Pure Storage’s (PSTG) Q3 Earnings to Gain From Flash Adoption

Pure Storage Inc.PSTG is scheduled to report third-quarter fiscal 2018 earnings on Nov 28. We expect the company to deliver strong results driven by rapid adoption of its flash-based solutions.

The company’s expanding product portfolio which includes platforms like NVMe, Purity FlashBlade, 75 blades up to 8 PB of storage, Object Storage, and Active Cluster is a key catalyst, in our view.

Notably, the company beat the Zacks Consensus Estimate for earnings in the trailing four quarters, with an average positive surprise of 41.33%. Last quarter, the company delivered a positive earnings surprise of 21.43%.

Moreover, the top-line performance has been consistent. The company has beaten the Zacks Consensus Estimate for revenues in all of the trailing four quarters.

Pure Storage, Inc. Price and EPS Surprise

Pure Storage, Inc. Price and EPS Surprise | Pure Storage, Inc. Quote

Pure Storage expects third-quarter fiscal 2018 revenues in the range of $267-$275 million. The Zacks Consensus Estimate is currently pegged at $272 million.

Pure Storage’s stock has returned 62.1% year to date, substantially outperforming the 31.1% rally of the industry .

Rapid Traction in Flash Storage Market

Pure Storage is rapidly gaining traction in the flash storage market, which is evident from its expanding customer base. In the second quarter, the company added more than 350 customers, bringing the total base to 3,700 organizations with nearly 25% of Fortune 500 customers.

Notably, 25% of the total revenues come from cloud customers. Increased spending from top 25 customers has been a major growth driver. Additionally, robust demand for FlashArray and FlashBlade products is projected to boost the top line.

During the quarter, FlashBlade array won “Best Innovation in AI Hardware” at AI Summit 2017. The recognition reflects growing clout of the solution among artificial intelligence (AI), deep learning and machine learning practitioners.  

Zenuity, a joint venture between Volvo Cars and Autoliv, selected FlashBlade and NVIDIA Corporation’s NVDA DGX-1 solution for its machine learning project to put the safest autonomous vehicles on the road by 2021. UC Berkeley’s genomics department and Man AHL were other notable customers who selected FlashBlade.

FlashStack solution, which is a joint offering from Pure Storage and Cisco Systems Inc. CSCO , was selected by the likes of Mississippi Community College Board (MCCB) and San Diego Padres during the quarter.

Pure Storage also announced the availability of the Copy Automation Tool (CAT) for SAP systems. The solution reduces time taken to copy SAP database significantly and cut SAP-related storage and management costs by up to 90% annually. CAT runs directly on FlashArray//M and FlashArray//X.

Why a Likely Positive Surprise?

Our proven model shows that Pure Storage is likely to beat earnings due to the favorable combination of Zacks Rank #3 (Hold) and +18.52% Earnings ESP . You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter .

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Stock to Consider

Here is a stock that, per our model, has the right combination of elements to post an earnings beat in its upcoming release.

Micron Technology Inc. MU has an Earnings ESP of +1.60% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. The company is set to report first-quarter fiscal 2018 earnings on Dec 19, 2017.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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