Pure Storage Faces Disappointing Guidance for Q4

In a recent development, Pure Storage shares are experiencing a significant decrease in late trading after the enterprise storage company provided disappointing guidance for its fiscal fourth quarter ending in January. This underwhelming forecast is primarily attributed to a combination of a business model transition and the delayed fulfillment of a large customer order.

According to the latest reports, Pure shares have fallen 13.3% to $32.88 during after-hours trading.

However, it is important to note that there were no concerning issues with the company's performance in the October quarter. Pure Storage reported a revenue of $762.8 million for the period, marking a 13% increase compared to the previous year. These figures surpassed both the company's forecast of $760 million and the Street consensus evaluated by FactSet, which stood at $761 million. Non-GAAP operating income was recorded as $169.1 million, surpassing the company's projected figure of $135 million. On an adjusted basis, Pure earned 50 cents per share, exceeding the consensus by ten cents. Under generally accepted accounting principles, the company earned 21 cents per share.

Despite the favorable results in the October quarter, the stock is now facing concerns due to the guidance provided. Pure Storage has predicted a revenue of $782 million for the January quarter, indicating a 3.5% decrease compared to the previous year and significantly lower than the consensus estimate of $919 million. The company also expects non-GAAP operating income for the quarter to be $150 million, falling short of the Street expectation of $199 million.

For the entire fiscal year ending in January, Pure estimates its revenue to reach $2.82 billion, reflecting a modest 2.5% increase, which falls below the Street consensus estimate of $2.96 billion. Furthermore, the company slightly adjusted its full-year non-GAAP operating margin estimate to 16%, up from the previous figure of 15.7%.

In regards to the softer January quarter guidance, Pure Storage identified two key factors. Firstly, there has been stronger-than-expected adoption of the company's storage-as-a-service offering, resulting in reduced upfront revenue compared to their traditional business model. The company now anticipates a 3 percentage point headwind to revenue instead of the initially expected 1 to 2 points. Additionally, Pure disclosed that the outlook was influenced by a $41 million telco product order, which is no longer expected to be fulfilled until the fiscal year of January 2025.

Rest assured, Pure Storage is actively assessing and addressing these challenges as they move forward.