Pure Storage Q2 Net Income Jumps 32% on Strong Subscription Growth

TL;DR

**PSTG's subscription pivot is paying off with strong revenue, but watch those soaring R&D costs eating into operating profit.**

AI Summary

Pure Storage, Inc. reported a significant increase in net income for the second quarter of fiscal 2026, reaching $47.1 million, up from $35.7 million in the second quarter of fiscal 2025, representing a 31.9% year-over-year growth. Total revenue also saw a healthy increase of 12.7%, climbing to $861.0 million in Q2 fiscal 2026 from $763.8 million in Q2 fiscal 2025. This growth was driven by both product revenue, which rose 10.9% to $446.3 million, and subscription services revenue, which increased 14.8% to $414.7 million. Despite revenue growth, income from operations decreased by 80.4% to $4.9 million in Q2 fiscal 2026 from $24.9 million in Q2 fiscal 2025, primarily due to a substantial 23.8% increase in research and development expenses to $242.0 million and a 14.2% rise in sales and marketing expenses to $285.9 million. The company's cash and cash equivalents increased to $887.8 million at the end of Q2 fiscal 2026 from $723.6 million at the end of fiscal 2025, while total liabilities slightly increased to $2,707.7 million from $2,657.5 million. The shift towards subscription services continues to be a strategic focus, with subscription revenue now nearly matching product revenue.

Why It Matters

Pure Storage's robust subscription services growth, up 14.8% to $414.7 million, signals a successful transition to a more predictable revenue model, which is highly attractive to investors seeking stable, recurring income streams in the competitive data storage market. This shift positions Pure Storage more favorably against cloud vendors and traditional hardware providers by offering flexible as-a-Service solutions. However, the significant increase in R&D and S&M expenses, leading to an 80.4% drop in operating income, suggests intense investment in innovation and market penetration, which could pressure short-term profitability but is crucial for long-term competitive advantage and market share expansion. Employees and customers benefit from continued product development and service enhancements, while the broader market sees a strong contender in the enterprise data cloud space.

Risk Assessment

Risk Level: medium — The company's income from operations decreased significantly by 80.4% from $24.9 million in Q2 fiscal 2025 to $4.9 million in Q2 fiscal 2026. This decline is primarily driven by substantial increases in operating expenses, with research and development rising 23.8% to $242.0 million and sales and marketing increasing 14.2% to $285.9 million. While revenue is growing, the disproportionate increase in expenses poses a risk to sustained profitability and operational efficiency.

Analyst Insight

Investors should monitor Pure Storage's operating expense growth closely in future filings. While the shift to subscription services is positive, the sharp decline in operating income suggests that current investments are heavily impacting profitability. A 'hold' position is advisable until there's clearer evidence of operating leverage improving or a slowdown in the rate of expense increases relative to revenue growth.

Financial Highlights

debt To Equity

2.05

revenue

$861.0M

operating Margin

0.57%

total Assets

$4,026.5M

total Debt

$100.0M

net Income

$47.1M

eps

$0.15

gross Margin

70.19%

cash Position

$887.8M

revenue Growth

+12.7%

Revenue Breakdown

Key Numbers

• $47.1M — Net Income (Increased 31.9% from $35.7M in Q2 FY25 to $47.1M in Q2 FY26)
• $861.0M — Total Revenue (Increased 12.7% from $763.8M in Q2 FY25 to $861.0M in Q2 FY26)
• $414.7M — Subscription Services Revenue (Increased 14.8% from $361.2M in Q2 FY25 to $414.7M in Q2 FY26)
• $4.9M — Income from Operations (Decreased 80.4% from $24.9M in Q2 FY25 to $4.9M in Q2 FY26)
• $242.0M — Research and Development Expenses (Increased 23.8% from $195.5M in Q2 FY25 to $242.0M in Q2 FY26)
• $285.9M — Sales and Marketing Expenses (Increased 14.2% from $250.3M in Q2 FY25 to $285.9M in Q2 FY26)
• $887.8M — Cash and Cash Equivalents (Increased from $723.6M at end of FY25 to $887.8M at end of Q2 FY26)
• $1,006.2M — Current Deferred Revenue (Increased from $953.8M at end of FY25 to $1,006.2M at end of Q2 FY26)

Key Players & Entities

• Pure Storage, Inc. (company) — Registrant of the 10-Q filing
• $47.1 million (dollar_amount) — Net income for Q2 fiscal 2026
• $35.7 million (dollar_amount) — Net income for Q2 fiscal 2025
• $861.0 million (dollar_amount) — Total revenue for Q2 fiscal 2026
• $763.8 million (dollar_amount) — Total revenue for Q2 fiscal 2025
• $446.3 million (dollar_amount) — Product revenue for Q2 fiscal 2026
• $414.7 million (dollar_amount) — Subscription services revenue for Q2 fiscal 2026
• $4.9 million (dollar_amount) — Income from operations for Q2 fiscal 2026
• $242.0 million (dollar_amount) — Research and development expenses for Q2 fiscal 2026
• $285.9 million (dollar_amount) — Sales and marketing expenses for Q2 fiscal 2026

FAQ

Risk Factors

• Increased Operating Expenses [high — operational]: Research and development expenses increased by 23.8% to $242.0M and sales and marketing expenses rose by 14.2% to $285.9M in Q2 FY26. This significant increase in operating expenses, despite revenue growth, led to a sharp 80.4% decrease in income from operations to $4.9M.
• Intensifying Competition [medium — market]: The competitive landscape in the data storage market is intense. Pure Storage faces competition from established players and emerging companies, which could impact market share and pricing power.
• Reliance on Subscription Growth [medium — financial]: While the shift to subscription services is a strategic strength, a significant portion of revenue is now recurring. Any slowdown in subscription growth or increased churn could materially impact financial performance.
• Supply Chain Disruptions [medium — operational]: As a hardware-centric company, Pure Storage is susceptible to global supply chain disruptions, which could affect product availability and cost of goods sold.
• Data Privacy and Security Regulations [low — regulatory]: Increasingly stringent data privacy and security regulations globally (e.g., GDPR, CCPA) require continuous compliance efforts and could lead to penalties for non-compliance.

Industry Context

The data storage industry is characterized by rapid technological advancements and intense competition. Companies are increasingly shifting towards cloud-based solutions and subscription models to provide flexibility and scalability. Pure Storage is navigating this transition, focusing on its subscription services while maintaining its product offerings.

Regulatory Implications

Pure Storage must comply with evolving data privacy and security regulations globally, which adds complexity and potential costs. Cybersecurity threats also pose a significant risk, requiring robust security measures to protect customer data and maintain trust.

What Investors Should Do

1. Monitor operating expense growth relative to revenue.
2. Analyze the trajectory of subscription services revenue.
3. Assess the impact of increased R&D spending on innovation and competitive positioning.

Glossary

Deferred Revenue

Revenue that has been received by a company but not yet earned. It represents future obligations to deliver goods or services. (A significant portion of Pure Storage's revenue is deferred, particularly for subscription services. The increase in current deferred revenue to $1,006.2M and non-current to $904.9M indicates strong future revenue streams.)

Accumulated Deficit

The cumulative net losses of a company since its inception, minus any cumulative net profits. A negative number indicates the company has historically incurred more losses than profits. (Pure Storage still has an accumulated deficit of ($1,335.9M), indicating that despite recent profitability, past losses have not yet been fully offset.)

Operating Lease Right-of-Use Assets

Assets recognized under accounting standards for leases, representing the lessee's right to use an asset for the lease term. (The increase in these assets to $191.2M suggests the company is expanding its use of leased facilities or equipment.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its identifiable net assets. (Pure Storage has $361.4M in goodwill, indicating past acquisitions where the purchase price exceeded the net asset value of the acquired entities.)

Year-Over-Year Comparison

Compared to the prior year's second quarter, Pure Storage has demonstrated solid revenue growth of 12.7%, reaching $861.0M. However, this growth came at the cost of significantly reduced operating income, which plummeted by 80.4% due to a substantial 23.8% increase in R&D and a 14.2% rise in sales and marketing expenses. While cash reserves have strengthened to $887.8M, total liabilities have seen a slight increase. The company's strategic shift towards subscription services continues, with subscription revenue now nearly matching product revenue, a trend that warrants close observation for its impact on future profitability and margins.

Key Financial Figures

• $0.0001 — which registered Class A Common Stock, $0.0001 par value per share PSTG New York Stock

Filing Documents

• pstg-20250803.htm (10-Q) — 1579KB
• ex-101kevankryslerseparati.htm (EX-10.1) — 94KB
• ex-102offerlettertarekrobb.htm (EX-10.2) — 27KB
• ex-1012500mcreditagreement.htm (EX-10.12) — 1182KB
• ex-311q2fy2026.htm (EX-31.1) — 11KB
• ex-312q2fy2026.htm (EX-31.2) — 11KB
• ex-321q2fy2026.htm (EX-32.1) — 9KB
• 0001474432-25-000046.txt ( ) — 10109KB
• pstg-20250803.xsd (EX-101.SCH) — 54KB
• pstg-20250803_cal.xml (EX-101.CAL) — 119KB
• pstg-20250803_def.xml (EX-101.DEF) — 248KB
• pstg-20250803_lab.xml (EX-101.LAB) — 762KB
• pstg-20250803_pre.xml (EX-101.PRE) — 527KB
• pstg-20250803_htm.xml (XML) — 1266KB

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited) 1 Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Operations 2 Condensed Consolidated Statements of Comprehensive Income 3 Condensed Consolidated Statements of Stockhold ers ' Equity 4 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 26

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 36

Controls and Procedures

Item 4. Controls and Procedures 37

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 38

Risk Factors

Item 1A. Risk Factors 38

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 59

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 59

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 59

Other Information

Item 5. Other Information 59

Exhibits

Item 6. Exhibits 61

Signatures

Signatures Table of Contents NOTE ABOUT FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "anticipate," "believe," "continue," "could," "design," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "project," "should," "will" or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding macroeconomic conditions, including, among other issues, inflation, interest rates, tariffs, currency fluctuations and a slowdown in demand, our ability to sustain or manage our profitability and growth, our expectations regarding demand for our products and subscription services, including Evergreen//One, trends in the external storage market, our ability to expand market share, our expectations that sales prices may decrease or fluctuate over time, our plans to expand and continue to invest internationally, our plans to continue investing in marketing, sales, support and research and development, our shift to subscription services, including as-a-Service offerings, our expectations regarding fluctuations in our revenue and operating results, including our ability to expand sales with our current hyperscale customer and achieve design wins with new hyperscale customers, the

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. PURE STORAGE, INC. Condensed Consolidated Balance Sheets (in thousands, except per share data, unaudited) At the End of Fiscal 2025 Second Quarter of Fiscal 2026 ASSETS Current assets: Cash and cash equivalents $ 723,583 $ 887,849 Marketable securities 798,237 649,661 Accounts receivable, net of allowance of $ 940 and $ 509 680,862 530,481 Inventory 42,810 46,812 Deferred commissions, current 99,286 104,795 Prepaid expenses and other current assets 222,501 305,140 Total current assets 2,567,279 2,524,738 Property and equipment, net 461,731 544,119 Operating lease right-of-use assets 146,655 191,202 Deferred commissions, non-current 229,334 235,220 Intangible assets, net 19,074 11,143 Goodwill 361,427 361,427 Restricted cash 12,553 19,770 Other assets, non-current 165,889 138,918 Total assets $ 3,963,942 $ 4,026,537 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 112,385 $ 112,162 Accrued compensation and benefits 230,040 212,869 Accrued expenses and other liabilities 156,791 156,720 Operating lease liabilities, current 43,489 46,460 Deferred revenue, current 953,836 1,006,197 Debt, current 100,000 — Total current liabilities 1,596,541 1,534,408 Operating lease liabilities, non-current 137,277 176,253 Deferred revenue, non-current 841,467 904,867 Other liabilities, non-current 82,182 92,188 Total liabilities 2,657,467 2,707,716 Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock, par value of $ 0.0001 per share— 20,000 shares authorized; no shares issued and outstanding — — Class A and Class B common stock, par value of $ 0.0001 per share— 2,250,000 (Class A 2,000,000 , Class B 250,000 ) shares authorized; 326,102 and 328,315 Class A shares issued and outstanding 33 33 Additional paid-in capital 2,674,500 2,652,761 Accumulated other comprehensive income 954 1,916 Accumulated deficit ( 1,369,012 ) ( 1,335,889 ) Total stockholders' equit

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