Pure Storage's Strong Q2 Performance and Raised Guidance Outpace NetApp in the Data Storage Sector

The data storage sector is undergoing a seismic shift as enterprises prioritize cloud-native solutions to manage AI-driven workloads and hybrid infrastructure. In this evolving landscape, Pure Storage (PSTG) has emerged as a standout performer, leveraging its cloud-first strategy to outpace traditional players like NetApp (NTAP). The company's Q2 2025 results and updated guidance underscore its momentum, while its valuation dynamics highlight a stark contrast with NetApp's more conservative approach.

Pure Storage: Cloud-Native Momentum and Aggressive Growth

Pure Storage's Q2 2025 (fiscal 2026) results were nothing short of impressive. Total revenue hit $861 million, a 13% year-over-year increase, driven by a 15% rise in subscription services revenue to $414.7 million. Its subscription Annual Recurring Revenue (ARR) surged 18% to $1.8 billion, reflecting strong customer retention and adoption of its recurring revenue model. The company also raised its full-year revenue guidance to $3.6–3.63 billion, implying 13.5–14.5% growth, up from prior expectations of 11%.

Pure's strategic focus on cloud-native infrastructure is paying dividends. Its Storage as a Service (STaaS) offerings saw 24% growth in Total Contract Value (TCV), while partnerships with hyperscalers like Meta validate its position in AI-optimized storage. Products like FlashBlade Exa and FlashArray XLR5 are tailored for AI training and low-latency workloads, aligning with the industry's shift toward compute-intensive applications.

Valuation-wise, Pure commands a trailing P/E of 150.15 and a P/S of 6.1x, reflecting investor confidence in its high-growth trajectory. While these multiples appear elevated, they are justified by its 18% ARR growth and 17.7% non-GAAP operating margin. The company's EV/EBITDA of 53.25 and PEG ratio of 1.69 suggest a premium valuation, but this is offset by its leadership in cloud-native storage and recurring revenue scalability.

NetApp: Traditional Strength Meets Cloud Transition

NetApp, by contrast, reported Q2 2025 (fiscal 2025) net revenues of $1.66 billion, a 6% year-over-year increase, with hybrid cloud revenue at $1.49 billion and public cloud at $168 million. While its all-flash array annualized net revenue run rate grew 19% to $3.8 billion, its cloud segment remains a smaller portion of its business compared to Pure's.

NetApp's strategic pivot toward AI and cloud-native solutions is evident in partnerships with Google Cloud and AWS, as well as innovations like NetApp ASA A-Series and ONTAP AI ransomware protection. However, its non-GAAP operating margin of 29% and GAAP operating margin of 21% highlight its stronger profitability relative to Pure.

Valuation metrics tell a different story. NetApp trades at a P/E of 18.06, P/S of 3.45, and EV/EBITDA of 13.44, significantly lower than Pure's. Its PEG ratio of 2.98 suggests investors are overpaying for its growth potential, but its $2.22 billion in cash and 28% non-GAAP operating margin provide a buffer for strategic investments.

Contrasting Momentum and Valuation Dynamics

The key divergence lies in their strategic execution and market positioning. Pure Storage's cloud-native focus has driven 13–15% revenue growth and 18% ARR expansion, supported by a 15.1% non-GAAP operating margin. Its raised guidance for 2026 (13.5–14.5% growth) reflects confidence in its platform's adoption, particularly in AI and hybrid cloud environments.

NetApp, while profitable, is transitioning from a traditional storage model. Its 6% revenue growth and 29% non-GAAP margin highlight operational efficiency but lag behind Pure's cloud-native acceleration. NetApp's lower valuation multiples make it appear undervalued, but its 2.98 PEG ratio indicates skepticism about its growth trajectory.

Investment Implications

For investors, the choice hinges on risk appetite and growth expectations. Pure Storage is a high-conviction play for those betting on the cloud-native and AI storage boom, despite its premium valuation. Its 18% ARR growth and 14% full-year guidance justify the risk, especially as enterprises increasingly prioritize scalable, subscription-based solutions.

NetApp, on the other hand, offers a more conservative bet with its strong cash reserves, 29% margins, and lower valuation multiples. While its cloud transition is slower, its $6.5–6.7 billion full-year revenue guidance and 28% non-GAAP operating margin provide downside protection.

Conclusion

Pure Storage's Q2 performance and raised guidance underscore its dominance in the cloud-native storage race, outpacing NetApp's traditional model. While Pure's valuation appears stretched, its 18% ARR growth and 14% revenue guidance align with the sector's long-term trends. NetApp, though profitable, faces the challenge of catching up in a market increasingly defined by agility and AI readiness. For investors, the data suggests a tilt toward Pure Storage for growth and NetApp for stability, depending on their strategic outlook.