Pure Storage stock rocketed higher Wednesday after the enterprise data storage company reported third-quarter earnings and sales that beat expectations. The company also said it had won a "design win" with a top-four hyperscale cloud provider for its DirectFlash data storage technology.
Pure Storage said reported adjusted earnings of 50 cents per share on sales of $831 million for its quarter that ended Nov. 3. Analysts polled by FactSet projected the Santa Clara, Calif.-based company would post adjusted earnings of 41 cents per share on sales of $815 million. For the same period a year earlier, Pure Storage posted adjusted earnings of 50 cents per share on sales of $763 million.
For the current quarter, Pure Storage guided for sales of $867 million. Analysts were previously projecting $856 million January-ending quarter, according to FactSet. The company now expects fiscal year sales of $3.15 billion, up from guidance for $3 billion it gave in August.
On the stock market today, Pure Storage stock rallied 22% to close at 65.27. That marks the stock's highest level since July.
A big factor for the stock's surge, according to analysts, was that Pure Storage announced what it called a design win with a top-four hyperscaler
"Pure Storage results and guidance were something of a mixed bag (better revenues, but lighter margins), however investor focus was solely on Pure Storage's announcement that they have won a program with a top-tier hyperscale data center operator that will see that customer incorporate Pure Storage software and DirectFlash Modules," wrote Wedbush analyst Matt Bryson, who rate Pure Storage stock as outperform.
Cloud Hyperscale Design Win; 'The Eagle Has Landed'
Pure Storage did not name the company in its press release, but the term is typically applied to tech giants Amazon, Microsoft, Google and Meta.
Pure Storage teased the design win at an analyst presentation in June. It is a big step for the company's push to convince major enterprise buyers to switch to its flash storage from the standard hard disk drives.
"This is the first ever design win to provide flash for standard hyperscaler storage and it is the vanguard for flash storage providing all online storage in major hyperscale environments in the future," Pure Storage Chief Executive Charles Giancarlo told analysts on a conference call Tuesday. "For reference, the hyperscale market is responsible today for 60% to 70% of all hard disk drives purchased globally."
Analysts were debating when Pure Storage would announce the hyperscaler design win in the weeks leading up to the report. Pure Storage stock had soared out to an 80% gain in the first half of the year based on optimism about a recovery for the overall data storage market, helped by AI. But shares of Pure Storage were slumping following a so-so second quarter report in late August.
The hyperscaler win could help rebuild momentum.
"The eagle has landed," as William Blair analyst Jason Ader wrote early Wednesday. Ader, who rate Pure Storage stock a positive outperform, added that Pure Storage's Q3 results were "solid" but investors were "pleased (and relieved) with the announcement of the top-four hyperscaler design win and its implications for Pure's future market opportunity."
Pure Storage Stock Technical Ratings
With Wednesday's gains, Pure Storage stock is back within range of an all-time high of 70.41 shares reached in June. Pure Storage stock also overtook its 200-day moving average for the first time since late October.
Coming into the report, Pure Storage stock had an IBD Composite Rating of 70 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
