Pure Storage, Nvidia provides AI-ready infrastructure

Pure Storage Inc. New York Stock Exchange: PSTG is a provider of enterprise flash data storage solutions in the computing and technology industry benefiting from the artificial intelligence (AI) boom. AI applications require high-power GPUs currently dominated by Nvidia Co. NASDAQ:NVDA and the enormous data storage capacity, which Pure Storage offers through its FlashBlade flash array storage systems. The combination of both hardware components is essential for AI-ready infrastructure (AIRI).

Pure Storage and Nvidia have already collaborated on AIRI based on Nvidia DGX systems using FlashBlade//S. Pure Storage shares rose 23% to all-time highs in its fiscal fourth-quarter 2024 earnings report.

Big name clients

Pure Storage boasts a list of world-class AI giants using its FlashBlade storage solutions, including Meta Platform Inc. NASDAQ: META, Amazon.com Inc. NASDAQ:AMZN, Salesforce Inc. New York Stock Exchange: CRM, Alphabet Inc. NASDAQ:GOOGLAND Equinix Inc NASDAQ: EQIX. Pure Storage serves nearly 60% of the Fortune 500 as customers, having added 6 more in the fiscal fourth quarter for a total of 349 companies.

Migration to the consumer price model

In the previous quarter, Pure Storage shares had taken a 15% cut as the market interpreted the loss of revenue as a sign of weak demand rather than recognition of booking-like revenue from migrating to a subscription model. Instead of publishing upfront revenue, a consumption model collects its revenue in the form of a subscription.

This is an accounting measure that has changed as enterprise customers move from a product-centric model to the Evergreen//One consumer Software-as-a-Service (SaaS) subscription pricing model.

Moving to a consumer pricing model allows for easier onboarding of new customers with low startup costs that increase as more storage is consumed. This has also been experienced by C3.ai Inc. NYSE:AI in 2023, when they too have changed. This time the market realized that Pure Storage’s fiscal fourth-quarter revenue data indicated a decline of 2.5% year-over-year, but instead focused on subscription services revenue, which was up 24% year-over-year. annual. Check the heat map of the sector on MarketBeat.

Compete with HDD

Traditional HDDs are even cheaper for higher capacity than SSDs. Pure Storage competes with HDD manufacturers such as Seagate Technology Holdings plc NASDAQ:STX for storage solutions. While FlashBlade systems are faster with faster read/write speeds, have lower latency, take up less space and consume less power, HDDs offer better value for money with much cheaper costs per terabyte. HDDs are playing catch-up in terms of speed, while SSDs are playing catch-up in terms of capacity and lower prices. Over 90% of cloud data storage currently uses HDD, but AI workloads require high-performance storage, which is an age-old advantage for Pure Storage.

Strong growth in subscription revenue

Pure Storage reported fiscal fourth-quarter 2024 earnings per share of 50 cents, beating consensus estimates by 6 cents. Revenue fell 2.5% year over year to $789.81 million from $784.31 million. This is due to the continued migration of enterprise customers to the consumer model. Subscription services revenue in the fourth quarter of 2024 increased 24% year-over-year to $328.9 million. Q4 2024 annual recurring revenue (ARR) increased 25% year-over-year to $1.4 billion. Fourth quarter 2024 GAAP margin was 72% and non-GAAP margin was 73.7%. Total cash and cash equivalents amounted to $1.5 billion.

Raise the bar

Pure Storage raised its fiscal first-quarter 2025 revenue forecast to $680 million versus analysts’ consensus estimates of $669.5 million. Full-year fiscal 2025 revenues are expected to be approximately $4.1 million versus $3.15 billion.

Comments from the CEO

Charlie Giancarlo, CEO of Pure Storage, commented: “Our data platform strategy is revolutionizing the storage industry. It helps enterprises and service providers unify fragmented data environments into a seamless, modern, and efficient system – a system ready for performance for artificial intelligence.”

Giancarlo continued: “And all of this can now be done with the reliability, performance and affordability of Flash, even at the price levels of hard disk systems.” Giancarlo also indicated that the company has signed a “remarkable” eight-figure Evergreen/One contract with one of the largest GPU cloud providers of AI infrastructure solutions in the world. He also noted that more and more customers are realizing that their fragmented data storage environment may be hindering their ability to leverage AI.

Pure Storage analyst ratings and price targets I’m on MarketBeat. Pure Storage peers and competitor actions can be found with MarketBeat Stock Screener.

Daily double bottom

The daily candlestick chart on PSTG illustrates the symmetrical triangle breakout pattern. This included a descending upper trend line that formed at $45.22 on February 9, 2024, indicating lower highs, and a ascending lower trend line formed at $38.78 on February 21, 2024, indicating higher lows. The daily relative strength index (RSI) has risen through the overbought 70 band, rising to the 78 band. Pullback support levels are at $52.14, $47.58, $45.22 and 42.52 $.

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