Pure Storage (NYSE:PSTG) Surprises With Q1 Sales, Quarterly Revenue Guidance Slightly Exceeds Expectations

Data storage solutions provider Pure Storage (NYSE:PSTG) announced better-than-expected revenue in Q1 CY2025, with sales up 12.3% year on year to $778.5 million. Guidance for next quarter’s revenue was better than expected at $845 million at the midpoint, 0.7% above analysts’ estimates. Its non-GAAP profit of $0.29 per share was 17.1% above analysts’ consensus estimates.

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"Pure continues to demonstrate the superiority of our technology and strategy through our steady growth and the expansion of our products and services," said Pure Storage CEO and Chairman, Charles Giancarlo.

Company Overview

Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE:PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.

Sales Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $3.25 billion in revenue over the past 12 months, Pure Storage is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Pure Storage’s 14.1% annualized revenue growth over the last five years was exceptional. This is a great starting point for our analysis because it shows Pure Storage’s demand was higher than many business services companies.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Pure Storage’s annualized revenue growth of 9.3% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Pure Storage reported year-on-year revenue growth of 12.3%, and its $778.5 million of revenue exceeded Wall Street’s estimates by 1.1%. Company management is currently guiding for a 10.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.1% over the next 12 months, an improvement versus the last two years. This projection is commendable and implies its newer products and services will spur better top-line performance.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Pure Storage was roughly breakeven when averaging the last five years of quarterly operating profits, one of the worst outcomes in the business services sector.

On the plus side, Pure Storage’s operating margin rose by 17.5 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Pure Storage generated a negative 4% operating margin.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Pure Storage’s EPS grew at an astounding 36.9% compounded annual growth rate over the last five years, higher than its 14.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Pure Storage’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Pure Storage’s operating margin expanded by 17.5 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Pure Storage reported EPS at $0.29, down from $0.32 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Pure Storage’s full-year EPS of $1.68 to grow 8.1%.

Key Takeaways from Pure Storage’s Q1 Results

We liked how revenue and EPS exceeded expectations this quarter. We were also glad its revenue guidance for next quarter slightly exceeded Wall Street’s estimates. On the other hand, subscription ARR in the quarter missed. Overall, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 1.1% to $54.51 immediately after reporting.

So should you invest in Pure Storage right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.