Pure Storage Q3 Revenue Up 16%, Net Income Dips on Higher Costs

Ticker: PSTG · Form: 10-Q · Filed: Dec 10, 2025 · CIK: 1474432

Pure Storage, INC. 10-Q Filing Summary
FieldDetail
CompanyPure Storage, INC. (PSTG)
Form Type10-Q
Filed DateDec 10, 2025
Risk Levelmedium
Pages15
Reading Time18 min
Key Dollar Amounts$0.0001
Sentimentmixed

Sentiment: mixed

Topics: Enterprise Storage, Cloud Services, Subscription Model, Financial Performance, Operating Expenses, Net Income, Revenue Growth, Data Management

Related Tickers: PSTG, DELL, NTAP, HPE

TL;DR

**PSTG's revenue growth is solid, but rising operating expenses are eating into profits, making it a 'wait and see' for sustained bottom-line improvement.**

AI Summary

Pure Storage, Inc. (PSTG) reported a mixed financial performance for the third quarter of fiscal 2026, with total revenue increasing by 16.05% to $964.453 million from $831.072 million in the prior-year quarter. This growth was driven by a 17.59% increase in product revenue to $534.760 million and a 14.19% rise in subscription services revenue to $429.693 million. Despite revenue growth, net income decreased by 13.88% to $54.806 million from $63.639 million in the third quarter of fiscal 2025. Diluted net income per share also fell to $0.16 from $0.19. For the first three quarters of fiscal 2026, total revenue grew 13.79% to $2.603 billion, and net income increased significantly by 36.75% to $87.929 million from $64.304 million in the same period of fiscal 2025. Operating expenses rose substantially, with research and development increasing by 28.13% to $256.364 million and sales and marketing up 14.85% to $293.817 million in the third quarter of fiscal 2026, impacting quarterly profitability. The company also saw a notable increase in inventory to $82.421 million from $42.810 million at the end of fiscal 2025, and a decrease in marketable securities to $678.775 million from $798.237 million.

Why It Matters

Pure Storage's mixed Q3 results highlight the challenges of balancing growth with profitability in a competitive data storage market. While strong revenue growth, particularly in subscription services, signals continued demand for its offerings and a successful shift to an as-a-Service model, the decline in net income due to increased operating expenses could concern investors focused on bottom-line performance. This indicates that PSTG is heavily investing in R&D and sales to maintain its competitive edge against rivals like Dell EMC and NetApp, potentially sacrificing short-term profits for long-term market share and innovation. Employees might see this as a commitment to future growth, while customers benefit from ongoing product development. The broader market will watch if these investments translate into sustained profitability and market leadership.

Risk Assessment

Risk Level: medium — The risk level is medium due to declining quarterly net income despite revenue growth, indicating potential margin pressures. Net income decreased by 13.88% to $54.806 million in Q3 fiscal 2026 from $63.639 million in Q3 fiscal 2025. This is coupled with significant increases in operating expenses, such as a 28.13% rise in research and development to $256.364 million, which could continue to impact profitability.

Analyst Insight

Investors should closely monitor Pure Storage's operating expense trends and their impact on future profitability. While the strong subscription revenue growth is positive, a deeper dive into the return on investment for increased R&D and sales & marketing spending is warranted. Consider holding existing positions but deferring new investments until there's clearer evidence of expense leverage and consistent net income growth.

Financial Highlights

revenue
$964.453M
total Assets
$4,218.411M
total Debt
$100.000M
net Income
$54.806M
eps
$0.16
gross Margin
72.30%
cash Position
$852.838M
revenue Growth
+16.05%

Revenue Breakdown

SegmentRevenueGrowth
Product Revenue$534.760M+17.59%
Subscription Services Revenue$429.693M+14.19%

Key Numbers

Key Players & Entities

FAQ

What were Pure Storage's key revenue figures for the third quarter of fiscal 2026?

Pure Storage reported total revenue of $964.453 million for the third quarter of fiscal 2026, an increase from $831.072 million in the prior-year quarter. Product revenue was $534.760 million, and subscription services revenue reached $429.693 million.

How did Pure Storage's net income change in Q3 fiscal 2026 compared to the previous year?

Pure Storage's net income decreased by 13.88% to $54.806 million in the third quarter of fiscal 2026, down from $63.639 million in the third quarter of fiscal 2025.

What were the main drivers behind the change in Pure Storage's profitability?

The decline in quarterly net income was primarily driven by significant increases in operating expenses. Research and development expenses rose by 28.13% to $256.364 million, and sales and marketing expenses increased by 14.85% to $293.817 million in Q3 fiscal 2026.

What is Pure Storage's strategic outlook regarding subscription services?

Pure Storage continues its shift to subscription services, including as-a-Service offerings like Evergreen//One, as evidenced by the 14.19% growth in subscription services revenue to $429.693 million in Q3 fiscal 2026, indicating a strategic focus on recurring revenue models.

What are the primary risks Pure Storage faces according to the filing?

Forward-looking statements highlight risks such as macroeconomic conditions (inflation, interest rates, slowdown in demand), the ability to sustain profitability and growth, potential decreases or fluctuations in sales prices, and disruptions to contract manufacturers or the supply chain.

How has Pure Storage's cash flow from operating activities performed?

For the first three quarters of fiscal 2026, net cash provided by operating activities increased to $612.086 million, up from $545.090 million in the same period of fiscal 2025, demonstrating strong operational cash generation.

What is the current status of Pure Storage's inventory?

Pure Storage's inventory significantly increased to $82.421 million at the end of the third quarter of fiscal 2026, compared to $42.810 million at the end of fiscal 2025.

What impact do stock-based compensation expenses have on Pure Storage's financials?

Stock-based compensation expense was a notable non-cash adjustment, totaling $348.155 million for the first three quarters of fiscal 2026, up from $318.956 million in the prior-year period, impacting reported net income.

What is Pure Storage's approach to capital allocation, specifically share repurchases?

Pure Storage engaged in significant share repurchases, with $215.447 million used for repurchases of common stock during the first three quarters of fiscal 2026, indicating a strategy to return value to shareholders.

How does Pure Storage manage its intellectual property and competitive position?

The company emphasizes its technological leadership and market opportunity, including its ability to meet hyperscalers' performance and price requirements, and its ability to innovate and introduce new products like Pure Fusion, relying on the adequacy of its intellectual property rights to maintain its competitive position.

Risk Factors

Industry Context

The enterprise storage market is characterized by rapid technological advancements, increasing data volumes, and intense competition. Companies are shifting towards hybrid and multi-cloud strategies, demanding flexible, scalable, and efficient storage solutions. Pure Storage competes with established players like Dell EMC, HPE, and NetApp, as well as cloud providers offering their own storage services.

Regulatory Implications

Pure Storage operates under general business regulations. Potential regulatory impacts could arise from data privacy laws (e.g., GDPR, CCPA) affecting how customer data is handled and stored, and from evolving cybersecurity standards that necessitate ongoing investment in security measures.

What Investors Should Do

  1. Monitor R&D and S&M spending effectiveness.
  2. Analyze inventory levels and turnover.
  3. Evaluate subscription services growth trajectory.
  4. Assess the impact of marketable securities reduction.

Glossary

Deferred Revenue
Revenue that has been received by the company but has not yet been earned. It is recognized as revenue over time as the services are provided or goods are delivered. (A significant portion of Pure Storage's revenue is deferred ($1.029B current and $931.8M non-current), indicating a strong subscription-based model where services are paid for in advance.)
Accumulated Deficit
The cumulative net losses of a company since its inception, minus any cumulative net profits. It represents a negative retained earnings balance. (Pure Storage has an accumulated deficit of ($1,281.083M), which is common for growth-stage technology companies that reinvest heavily in R&D and market expansion.)
Marketable Securities
Short-term, highly liquid investments that can be readily converted into cash. (The company holds $678.775M in marketable securities, which represents a portion of its liquid assets that can be used for strategic investments or to meet short-term obligations.)
Goodwill
An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets. (Pure Storage has $364.742M in goodwill, suggesting past acquisitions that have contributed to its asset base and potential future growth strategies.)

Year-Over-Year Comparison

Pure Storage demonstrated solid top-line growth in the third quarter of fiscal 2026, with total revenue increasing by 16.05% year-over-year to $964.453 million. However, this growth came at the expense of profitability, as net income decreased by 13.88% to $54.806 million due to substantial increases in operating expenses, particularly R&D and Sales & Marketing. While total assets grew to $4,218.411 million, the company also saw a notable increase in inventory to $82.421 million and a decrease in marketable securities to $678.775 million, suggesting shifts in asset allocation and potential operational considerations.

Filing Stats: 4,457 words · 18 min read · ~15 pages · Grade level 18.8 · Accepted 2025-12-10 16:43:56

Key Financial Figures

Filing Documents

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 28

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 39

Controls and Procedures

Item 4. Controls and Procedures 40

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 41

Risk Factors

Item 1A. Risk Factors 41

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 62

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 62

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 62

Other Information

Item 5. Other Information 63

Exhibits

Item 6. Exhibits 64

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 Third Quarter of Fiscal 2026 ASSETS Current assets: Cash and cash equivalents $ 723,583 $ 852,838 Marketable securities 798,237 678,775 Accounts receivable, net of allowance of $ 940 and $ 204 680,862 620,959 Inventory 42,810 82,421 Deferred commissions, current 99,286 109,370 Prepaid expenses and other current assets 222,501 307,891 Total current assets 2,567,279 2,652,254 Property and equipment, net 461,731 566,336 Operating lease right-of-use assets 146,655 194,409 Deferred commissions, non-current 229,334 240,113 Intangible assets, net 19,074 9,407 Goodwill 361,427 364,742 Restricted cash 12,553 19,151 Other assets, non-current 165,889 171,999 Total assets $ 3,963,942 $ 4,218,411 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 112,385 $ 128,022 Accrued compensation and benefits 230,040 244,939 Accrued expenses and other liabilities 156,791 159,827 Operating lease liabilities, current 43,489 43,599 Deferred revenue, current 953,836 1,028,636 Debt, current 100,000 — Total current liabilities 1,596,541 1,605,023 Operating lease liabilities, non-current 137,277 181,948 Deferred revenue, non-current 841,467 931,768 Other liabilities, non-current 82,182 96,783 Total liabilities 2,657,467 2,815,522 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 330,509 Class A shares issued and outstanding 33 33 Additional paid-in capital 2,674,500 2,681,933 Accumulated other comprehensive income 954 2,006 Accumulated deficit ( 1,369,012 ) ( 1,281,083 ) Total stockholders' equity 1

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