Pure Storage(PSTG) - 2026 Q3 - Quarterly Report

Revenue Performance - Product revenue for Q3 FY2026 was $534.8 million, an 18% increase from $454.7 million in Q3 FY2025[172] - Subscription services revenue for Q3 FY2026 was $429.7 million, a 14% increase from $376.3 million in Q3 FY2025[172] - Total revenue for Q3 FY2026 reached $964.5 million, a 16% increase from $831.1 million in Q3 FY2025[172] - Subscription Annualized Recurring Revenue (ARR) at the end of Q3 FY2026 was $1.84 billion, reflecting a 17% year-over-year growth[178] - Total remaining performance obligations (RPO) at the end of Q3 FY2026 were $2.9 billion, indicating a 24% year-over-year growth[179] - Revenue in the United States grew 22% in Q3 FY2026, from $561.9 million to $683.2 million[175] - Revenue from the rest of the world grew 4% in Q3 FY2026, from $269.2 million to $281.3 million[175] Product Development and Expenses - The introduction of new products at Pure//Accelerate included the general availability of Pure Storage Cloud Azure Native and FlashArray//X R5[157] - The company expects research and development expenses to increase in absolute dollars to support product development and operational scale[165] - Sales and marketing expenses are anticipated to rise as the company invests in capturing growth opportunities, particularly in the enterprise market[166] - Total product cost of revenue decreased by $2,964 thousand (2%) in Q3 2026 compared to Q3 2025, while total subscription services cost of revenue increased by $21,890 thousand (23%) in the same period[182] - Product gross margin improved to 72% in Q3 2026 from 66% in Q3 2025, driven by royalties from hyperscaler shipments and a favorable product mix[182] - Research and development expenses increased by $56,278 thousand (28%) in Q3 2026 compared to Q3 2025, primarily due to higher employee compensation and related costs[186] - Sales and marketing expenses rose by $37,987 thousand (15%) in Q3 2026 compared to Q3 2025, mainly due to increased employee compensation and travel costs[188] - General and administrative expenses increased by $25,959 thousand (39%) in Q3 2026 compared to Q3 2025, driven by higher employee compensation and related costs[192] Financial Position and Cash Flow - Cash, cash equivalents, and marketable securities totaled $1.5 billion at the end of Q3 2026, sufficient to fund operating and capital needs for at least the next 12 months[197] - A $500 million revolving credit facility was established in June 2025, replacing a prior $300 million facility, with proceeds available for general corporate purposes[199] - The company may pursue acquisitions or investments in complementary businesses and technologies to support growth opportunities[198] - U.S. Dollar denominated borrowings under the Credit Facility bear interest at a base rate with a margin ranging from 0% to 0.50% or the term SOFR rate with a margin from 0.875% to 1.50%[200] - As of the end of Q3 fiscal 2026, there were no outstanding borrowings, and the company was in compliance with all covenants under the Credit Facility, maintaining a Consolidated Net Leverage Ratio of 3.5:1[201] - Outstanding letters of credit increased from $7.2 million at the end of fiscal 2025 to $13.5 million at the end of Q3 fiscal 2026[202] - The company repurchased approximately 0.6 million shares at an average price of $87.23 per share for a total of $53.3 million during Q3 fiscal 2026, and 3.9 million shares for $215.4 million in the first three quarters of fiscal 2026[203] - Net cash provided by operating activities increased from $545.1 million in the first three quarters of fiscal 2025 to $612.1 million in fiscal 2026, driven by higher net income and stock-based compensation[205] - Capital expenditures in the first three quarters of fiscal 2026 amounted to $197.8 million, supporting the Evergreen//One offering and data center expansion[208] - Net cash used in financing activities during the first three quarters of fiscal 2026 was $449.966 million, primarily due to share repurchases and tax withholding remittances[210] - The company had cash, cash equivalents, and marketable securities totaling $1.5 billion at the end of Q3 fiscal 2026, with a potential $7.0 million decrease in fair value due to a hypothetical 1.00% increase in interest rates[219][220] Foreign Currency and Other Income - Adverse changes in foreign currency exchange rates of 10% could have resulted in an approximate $8.8 million impact on income before income taxes at the end of Q3 fiscal 2026[222] - Other income increased by $38,461 thousand in the first three quarters of fiscal 2026 compared to the same period in fiscal 2025, primarily due to gains from the sale of equity securities[195]