Pure's Q2 2026: Contradictions Emerge on Meta's Exabytes, Evergreen//One Revenue, and Hyperscaler Progress

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $861M, up 13% YOY
• Gross Margin: 72.1%; product GM 68% (up sequentially); subscription services GM 76.5%
• Operating Margin: 15.1% (operating profit $130M)

Guidance:

• FY26 revenue expected at $3.60–$3.63B (~14% YOY at midpoint), up from prior ~11% growth outlook.
• FY26 operating profit expected at $600–$625M (~10% YOY at midpoint), >300 bps increase vs prior guidance.
• Q3 revenue expected at $950–$960M (~15% YOY at midpoint).
• Q3 operating profit expected at $185–$195M (~14% YOY at midpoint).
• Meta deployments expected at 1–2 exabytes in FY26, possibly more; FY26 hyperscaler revenue not material.
• Guidance now provided as ranges to allow investment flexibility.

Business Commentary:

• Revenue and Profitability Growth:
• Pure Storage reported revenue of $861 million for Q2 FY2026, growing 13% year over year, with an operating profit of $130 million resulting in an operating margin of 15.1%.

• This growth was driven by strong customer adoption of its platform strategy, particularly large enterprises and the momentum of FlashBlade, Evergreen One, Cloud Block Store, and Portworx.

• Subscription Services Momentum:

• Subscription services revenue in Q2 reached $415 million, up 15% year over year, accounting for 48% of total revenue.

• The growth in subscription services is due to high volume, high velocity transactions and the expanding demand for Evergreen One and subscription-based offerings.

• Hyperscaler Engagements and Meta Progress:

• Pure Storage initiated its first volume deployment with Meta, recognizing revenue in Q2 and expects further deployments to reach one to two exabytes by the end of the fiscal year.

• The advancement with Meta is driven by the strategic co-engineering effort and the potential to replace hard disk and SSD environments with Direct Flash technology.

• Financial Outlook and Guidance:

• Pure introduced a revenue guidance range for fiscal year 2026, anticipating revenue between $3.6 billion and $3.63 billion, representing a 14% year over year growth at the midpoint.
• This increased guidance reflects broad-based strength across the portfolio, strong macroeconomic conditions, and accelerating momentum in core software and service offerings.

Sentiment Analysis:

• Management beat revenue and operating profit guidance, raised FY26 outlook, and reported 13% YOY revenue growth. They cited broad-based strength, accelerating software/services momentum, and began recognizing revenue from Meta. Gross margin remained strong at 72.1%, product GM rose to 68%, and subscription services revenue grew 15% YOY to $415M (48% of revenue).

Q&A:

• Question from Amit Daryanani (Evercore): What drives the acceleration to mid-teens growth in the back half versus first-half growth?
  Response: Stronger pipeline visibility and broad-based momentum, aided by the enterprise data cloud/Fusion launches and an improving macro, are driving larger deals and higher confidence.

• Question from Aaron Rakers (Wells Fargo): Update on Meta visibility, ramp to double-digit exabytes next year, and margin profile?
  Response: Meta is on track; confident in 1–2 EB this year with royalty-like revenue at >90% margin; visibility is improving but interpreted cautiously.

• Question from Howard Ma (Guggenheim Securities): How much of gross margin improvement was from Meta shipments?
  Response: Meta was immaterial in Q2; GM improvement came mainly from product/software mix shift to higher-end solutions and pricing discipline, with Portworx also contributing.

• Question from Matt Colicci for Mike Sikos (Needham & Company): Any change to guidance philosophy beyond adding ranges?
  Response: Guidance remains data-driven; ranges align with peers and provide flexibility to invest for growth; strong RPO supports confidence.

• Question from Jason Ader (William Blair): Significance and reception of the Nutanix partnership?
  Response: High interest; first true external storage integration for Nutanix, integrated with Fusion for greater scale; GA targeted by year-end.

• Question from Eddie for Krish (TD Cowen): Progress with other hyperscalers—still early or advancing?
  Response: Early-stage but progressing: technology assessments, multiple POCs, and co-engineering underway, aided by learnings from the first hyperscaler.

• Question from Simon Leopold (Raymond James): How to think about Meta’s contribution near-term and longer term?
  Response: Expect 1–2 EB in FY26; revenue is royalty-based at >90% margin; not material to FY26 revenue, with better visibility developing.

• Question from Samik Chatterjee (JPMorgan): Expected ramp profile for other hyperscalers once won?
  Response: Too early to specify; focus is on validation and design wins, after which visibility on ramp will improve.

• Question from Eric Woodring (Morgan Stanley): What does 'possibly more than 1–2 EB' for Meta imply?
  Response: Confidence in 1–2 EB with potential upside; FY26 impact remains not material; updates will follow as execution progresses.

• Question from Ruplu for Wamsi Mohan (Bank of America): FlashBlade E strength and impact on product GM; any DFM density roadmap margin effects?
  Response: Broad-based strength and disciplined pricing drove GM; software-led data reduction and rising DFM densities also support margin.

• Question from Eric Martinuzzi (Lake Street): Will SSD environments be replaced or coexist with DirectFlash at hyperscalers?
  Response: No rip-and-replace; changes occur with new builds. DirectFlash can span all tiers with better performance and reliability.

• Question from Adia Murchin (Citigroup): How to think about product vs. subscription split and GM trajectory?
  Response: Both product and subscription should grow; GM will reflect mix (royalties, Portworx, pricing). Subscription GM remains higher; mix is hard to forecast.

• Question from Caden for James Fish (Piper Sandler): Competitive landscape vs. VAST and others at hyperscalers/neo-clouds?
  Response: Pure competes well in AI/HPC and neo-clouds; portfolio breadth across performance, block/file/object, and capacity wins multi-workload deals.

• Question from David Voigt (UBS): How did demand evolve through the quarter and by verticals?
  Response: Steady, stronger-than-typical linearity; expanding large-deal pipeline and broader customer adoption signal both macro and secular strength.