[Note About Forward-Looking Statements](index=3&type=section&id=Note%20About%20Forward-Looking%20Statements) This section outlines forward-looking statements in the Form 10-Q, emphasizing inherent risks and uncertainties in macroeconomic conditions, product demand, and investment plans - Forward-looking statements cover a wide range of topics including macroeconomic conditions, demand for products and subscription services (Evergreen//One), market share expansion, international investment plans, and the shift to as-a-Service offerings[9](index=9&type=chunk) - The company acknowledges that actual results may differ materially due to known and unknown risks, uncertainties, and assumptions, as detailed in the 'Risk Factors' section[9](index=9&type=chunk)[10](index=10&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Fiscal 2025 (in thousands) | Q2 Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total current assets | $2,567,279 | $2,524,738 | $(42,541) | -1.65% | | Total assets | $3,963,942 | $4,026,537 | $62,595 | 1.58% | | Total current liabilities | $1,596,541 | $1,534,408 | $(62,133) | -3.89% | | Total liabilities | $2,657,467 | $2,707,716 | $50,249 | 1.89% | | Total stockholders' equity | $1,306,475 | $1,318,821 | $12,346 | 0.94% | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Q2 Fiscal 2025 (in thousands) | Q2 Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Product revenue | $402,595 | $446,303 | $43,708 | 10.86% | | Subscription services revenue | $361,176 | $414,699 | $53,523 | 14.82% | | Total revenue | $763,771 | $861,002 | $97,231 | 12.73% | | Gross profit | $540,080 | $604,336 | $64,256 | 11.90% | | Income (loss) from operations | $24,878 | $4,871 | $(20,007) | -80.42% | | Net income | $35,674 | $47,118 | $11,444 | 32.08% | | Basic EPS | $0.11 | $0.14 | $0.03 | 27.27% | | Diluted EPS | $0.10 | $0.14 | $0.04 | 40.00% | | Metric | First Two Quarters Fiscal 2025 (in thousands) | First Two Quarters Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Product revenue | $749,979 | $818,447 | $68,468 | 9.13% | | Subscription services revenue | $707,271 | $821,040 | $113,769 | 16.09% | | Total revenue | $1,457,250 | $1,639,487 | $182,237 | 12.51% | | Gross profit | $1,035,786 | $1,140,489 | $104,703 | 10.11% | | Income (loss) from operations | $(16,896) | $(26,300) | $(9,404) | -55.66% | | Net income | $665 | $33,123 | $32,458 | 4880.90% | | Basic EPS | $0.00 | $0.10 | $0.10 | N/A | | Diluted EPS | $0.00 | $0.10 | $0.10 | N/A | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | Q2 Fiscal 2025 (in thousands) | Q2 Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Net income | $35,674 | $47,118 | $11,444 | 32.08% | | Change in unrealized net gains on available-for-sale securities | $8,291 | $85 | $(8,206) | -98.97% | | Comprehensive income | $43,965 | $47,203 | $3,238 | 7.37% | | Metric | First Two Quarters Fiscal 2025 (in thousands) | First Two Quarters Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Net income | $665 | $33,123 | $32,458 | 4880.90% | | Change in unrealized net gains on available-for-sale securities | $6,489 | $962 | $(5,527) | -85.17% | | Comprehensive income | $7,154 | $34,085 | $26,931 | 376.45% | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) | Metric | Q2 Fiscal 2025 (in thousands) | Q2 Fiscal 2026 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Balance at end of Q1 | $1,373,973 | $1,244,055 | $(129,918) | | Stock-based compensation expense | $106,861 | $119,509 | $12,648 | | Tax withholding on equity awards | $(76,183) | $(57,799) | $18,384 | | Repurchases of common stock | — | $(42,242) | $(42,242) | | Net income | $35,674 | $47,118 | $11,444 | | Balance at end of Q2 | $1,453,161 | $1,318,821 | $(134,340) | | Metric | First Two Quarters Fiscal 2025 (in thousands) | First Two Quarters Fiscal 2026 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | | Balance at end of Fiscal 2024/2025 | $1,270,094 | $1,306,475 | $36,381 | | Stock-based compensation expense | $221,478 | $217,687 | $(3,791) | | Tax withholding on equity awards | $(88,661) | $(117,946) | $(29,285) | | Repurchases of common stock | — | $(162,178) | $(162,178) | | Net income | $665 | $33,123 | $32,458 | | Balance at end of Q2 | $1,453,161 | $1,318,821 | $(134,340) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | First Two Quarters Fiscal 2025 (in thousands) | First Two Quarters Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :--------------------------------

Core Insights - Pure Storage, Inc's (PSTG) shares have gained 37.1% in the past month and 29.4% since strong quarterly results were announced on August 27 [1][8] - The stock has outperformed the Computer-Storage Devices industry, the Zacks Computer and Technology sector, and the S&P 500 composite, which grew by 12.7%, 2.9%, and 3.1% respectively [4] Price Performance - Closing at $78.73, PSTG is near its 52-week high of $80.68 reached on August 28, 2025 [4] Business Growth Drivers - Strong demand from large enterprises and ongoing momentum in FlashBlade, particularly FlashBlade//E, are key growth drivers [5] - Subscription services revenues rose 14.8% to $414.7 million, with annual recurring revenues (ARR) reaching nearly $1.8 billion, up 18% year-over-year [6][8] - The introduction of new storage systems in the Flash portfolio aims to address high-performance and scalable workloads [7] - The launch of the Enterprise Data Cloud (EDC) enhances data and storage management capabilities [8] Financial Health - Pure Storage exited the fiscal second quarter with cash and cash equivalents of $1.5 billion, and cash flow from operations was $212.2 million [9] - The company returned $42 million to shareholders through share repurchases [10] Future Outlook - For fiscal 2026, PSTG expects revenues between $3.6 billion and $3.63 billion, indicating a 14% year-over-year growth at the midpoint [11] - Analysts have revised earnings estimates upward, reflecting bullish sentiment [12] Competitive Landscape - Despite strong performance, Pure Storage faces competition in the flash-based storage market and potential delays in enterprise cloud migrations due to macroeconomic uncertainties [13][14] Valuation Concerns - PSTG is trading at a forward Price/Earnings ratio of 36.41X, significantly higher than the industry average of 19.47X, raising concerns about its valuation [15] Investment Recommendations - Current sentiment suggests that new investors should wait for a better entry point, while existing investors are advised to retain their holdings [16][17]

Core Viewpoint - Kerrisdale Capital is shorting Pure Storage Inc. due to its belief that the company is poorly positioned to capture significant market share in cloud and AI infrastructure spending [1][3]. Company Positioning - Kerrisdale Capital describes Pure Storage's core product as having little chance of adoption by hyperscalers, suggesting that the company's narrative around its new quad-level cell (QLC) flash-based products is unrealistic and ignores fundamental storage architecture principles [2][3]. - The report highlights Pure Storage's modest growth rate, declining competitive differentiation, and weak positioning in the AI and cloud infrastructure sectors, asserting that the company's product capabilities are "narrow and replicable" [3][4]. Market Dynamics - Despite securing a deal with Meta, Kerrisdale believes that Pure Storage's prospects for partnerships with other major hyperscalers are bleak, predicting that the company will lose market share to emerging ultra-high-performance data infrastructure competitors [3][4]. - The report emphasizes that Pure Storage's products are undifferentiated and that its market share has remained stagnant for years, characterizing the company's core business as a "melting ice cube" in the context of ongoing enterprise workload migration to the cloud [4]. Financial Outlook - Kerrisdale anticipates that Pure Storage shares will trend lower as the company struggles to gain market share in the core enterprise storage market. The report notes that Pure Storage's software business primarily involves maintenance and support, which does not justify a Software as a Service (SaaS) multiple [5]. - Currently, Pure Storage is trading at approximately 41.3 times forward earnings, with a year-to-date stock gain of about 24% and a 62% increase over the past year [5][6].

Group 1 - MongoDB's stock experienced a record rally of 44%, leading a surge in enterprise technology companies benefiting from the artificial intelligence boom [1] - Other companies also saw significant gains, with Pure Storage rising 33%, Snowflake increasing by 21%, and Autodesk up by 8.4% [1] - The generative AI trend, which began in late 2022, has primarily benefited companies like Nvidia, Microsoft, Google, and Oracle, as well as hardware vendors like Dell and Super Micro Computer [2] Group 2 - Recent quarterly results and executive commentary have alleviated concerns regarding AI's impact on enterprise tech companies, indicating that financial benefits are beginning to materialize [3] - MongoDB's CEO noted that while enterprise rollouts of AI services are occurring, they are happening gradually, with companies cautious about further investments until they see successful outcomes [4] - MongoDB reported a 24% year-over-year revenue increase to $591 million, surpassing the average analyst estimate of $556 million, along with earnings and full-year profit and revenue forecasts exceeding expectations [4]

Core Insights - Pure Storage (PSTG) reported second-quarter fiscal 2026 non-GAAP earnings per share (EPS) of 43 cents, exceeding the Zacks Consensus Estimate by 10.3% and slightly down from 44 cents in the prior-year quarter [1][8] - Quarterly revenues increased by 13% year-over-year to $861 million, surpassing both the Zacks Consensus Estimate by 1.8% and management's guidance of $845 million, driven by strong demand from large enterprises and growth in FlashBlade and core software offerings [2][8] Financial Performance - PSTG's product revenues, which accounted for 51.8% of total revenues, reached $446.3 million, reflecting a 10.6% year-over-year increase, while subscription services revenues (48.2%) rose by 14.8% to $414.7 million [5] - Subscription annual recurring revenues (ARR) were nearly $1.8 billion, marking an 18% increase year-over-year [6] - Non-GAAP operating income is forecasted between $605 million and $625 million, indicating about 10% year-over-year growth at the midpoint, which is an improvement from prior guidance [3][4] Guidance and Market Response - For fiscal 2026, PSTG expects revenues in the range of $3.6 billion to $3.63 billion, suggesting a 14% year-over-year growth at the midpoint, which is an increase from the previously guided 11% growth [3][4] - Following the strong quarterly performance and positive guidance, PSTG shares jumped 15% in pre-market trading, with a 21% increase over the past year compared to the industry growth of 7.1% [4] Margin and Cash Flow - The non-GAAP gross margin was reported at 72.1%, slightly down from 72.8% in the prior-year quarter, while the non-GAAP operating margin decreased to 15.1% from 18.1% year-over-year [10][11] - Cash flow from operations for the quarter was $212.2 million, down from $226.6 million in the prior-year quarter, with free cash flow at $150.1 million compared to $166.6 million [12] Shareholder Returns and Obligations - In the fiscal second quarter, the company returned $42 million to shareholders through share repurchases, with $109 million remaining under its current authorization plan [13] - Remaining performance obligations totaled $2.8 billion, reflecting a 22% year-over-year increase [13] Future Outlook - For fiscal Q3, PSTG anticipates revenues in the range of $950 million to $960 million, indicating a 15% increase at the midpoint from the previous year, with non-GAAP operating income expected to be between $185 million and $195 million [14]

Financial Data and Key Metrics Changes - Revenue for Q2 FY 2026 was $861 million, representing a 13% year-over-year growth, while operating profit was $130 million with an operating margin of 15.1% [22][28] - Subscription services revenue reached $415 million, up 15% year-over-year, accounting for 48% of total revenue [26] - Total remaining performance obligations (RPO) grew 22% to $2.8 billion, reflecting robust renewals and new commitments [26] - Total gross margin remained strong at 72.1%, with subscription services gross margin at 76.5% [27] Business Line Data and Key Metrics Changes - Strong performance was noted across the entire portfolio, particularly in FlashBlade and core software and services offerings like Evergreen One, Cloud Block Store, and Portworx [22][24] - Total contract value (TCV) sales for Storage as a Service offerings grew 24% year-over-year to $125 million [24] - The FlashBlade E family showed strength, contributing to overall product gross margin improvement [88] Market Data and Key Metrics Changes - U.S. revenue was $577 million, growing 7%, while international revenue was $284 million, growing 26% year-over-year [27] - More than 300 new customers were added, maintaining a 62% penetration rate in the Fortune 500 [27] Company Strategy and Development Direction - The company is focused on the enterprise data cloud architecture, which is transforming how organizations manage data, emphasizing the shift from traditional siloed storage to a software-defined model [9][11] - Continued investment in partnerships with hyperscalers, including Meta, to enhance direct flash technology and expand market presence [25][17] - The introduction of a guidance range for financial metrics aims to align with industry practices and provide flexibility for growth opportunities [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to extend industry leadership despite a variable macro environment, citing strong execution and planning [20] - Positive momentum is expected in the second half of the fiscal year, driven by strong demand signals and an increasing pipeline of large deals [110] - The company anticipates revenue for FY 2026 to be in the range of $3.6 billion to $3.63 billion, representing a 14% year-over-year growth at the midpoint [31] Other Important Information - The company reported a strong free cash flow performance of $150 million, with a free cash flow margin of 17.4% [29] - A new partnership with Nutanix is expected to enhance customer interest and scalability in virtualization environments [58] Q&A Session Summary Question: What is driving the acceleration of growth in the back half of the fiscal year? - Management noted broad-based strength in product lines and improved visibility into the pipeline, contributing to confidence in growth forecasts [36] Question: How has the relationship with Meta evolved? - The relationship is progressing as expected, with deployments on track and revenue recognition beginning [42] Question: What factors contributed to the sequential gross margin improvement? - Management attributed the improvement to revenue mix, product mix, and pricing discipline, with Meta's contribution being less material than anticipated [48] Question: How is the engagement with other hyperscalers progressing? - Early-stage engagements are ongoing, with technology assessments and proofs of concept underway, but still in the initial phases [64] Question: What are the long-term expectations for Meta's contribution? - Management expects to achieve one to two exabytes of deployment this fiscal year, with potential for double-digit contributions in the next fiscal year [70] Question: How should the split between product versus subscriptions be viewed? - Management indicated that both product and subscription revenues are expected to grow, with subscription gross margins being higher than product gross margins [98]

Financial Data and Key Metrics Changes - Revenue for Q2 FY 2026 was $861 million, representing a 13% year-over-year growth [20] - Operating profit was $130 million, resulting in an operating margin of 15.1% [20] - Subscription services revenue reached $415 million, up 15% year-over-year, accounting for 48% of total revenue [25] - Total remaining performance obligations (RPO) grew 22% to $2.8 billion [25] - Free cash flow was $150 million, with a free cash flow margin of 17.4% [28] Business Line Data and Key Metrics Changes - Strong performance in FlashBlade and core software and services offerings, including Evergreen One, Cloud Block Store, and Portworx [20][6] - TCV sales for Storage as a Service offerings grew 24% year-over-year to $125 million [23] - Product gross margin rose to 68%, aligning with long-term expectations [26] Market Data and Key Metrics Changes - U.S. revenue was $577 million, growing 7%, while international revenue was $284 million, growing 26% year-over-year [26] - The company added over 300 new customers, maintaining a 62% penetration of the Fortune 500 [26] Company Strategy and Development Direction - The company is focused on the enterprise data cloud architecture, which transforms data management for organizations [9][13] - Continued emphasis on modernizing IT environments, including partnerships with hyperscalers and financial institutions [11][15] - The introduction of a guidance range for financial metrics to align with industry practices and allow flexibility for growth opportunities [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum and the macroeconomic environment, indicating a positive outlook for the second half of the fiscal year [36][110] - The company anticipates revenue growth of 14% year-over-year for FY 2026, with Q3 revenue expected to be between $950 million and $960 million [29][30] Other Important Information - The company recognized its first revenue from a strategic co-engineering effort with Meta during Q2 [24] - The balance sheet remains strong with $1.5 billion in cash and investments [27] Q&A Session Summary Question: What is driving the acceleration of growth in the back half of the fiscal year? - Management noted broad-based strength in product lines and improved visibility into the pipeline, contributing to confidence in forecasts [35] Question: How has the relationship with Meta evolved? - The relationship is progressing as expected, with revenue recognition beginning and confidence in achieving the forecasted deployment of one to two exabytes [40][42] Question: How much of the gross margin improvement was due to Meta shipments? - Management indicated that while Meta contributed to gross margin improvement, the majority came from product and revenue mix, as well as pricing discipline [48] Question: What are the expectations for the partnership with Nutanix? - The partnership is generating strong customer interest, with plans for general availability by the end of the year [57] Question: How are early engagements with other hyperscalers progressing? - Engagements are progressing well, with technology assessments and proofs of concept underway, but still in early stages [62] Question: What are the demand drivers observed in the quarter? - Demand was steady with above-average linearity, indicating strong macro and competitive environments, along with an increasing willingness from customers to expand their needs [110]

Financial Performance - Pure Storage achieved strong numbers across the board, including margins and guidance that topped analyst expectations [1] - Product revenue is up, along with as-a-service offerings, indicating balanced growth across products and software [2] - The company recognized its first revenue from a hyperscale environment last quarter and anticipates continued scaling in the future [6] AI and Technology Trends - AI has shifted enterprises' perspective on their data, highlighting fragmentation and prompting a need for a unified data cloud [4] - Pure Storage plays into the AI environment by selling products into both AI training and inference environments [3] - The company introduced the concept of an enterprise data cloud, enabling data storage to operate like a cloud within the enterprise for security, performance, and AI analytics [4][5] - Performance is critical in AI environments, requiring low latency and rapid delivery of vast amounts of data [9] - FlashBlade Exa, a product introduced earlier this year, has achieved top industry benchmarks [9] Market Dynamics and Strategy - North America is currently the largest market for AI, with significant buying activity also observed in the Middle East and Far East [10][11] - Pure Storage provides only flash storage, offering benefits in hyperscale environments by reducing space, power, and cooling requirements [7][8] - Strong buying signals are observed, reflecting both macro conditions and the company's industry strength [12]

Q2 Fiscal Year 2026 Performance - Total revenue reached $861 million, representing a 13% year-over-year growth[9] - Subscription Annual Recurring Revenue (ARR) hit $1.8 billion, an 18% year-over-year increase[9] - Storage as a Service offerings generated $125 million in revenue, a 24% year-over-year growth[9] - Non-GAAP operating margin was 15.1%[9] - Free cash flow was $150.1 million, resulting in a free cash flow margin of 17.4%[12, 33] Customer Satisfaction and Adoption - The company has over 13,500 global customers[9] - Net Promoter Score (NPS) reached 81, the highest in the industry[9] - 62% of Fortune 500 companies are customers[9, 31] Financial Position - Total cash and marketable securities amounted to $1.54 billion[9] - Remaining Performance Obligations (RPO) reached $2.84 billion, a 22% year-over-year growth[9] Future Outlook (Guidance) - Q3 Fiscal Year 2026 revenue is projected to be between $950 million and $960 million, indicating a year-over-year growth of 14.3% to 15.5%[57] - Q3 Fiscal Year 2026 non-GAAP operating income is expected to range from $185 million to $195 million, a year-over-year growth of 10.6% to 16.6%[57] - Fiscal Year 2026 revenue guidance was raised to $3.60 billion - $3.63 billion, reflecting a 13.5% to 14.5% year-over-year growth[59] - Fiscal Year 2026 non-GAAP operating income guidance was increased to $605 million - $625 million, an 8.2% to 11.7% year-over-year growth[59]

Financial Performance - Pure Storage's Q2 revenue reached $846 million, exceeding expectations of around $846 million [1] - Pure Storage's product revenue for Q2 was $446 million, surpassing the expected $421.7 million [2] - Pure Storage's non-GAAP earnings per share for Q2 were 43 cents, above the anticipated 39 cents [2] - Pure Storage's revenue guidance for the next quarter is $950 million to $960 million, higher than the previous expectation of $913.2 million [2] - Pure Storage has increased its full-year revenue guidance to $3.6 billion to $3.63 billion, up from the previous range of $3.52 billion [3] Market Reaction - Pure Storage's stock is up over 13% [1][3]