News

Pure Storage PSTG reported non-GAAP earnings per share (EPS) of 50 cents in fourth-quarter fiscal 2024, which beat the Zacks Consensus Estimate by 11.1%. The company reported non-GAAP EPS of 53 cents in the prior-year quarter.

Total revenues decreased 3% from the year-ago reported quarter to $789.8 million. However, revenue’s beat the Zacks Consensus Estimate by 1%.

Strong demand for subscription-based offerings particularly Evergreen//One and Portworx acted as catalysts amid macroeconomic weakness.

For fiscal 2024, the company reported revenues of $2.8 billion, up 3% year over year. Subscription services revenues of $1.2 billion rose 26% year over year. PSTG noted that the total contract value (TCV) sales for Evergreen//One and Evergreen//Flex exceeded $400 million in fiscal 2024.

Pure Storage, Inc. Price, Consensus and EPS Surprise

Quarter in Detail

Product revenues (contributing 58% to total revenues) amounted to $460.9 million, down 15.4% on a year-over-year basis.

Subscription services revenues (42%) of $328.9 million rose 24% on a year-over-year basis.

We expected Product and Subscription services revenues to be $502.8 million and $279.2 million, respectively, for the fiscal fourth quarter.

Subscription annual recurring revenues (ARR) amounted to nearly $1.374 billion, up 25% on a year-over-year basis. Subscription ARR includes the annualized value of all active subscription contracts as of the last day of the quarter, along with annualized on-demand revenues.

Total revenues in the United States and International were $522 million and $268 million, respectively.

Margin Highlights

The non-GAAP gross margin expanded 290 basis points (bps) year over year to 73.7%.

The non-GAAP Product gross margin expanded 420 bps year over year to 73.4%. The non-GAAP Subscription gross margin was 74.1%, which contracted 10 bps on a year-over-year basis.

Non-GAAP operating expenses, as a percentage of total revenues, were 53.7% compared with 51.3% in the prior-year quarter.

Pure Storage reported non-GAAP operating income of $157.8 million compared with $158.6 million in the year-ago quarter. The non-GAAP operating margin was 20% compared with 19.6% in the prior-year quarter.

Balance Sheet & Cash Flow

Pure Storage exited the fiscal fourth quarter that ended on Feb 4 with cash, cash equivalents and marketable securities of $1.5 billion, up from $1.35 billion as of Nov 5, 2023.

Cash flow from operations amounted to $244.4 million in the fiscal fourth quarter compared with $158.4 million in the prior-year quarter. Free cash flow was $200.9 million compared with $113.3 million in the prior-year quarter.

In the fiscal fourth quarter, the company returned $21.4 million to shareholders by repurchasing 0.6 million shares. For fiscal 2024, it returned $135.7 million to shareholders by repurchasing 4.7 million shares. It has $145 million left from its previously announced $250 million share repurchase plan. PSTG also announced a new buyback authorization worth $250 million.

Deferred revenues increased 15.1% year over year to $1.595 billion in the quarter under review.

The remaining performance obligations at the end of the fiscal fourth quarter totaled $2.3 billion, up 31% year over year. The metric represented total committed non-cancelable future revenues.

Guidance

Management expects fiscal 2025 revenues to be $3.1 billion, indicating a rise of 10.5% from the year-earlier levels. The company expects strengthening demand trends to drive performance but remains wary of the volatile macroeconomic conditions.

The non-GAAP operating margin is suggested to be 17%. TCV sales for Evergreen//One & Evergreen//Flex subscription service offerings are forecast to be $600 million, implying 50% growth from a year ago.

Pure Storage expects revenues to be $680 million for first-quarter fiscal 2025, representing an increase of 15.4% from the year-ago reported figure.

The non-GAAP operating income for the fiscal first quarter is expected to be $68 million. The non-GAAP operating margin is expected to be 10%.

Zacks Rank and Stocks to Consider

Pure Storage currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks worth consideration in the broader technology space are Manhattan Associates MANH, Watts Water Technologies WTS and Microsoft MSFT. While Manhattan Associates sports a Zacks Rank #1 (Strong Buy), Watts Water and Microsoft carry a Zacks Rank of 2 (Buy) each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MANH’s 2024 EPS has increased 3.6% in the past 60 days to $3.76. Manhattan Associates’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 27.6%. Shares of MANH have surged 76.6% in the past year.

The Zacks Consensus Estimate for Watts Water’s 2024 EPS has improved 10 cents to $8.54 in the past seven days. The long-term earnings growth rate is pegged at 7.8%. Shares of WTS have jumped 14.6% in the past year.

The Zacks Consensus Estimate for Microsoft’s fiscal 2024 EPS is pegged at $11.63, indicating growth of 18.6% from the year-ago levels. Microsoft’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 8.8%. The long-term earnings growth rate is pegged at 16.2%. MSFT has gained 64.6% in the past year.

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