Pure Storage’s Q3 Earnings Call: Our Top 5 Analyst Questions

Pure Storage’s third quarter results were met with a significant negative market reaction, driven by concerns over declining operating margins despite strong year-on-year revenue growth. Management attributed the quarter’s performance to sustained enterprise demand and rapid adoption of its Evergreen One and modern virtualization solutions. CEO Charlie Giancarlo emphasized, “Our results were underpinned by continued strength in enterprise and sustained momentum in our Evergreen One and modern virtualization solutions.” The company also noted that shipments to hyperscale customers exceeded full-year forecasts earlier than anticipated, supporting the quarter’s top-line growth.

Is now the time to buy PSTG? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Pure Storage’s Q3 Earnings Call

• Amit Daryanani (Evercore ISI) asked about the impact of memory price inflation on margins. CEO Charlie Giancarlo explained that commodity pricing mostly affects top-line revenue rather than gross margins, which tend to remain stable due to the cost-plus nature of industry pricing.
• Aaron Rakers (Wells Fargo) questioned the large increase in sequential inventory. CFO Tarek Robbiati clarified this was due to tariff mitigation and strategic purchases to avoid supply chain disruptions, noting inventory levels remain low relative to company size.
• Howard Ma (Guggenheim Securities) inquired about the sustainability of high product gross margins amid a mix shift to higher-end offerings. Robbiati pointed to strong demand for premium configurations and term license software sales, cautioning that future margin dynamics may change with new revenue models.
• Samik Chatterjee (JPMorgan Chase) sought updates on hyperscaler engagements and associated investments. CTO Rob Lee highlighted ongoing projects with top hyperscalers and noted investments are directed toward direct flash, AI, and enterprise product expansion.
• Wamsi Mohan (Bank of America) pressed on whether increased investments could lead to operating margin declines. Giancarlo and Robbiati emphasized that while investments will rise, the company expects operating profit to grow year over year, though margin expansion may moderate.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) the pace of adoption for new enterprise and hyperscaler deployments, (2) the impact of evolving revenue models on gross margins—especially in the hyperscaler channel, and (3) how supply chain dynamics and commodity pricing trends affect cost structure and inventory management. Execution on R&D investments and the rollout of features like AI Copilot and Fusion will also be key indicators of competitive position.

Pure Storage currently trades at $71.11, down from $94.85 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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