Why Pure Storage Stock Is Sailing Higher After Earnings

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Pure Storage (PSTG) stock is surging in Wednesday's session after the advanced data storage company beat top- and bottom-line expectations for its fiscal 2025 third quarter and announced it had been awarded a design win from a "top-four hyperscaler."

In the quarter ended November 3, Pure Storage's revenue increased 8.9% year over year to $831.1 million. Its earnings per share (EPS) remained unchanged from the year-ago period at 50 cents.

The results beat analysts' expectations. Wall Street was anticipating revenue of $815 million and earnings of 41 cents per share, according to Investor's Business Daily.

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"Pure Storage has achieved another industry first in our journey of data storage innovation with a transformational design win for our DirectFlash technology in a top-four hyperscaler," said Pure Storage CEO Charles Giancarlo in a statement. "This win is the vanguard for Pure Flash technology to become the standard for all hyperscaler online storage, providing unparalleled performance and scalability while also reducing operating costs and power consumption."

The company anticipates test runs for the major tech firm to start in early 2025 and is targeting "large full production deployments, on the order of double-digit Exabytes" by calendar year 2026, Giancarlo said on the company's earnings call in regard to the design win. This corresponds to Pure Storage's fiscal 2027.

As a result of its strong financial performance in the first nine months of its current fiscal year, Pure Storage raised its full-year outlook. The company now anticipates revenue of approximately $3.15 billion and operating income of roughly $540 million.

This is up from its previous forecast for revenue of approximately $3.1 billion and operating income of about $532 million.

Is Pure Storage stock a buy, sell or hold?

Pure Storage was already doing well on the price charts heading into Wednesday's trading. Indeed, the tech stock was up 50% through the year to date through the December 3 close vs the S&P 500's 28.5% total return (price change plus dividends).

Unsurprisingly, Wall Street is bullish on the large-cap stock. According to S&P Global Market Intelligence, the average analyst target price for PSTG is $70.62, representing implied upside of nearly 7% to current levels. Additionally, the consensus recommendation is a Buy.

Financial services firm Needham is one of those with a Buy rating and a fresh $75 price target on PSTG stock, up from its previous target of $62.

"We expect Pure Storage to gain share from competing storage vendors on the strength of its expanding product portfolio and innovative product roadmap – both of which are underpinned by Pure Storage's Purity software," says Needham analyst Mike Cikos.

The analyst thinks PSTG'S Evergreen subscriptions are "a direct reflection of its software-based offering and its disruptive approach to the Storage market. Furthermore, growing Evergreen subscriptions are expected to benefit the economic model through improved customer lifetime value."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.