Pure Storage(US:PSTG)2025-08-27 22:02Financial 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]