Pure Storage Margin To Expand From NAND Pricing Weakness: Analyst

Core Viewpoint - B of A Securities analyst Wamsi Mohan has revised full-year estimates for Pure Storage, Inc. (PSTG) ahead of its earnings release, forecasting first quarter fiscal 2026 revenue of $772 million and EPS of 26 cents, slightly above Street expectations [1] Group 1: Revenue and Earnings Forecast - The first quarter is typically the company's weakest seasonally, with an average sequential revenue decline of 16% since 2016 [2] - Mohan anticipates a more moderate 12% quarter-over-quarter decline, reflecting continued momentum from FlashBlade/E adoption [3] - The second quarter revenue is estimated at $835 million, slightly below the Street estimate of $839 million [4] Group 2: Operating Margin Insights - The forecasted operating margin for the first fiscal quarter is 10.7%, higher than the Street's estimate of 10.6% and the company's guidance of 10.4% [4] - The primary driver for the stronger-than-expected operating margin is robust subscription margins [4] - The analyst expects PSTG to reiterate its full-year operating margin guidance of 17% [5] Group 3: Market Conditions and Competition - A pause in enterprise IT spending is expected in the second and third quarters of 2025 due to macro uncertainty, impacting IT hardware, especially storage [6] - Increased competition from Dell Technologies' new products and aggressive pricing is anticipated to limit upside in the storage industry [6] Group 4: Long-term EPS Revisions - EPS for FY27 has been revised to $2.07 from $2.06, and FY28 to $2.46 from $2.49 [6] Group 5: Risks and Price Forecast - Upside risks include a faster recovery in the commercial segment, lower flash costs, quicker supply chain recovery, and unexpected market share gains [7] - Downside risks involve an extended economic slowdown, rising costs, intense competition, enterprise migration to the public cloud, and execution challenges [8] - The analyst maintains a Neutral rating with a price forecast of $73, citing that product growth has yet to re-accelerate and competitive pressures present margin risks [9]