength and robust gross margins.
Product Revenue Product revenue of $534 million grew 18% year-over-year. This includes royalties from hyperscale shipments and a portion of Portworx software revenue when sold as term licenses.
Subscription Services Revenue Subscription services revenue in Q3 reached $430 million, up 14% year-over-year, accounting for 45% of total revenue. This growth reflects the strong resonance of Evergreen//One and subscription-based offerings with customers.
Annual Recurring Revenue (ARR) ARR grew 17% to $1.8 billion, driven by the growth in subscription services and Evergreen//One offerings.
Remaining Performance Obligations (RPO) RPO grew 24% to $2.9 billion, encompassing storage-as-a-service offerings and Evergreen subscriptions.
U.S. Revenue U.S. revenue was $683 million, growing 22% year-over-year, reflecting strong domestic demand.
International Revenue International revenue was $281 million, growing 4% year-over-year, indicating slower growth compared to the U.S.
Total Gross Margin Total gross margin increased to 74.1%, with subscription services gross margin at 75.5% and product gross margin at 72.9%. Growth in product gross margins was due to a stronger mix of higher performance flash arrays, a larger proportion of Portworx software sold as term licenses, and hyperscaler shipments.
Operating Cash Flow Operating cash flow was $116 million, reflecting strong cash generation capabilities.
Free Cash Flow Free cash flow was $53 million, with a free cash flow margin on revenue of 5.5%. This was supported by capital investments in test and infrastructure equipment for data center expansion and Evergreen//One subscription growth.
Enterprise Data Cloud: Extended into Azure with Pure Storage Cloud, enabling customers to unify data across public and private environments. Expanded unified data platform with new systems like XL 190 and improved data reduction efficiency. Introduced AI Copilot for intelligent control plane, simplifying management and automating tasks.
Portworx: Continues to lead in cloud-native, Kubernetes, and container storage. Selected by major companies like NVIDIA and SiriusXM for flexibility and cost efficiency. Expanded role in Kubernetes virtualization and AI workloads.
FlashBlade//EXA: Published benchmarks showing superior performance for AI and high-performance computing, delivering data to GPUs twice as fast as competitors.
Hyperscale Shipments: Exceeded annual forecast of 2 exabytes by Q3, with continued momentum expected in Q4 and FY '27. Provides a compelling alternative to hyperscalers facing cost and power constraints.
Geographic Revenue: U.S. revenue grew 22% to $683 million, while international revenue grew 4% to $281 million. Added 258 new customers, with 63% penetration in the Fortune 500.
Financial Performance: Q3 revenue of $964 million grew 16% YoY, with operating profit up 17% to $196 million. Subscription services revenue reached $430 million, accounting for 45% of total revenue. ARR grew 17% to $1.8 billion.
Supply Chain Resilience: Prepared for potential supply chain challenges with a broad supplier base, manufacturing sites on three continents, and strong business continuity plans.
Strategic Investments: Plans to capitalize on hyperscaler revenues to increase R&D and sales/marketing investments for long-term growth. Evaluating new business models for hyperscaler business in FY '27.
Leadership Changes: Appointed Pat Finn as Chief Revenue Officer to scale sales and go-to-market strategies. Acknowledged contributions of outgoing leader Dan FitzSimons.
Global supply chain pressures: Increased commodity pricing and excess demand are expected to put pressure on global supply chains, leading to extended component lead times and higher component pricing across the technology industry.
Hyperscaler business model changes: Potential changes in gross margin economics for the hyperscaler business in fiscal year '27 could impact financial performance.
Macroeconomic environment: Economic uncertainties, including commodity pricing fluctuations, could affect revenue growth and operational costs.
Competitive pressures: The company faces competition in the data storage and management space, requiring continuous innovation and investment to maintain market share.
Operational scalability: The need for significant incremental investments in R&D and sales and marketing to sustain momentum and capture growth opportunities could strain resources.
Q4 FY 2026 Revenue: Anticipated to be in the range of $1.02 billion to $1.04 billion, representing approximately 17.1% year-over-year increase at the midpoint.
Q4 FY 2026 Operating Profit: Expected to be in the range of $220 million to $230 million, representing approximately a 47% year-over-year increase at the midpoint.
FY 2026 Revenue: Projected to be in the range of $3.63 billion to $3.64 billion, representing 14.7% year-over-year growth at the midpoint, an increase from the previously provided guidance of 14% year-over-year growth.
FY 2026 Operating Profit: Anticipated to be in the range of $629 million to $639 million, representing approximately a 13.3% year-over-year increase at the midpoint, an increase from the previously provided guidance.
Hyperscaler Business Outlook: Momentum expected to continue in Q4 FY 2026 and into FY 2027. Additional business model options and potential changes in gross margin economics for FY 2027 will be evaluated.
Commodity Pricing Impact: Increased commodity pricing and excess demand are expected to put pressure on global supply chains, potentially extending component lead times and increasing component pricing. Higher commodity pricing is expected to positively affect revenue growth.
Future Investments: Plans to capitalize on hyperscaler revenues to make significant incremental investments in R&D and sales and marketing to sustain momentum and capture additional profitable growth opportunities in the enterprise.
Share Repurchase: In Q3, the company returned $53 million to shareholders through the repurchase of 600,000 shares and offset roughly 1 million shares in employee's award withholding taxes. The company currently has $56 million of its buyback authorization remaining. They intend to update on a new share repurchase authorization at the end of fiscal year '26.
The earnings call summary shows strong revenue and operating profit guidance, significant subscription services growth, and positive feedback on new product offerings. The Q&A section highlights strategic engagements with hyperscalers and potential growth in high-margin areas. Despite some uncertainties, the overall sentiment is positive, with increased guidance and optimistic future growth prospects.
The earnings call summary shows strong revenue and subscription growth, robust free cash flow, and high-margin opportunities with Meta. The Q&A section reinforces confidence with improved macroeconomic conditions, better pipeline visibility, and strong demand for large deals. The Nutanix partnership and Fusion 2.0 introduction are additional positives. Despite some lack of detail in responses about hyperscaler engagements, the overall sentiment remains positive due to strong financial metrics and optimistic guidance.
The earnings call reflects strong financial performance with revenue and EPS growth, robust subscription services, and significant shareholder returns through buybacks. The guidance is optimistic, predicting double-digit revenue growth and a solid operating margin. Despite supply chain challenges and macroeconomic uncertainties, the Q&A section reveals steady progress with hyperscalers and no significant changes in customer sentiment. The company’s strong cash position and ongoing strategic initiatives, such as new product launches and market expansion, further support a positive outlook for the stock price over the next two weeks.
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