Shares of data center storage rivals Pure Storage Inc. and NetApp Inc. took a hit in extended trading today, despite posting earnings and revenue that beat expectations, but both companies were completely overshadowed by Nutanix Inc.
Nutanix crushed Wall Street’s estimates, sending its stock soaring more than 15% after-hours. Pure Storage’s stock fell more than 16% in the after-hours market action, while NetApp’s were down over 5% after both companies warned of longer sales cycles.
Pure Storage reported second-quarter earnings before certain costs such as stock compensation of 44 cents per share on revenue of $763.8 million during the second quarter, which ended Aug. 4. The results were better than expected, with analysts looking for earnings of just 37 cents on revenue of $756 million. All told, the company delivered a net profit of $35.6 million, up from a loss of $7.1 million in the same quarter one year ago.
Meanwhile, NetApp delivered first quarter earnings before certain costs of $1.56 per share on total sales of $1.54 billion, up 8% from a year ago and also coming in ahead of expectations. Wall Street had forecast the company to deliver a profit of just $1.45 per share on slightly lower sales of $1.53 billion. Net income for the period came to $248 million, up from $149 million one year ago.
Of the three storage companies, the best performance came from Nutanix, which posted fiscal fourth-quarter earnings of 27 cents per share on sales of $548 million, up 10% from the year-ago period. That contrasted well with the Street’s forecast of just 20 cents per share in earnings and $537.7 million in sales.
Pure Storage
With regard to Pure Storage, the most disappointing thing for investors was its outlook. The company said it’s lowering its annual guidance for subscription-as-a-service sales to $500 million, down from its earlier forecast of almost $600 million. Even so, the company maintained its overall sales projection of $3.1 billion.
Revenue from subscription services was the major bright spot during the quarter, rising 25% from a year earlier to $361.2 million. For the last couple of years, the company has been pushing customers to transition from one-off hardware purchases to subscription-based storage platforms in order to secure more recurring revenue.
NAND Research Inc. analyst Steve McDowell told SiliconANGLE the increase in subscription sales was the major reason for its strong performance. “It’s not surprising to see customers responding so strongly to Pure’s subscription offerings,” he said. “While every storage vendor has a subscription solution, Pure’s Evergreen is one of the most attractive on the market.”
Pure Storage Chairman and Chief Executive Charles Giancarlo (pictured above) echoed those thoughts, saying that in a world where energy demands are soaring, moving from disk-based storage to the company’s flash-based drives is an easy choice.
“Businesses can grow their data storage and reduce their energy footprint with Pure on a platform that eliminates existing data silos and simplifies customers’ data centers with guaranteed service-level agreements,” he said.
Despite that optimistic outlook, Giancarlo told analysts on a conference call that the company is currently experiencing a “lengthening” of negotiations for larger subscription deals. However, the company offered strong guidance for the current quarter, saying it anticipates revenue of $815 million, ahead of Wall Street’s forecast of $811 million.
McDowell said the after-hours decline in Pure Storage’s share price was a direct consequence of those elongated sales cycles, which are the reason for its lower short-term guidance. However, he said he thinks the company will continue to outperform the rest of the storage market in terms of subscription sales.
He also pointed to the company’s high-density QLC-based products, such as the FlashArray//E and FlashBlade//E, as a reason for optimism. “These products compete directly against traditional hard-drive based systems for nearline storage, and show that enterprises are starting to choose flash storage over HDD as replacement cycles occur,” he explained.
Pure Storage specializes in flash-based data storage hardware and also sells subscription-based software for managing data storage. Prior to today, its stock had gained more than 70% in the year to date.
NetApp
NetApp also reported a big increase in subscription-based sales, saying that its annual recurring revenue from all-flash storage arrays rose from $2.8 billion one year ago, to $3.4 billion at the end of the quarter, representing a healthy 21% gain.
The company also reported total billings of $1.45 billion at the end of the quarter, up from $1.3 billion a year ago. Billings is a key performance metric that approximates the amounts that the company has billed to customers in the quarter that have not yet been paid. In other words, it’s a gauge of future revenue from subscription-based services.
Digging into the company’s numbers, NetApp reported hybrid cloud revenue of $1.38 billion, up from $1.28 billion a year earlier, and public cloud revenue of $159 million, compared to $154 million a year ago.
For the current quarter, NetApp is looking for revenue of $1.64 billion at the midpoint of its guidance range, which is just above the $1.63 billion estimate from Wall Street analysts. The company also boosted its full-year outlook to $6.58 billion, up from an earlier forecast of $6.55 billion.
NetApp CEO George Kurian (above) hailed the company’s strong performance. “We started fiscal 2025 on a high note, delivering strong revenue growth and setting records for first quarter operating margin and earnings per share,” he said.
NetApp, which sells both flash-based memory and standard disk storage, has been on a tear this year, with its stock up more than 50% prior to today’s decline.
Nutanix
Nutanix’s strong after-hours performance was driven not only by its solid results, but also its bullish full-year guidance. For fiscal 2025, it said it’s aiming for total revenue of $2.435 billion to $2.465 billion, with the midpoint of that range coming in ahead of the Street’s target of $2.43 billion.
The company also sees an adjusted operating margin rate of between 15.5% and 17%, above analysts’ forecasts.
During the quarter, Nutanix’s annual contract value billings, which is a similar metric to the one used by NetApp, increased 21% to $338 million. Meanwhile, the average contract duration expended slightly, from 3.0 years to 3.1 years, the company said.
Nutanix CEO Rajiv Ramaswamy (above) told SiliconANGLE that he believes fiscal 2025 will be a good year for generating sustainable growth and profitability, adding that all of the company’s major performance indicators show improvements from where it was a year earlier.
“We’re setting ourselves up to be the platform for the future, for running apps everywhere,” he said. “We’ve made big strides in becoming the platform for running containerized apps.”
McDowell agreed that Nutanix appears to be firing on all cylinders, adding that much of this is down to the overall strength of its combined offerings and its expanded set of partners.
“Nutanix has also grown its market reach in the past several quarters with new strategic relationships with Cisco, Dell and Nvidia,” the analyst said. “Dell’s is the most notable, but each of these partners is starting to sell more bundled Nutanix solutions. This has a growing impact on Nutanix’s revenue and will only increase over the coming quarters.”
The company also warned investors that it’s seeing longer sales negotiations, but McDowell said that’s primarily because it’s targeting larger and more complex enterprise deals, where risk tolerance is lower and evaluation times are longer.
“It’s a good problem to have and should only impact short-term revenue, not long-term success. Nutanix has the right product mix,” he said.
Prior to today’s price movements, Nutanix’s stock was up by about 11% in the year to date.