Pure Storage's AI-Driven Subscription Model Fuels 70% Surge in Storage-as-a-Service Sales

Pure Storage's Storage-as-a-Service sales surge 70% as enterprises embrace AI-driven subscription model

Pure Storage kicked off its 2026 fiscal year with results that underscore the shift happening in enterprise storage - away from traditional capital expenditure models and toward flexible, subscription-based consumption. The company's Q1 results showed total revenue of $778.5 million, up 12% year-over-year, while Total Contract Value (TCV) sales for its storage-as-a-service offerings jumped 70% to $95 million. This acceleration in subscription adoption comes as enterprises grapple with both supporting AI workloads and navigating economic uncertainty, including potential tariff impacts. Pure's CEO Charles Giancarlo positioned the company's Evergreen model as a hedge against ongoing economic volatility during the earnings call: In this uncertain tariff environment, our Evergreen model provides customers with pricing predictability, guaranteed SLAs (Service Level Agreements), and a trusted partner committed to transparency. The numbers released this week reflect an ongoing transformation at Pure. Subscription services revenue reached $406.3 million in Q1, up 17% year-over-year and now representing over 50% of Pure's total revenue - a milestone that reflects the strategic pivot Giancarlo has been spearheading since the company introduced its subscription offering several years ago. Annual Recurring Revenue (ARR) grew 18% to $1.7 billion, while remaining performance obligations climbed 17% to $2.7 billion. CFO Kevan Krysler, who announced his departure after more than five years at Pure, highlighted the significance of this shift: Q1 TCV sales for our Storage-as-a-Service solutions jumped 70% to $95 million, fueled by both large Evergreen//One deals defined as greater than $5 million as well as our higher velocity transactions. The subscription model offers Pure several advantages beyond predictable revenue streams. As Krysler noted, it also insulates customers from potential tariff-related price increases: With our Evergreen//One storage as a service solution, any incremental tariff costs we incur will be absorbed in our continuously improving back end life cycle economics. As a result, customer subscription rates will not be subjected to higher tariff costs." While the subscription metrics dominated the financial results, AI also emerged as a primary driver of customer demand. Giancarlo outlined three distinct ways Pure is currently capturing AI opportunities: First, we deliver industry leading high performance storage for public and private GPU farms, supporting small, medium, and large machine learning and training workloads. Second, as enterprises adopt inference engines and retrieval augmented generation or RAG to apply commercial Large Language Models to proprietary data, they need storage infrastructure that scales non-disruptively and adapts to evolving AI demands. Third, AI is accelerating the push to modernize IT by breaking down infrastructure and data silos, enabling faster, broader access to real-time information. The company's new FlashBlade//EXA platform, announced during the quarter, represents Pure's push into AI infrastructure. Giancarlo described it as "the industry's highest performing storage platform for AI and high performance computing when it is delivered later this quarter." The platform features a new disaggregated architecture designed to scale and support massive GPU clusters - aimed at easing bottlenecks for organizations trying to get the most out their AI investments (which, as we know, has been somewhat challenging). At the center of all of this is Pure's evolution from a storage vendor to a platform provider, which appears to be gaining traction with enterprise buyers. The company's Fusion 2.0 software, launched last quarter, has already attracted almost 100 customers who are using or testing it to manage their data infrastructure. Giancarlo explained: Customers are implementing their data management policies in software and applying their governance across their global data estate, ensuring consistent policy enforcement at scale and reducing human error. This platform approach seeks to address a challenge facing enterprises: the fragmentation of data across multiple storage systems and locations. As Giancarlo noted: Our Fusion software eliminates data silos, transforming fragmented storage into a unified enterprise data cloud. Pure has also made moves to capitalize on disruption in the server virtualization market. The company announced a partnership with Nutanix that will integrate the Nutanix Cloud Platform with Pure's storage platform, addressing what Giancarlo called "a major challenge in the current virtualization market." The partnership is part of a broader virtualization strategy that includes support for Kubernetes-based virtualization through Portworx and integration with Microsoft's Azure VMware Service. Pure highlighted two customer wins in this space: a global automotive manufacturer that needed to reduce costs and increase reliability across multiple manufacturing sites without disrupting production, and a global healthcare company facing infrastructure cost increases. He said: Both wins reflect a broader enterprise trend. Customers are moving away from legacy systems in favor of modern flexible infrastructure. Pure is at the forefront of this shift, helping enterprises redefine their data storage and management architectures. While enterprise adoption drives current growth, Pure's longer-term opportunity with hyperscalers continues to advance (diginomica has highlighted this previously). The company confirmed that production validation testing with Meta remains on schedule, with Pure still expecting to deliver 1-2 exabytes of storage in the second half of the year. Giancarlo said: We remain on track to deliver our anticipated 1 to 2 exabytes of this solution in the second half of the year as planned. The company also announced new collaborations with SK Hynix, adding to existing partnerships with Kioxia and Micron, positioning Pure to shape the market for flash storage in hyperscale environments. Beyond the headline numbers, Pure's financial performance demonstrated balanced growth in the current environment. Gross margin improved to 70.9% in Q1, with subscription services margin reaching 77.2%. Operating profit of $82.7 million delivered an operating margin of 10.6%, even as the company absorbed approximately $8 million in additional operating expenses due to foreign currency fluctuations. The company's geographic spead showed strength, with international revenue growing 21% to $248 million, outpacing U.S. revenue growth of 9%. Pure added 235 new customers during the quarter, bringing its penetration of the Fortune 500 to 62%. For Q2, Pure expects revenue of $845 million, representing 10.6% year-over-year growth, with operating profit of $125 million and an operating margin of 14.8%. The company maintained its full-year fiscal 2026 guidance, projecting revenue of $3.515 billion (11% growth) and operating margin of 17%. Pure Storage's Q1 results demonstrate that the company is continuing to shift from a flash storage vendor to a platform provider - a strategy that is gaining traction with enterprise customers. The 70% increase in Storage-as-a-Service bookings isn't just a financial metric - it reflects a shift in how enterprises want to consume storage infrastructure in an AI-driven world (a shift that aligns with the rest of the enterprise technology stack). We will be heading out to Las Vegas next month for Pure's annual Accelerate event, where we will be speaking to executives and customers to understand how this strategy is progressing in practice, on the ground. Stay tuned for content from that.

Pure Storage CEO: Subscription Services Opportunity Trumps Tariff Concerns

'Pure's storage-as-a-service offering, Evergreen//One, delivers the full value of our platform with Pure managing and maintaining the infrastructure with the industry's strongest service level agreements. In this uncertain tariff environment, our Evergreen model provides customers with pricing predictability, guaranteed SLAs, and a trusted partner committed to transparency,' says Pure Storage CEO Charles Giancarlo. New storage and AI-focused technology releases combined with increasing hyperscaler cloud opportunities led to a robust first fiscal quarter 2026 and strong future guidance for Pure Storage Charlie Giancarlo, chairman and CEO of the Santa Clara, Calif.-based storage leader, Wednesday told financial analysts in prepared remarks during the quarterly financial conference call that the company delivered solid performance for its first fiscal quarter, including double-digit revenue growth despite the dynamic macro environment thanks in part to its growing subscription services. Giancarlo also said that CFO Kevan Krysler is planning to leave the company to pursue new opportunities, but will remain to help transition his successor into the role. The new CFO is slated to be named in the future. [Related: Pure Storage Plans Tariff-Related Price Hikes On Hardware] Looking at the macroeconomic environment, Giancarlo said the company's near-term view for the year remains largely unchanged despite increased uncertainty. "That said, our consistent performance and disciplined execution will continue to set Pure apart as a leader in our industry," he said. "We remain confident in our ability to outpace the competition." Actually, Giancarlo said, Pure Storage has escaped some of the uncertainties caused by the Trump administration's tariffs via its Evergreen//One and Evergreen//Forever subscription services. "With tariffs top of mind for many companies, pricing of our Evergreen portfolio will remain unaffected by current tariff-related changes," he said. "Pure's storage-as-a-service offering, Evergreen//One, delivers the full value of our platform with Pure managing and maintaining the infrastructure with the industry's strongest service level agreements. In this uncertain tariff environment, our Evergreen model provides customers with pricing predictability, guaranteed SLAs, and a trusted partner committed to transparency." When asked by an analyst about the impact of the macroeconomic environment on Pure Storage's business, Giancarlo said that the company didn't see any pull in during its first fiscal quarter. "Of course, that was through April," he said. "I would say that right now, if there's a pull in, it's really a de minimis amount. Q2 might be a slightly different story, but I wouldn't say that it's going to be a substantial amount." Krysler added that when looking at the first fiscal quarter results, Pure Storage saw broad-based strength across the board in terms of traditional sales as well as Evergreen//One. "I don't think that we can specifically say Evergreen//One benefited because of the tariff or potential tariff environment, but we do think that could be an opportunity for Evergreen//One over time, possibly, and that's because we're just not planning to increase our subscription rates," he said. "In the event we incur higher tariff costs, we can actually absorb those costs in the operation of our service." When specifically asked whether Pure Storage expects improved subscription margins in the event of higher tariff costs, Krysler said the company is very efficient with leveraging its technology in general. "[We're] able to manage tariffs effectively given the agility of our manufacturing footprint and supply chain," he said. So as we sit here today, I would not see a significant burden or impact on our subscription gross margins." Giancarlo said in his prepared remarks that version 2.0 of Pure Storage's Fusion hybrid storage cloud operating model, introduced during the quarter, has received an outstanding reception, with nearly 100 customers already using or testing it to manage their data infrastructures. "Customers are implementing their data management policies in software and applying their governance across their global data estate, ensuring consistent policy enforcement at scale and reducing human error," he said. "As I shared last quarter, our Fusion v2 software eliminates data silos, transforming fragmented storage into a unified enterprise data cloud." During the Pure Storage //Accelerate conference being held next month in Las Vegas, the company will introduce new innovations to let customers create their own enterprise data clouds, which Giancarlo said will let them focus more on business outcomes instead of their infrastructure. The past quarter also saw the launch of Pure Storage's FlashBlade//EXA, which Giancarlo called the industry's highest-performing storage platform for AI and high-performance computing. It is slated to start shipping later this quarter. "Modern AI environments require a wide variety of performance levels consistently delivered across tens of thousands of GPUs," he said. "FlashBlade//EXA delivers ultra-fast data access with unmatched read and write bandwidth, using a new disaggregated architecture which scales effortlessly to support massive GPU clusters. And it provides the ease of installation, operation, management, and upgradability that Pure is known for." The first fiscal quarter 2026 also saw several important customer wins, Giancarlo said. This includes delivering high-performance storage for public and private GPU farms supporting small, medium, and large machine learning and training workloads. "As enterprises adopt inference engines and retrieval-augmented generation or RAG to apply commercial large language models to proprietary data, they need storage infrastructure that scales non-disruptively and adapts to evolving AI demands," he said. "[And] AI is accelerating the push to modernize IT by breaking down infrastructure and data silos, enabling faster, broader access to real-time information. Unlike other vendors requiring different products for different use cases, Pure's unified platform handles the full range of AI workloads with simplicity and efficiency." Pure Storage this month also unveiled a major agreement with Nutanix under which the Pure Storage platform will integrate with the Nutanix Cloud Platform to help build modern, scalable, virtualized environments purpose-built for data center-scale workloads when it becomes available generally available later this year, Giancarlo said. "Our partnership will deliver a high-performance virtualized environment providing Nutanix Cloud Infrastructure with Pure's Enterprise Data Cloud using Pure FlashArray storage," he said. Pure Storage is also helping businesses transition modern virtualization in several ways, including reducing the cost of existing virtualization solutions through efficient CPU utilization and reduction of compute cores along with Pure Portworx support for multiple modern virtualization technologies including RedHat OpenShift and other Kubernetes platforms, Giancarlo said. Pure Storage also worked with Microsoft to integrate Cloud Block Store with Azure VMware Service (AVS) to let customers lift and shift their VMware workloads and data to Azure under Microsoft's VMware license, Giancarlo said. The company is expanding this integration into a fully managed service available natively through AVS, and is expected to be generally available later this year, he said. A number of customer wins, including one with a global automotive manufacturer which used Pure Storage with a modern virtualization solution with Portworx and one with a global healthcare company which included the Pure Storage platform and Portworx to unify operations with a single workflow across the customer's application landscape, reflected what Giancarlo called a broad enterprise trend. "Customers are moving away from legacy systems in favor of modern, flexible infrastructure," he said. "Pure is at the forefront of this shift, helping enterprises redefine their data storage and management architectures. This strategic engagement drives deeper customer relationships and sets the stage for continued expansion across the business." Pure Storage's strategic collaboration with hyperscaler company Meta continues to advance, with production validation testing and solution certification on schedule, Giancarlo said. "We remain on track to deliver our anticipated 1-2 exabytes of this solution in the second half of the year, as planned," he said. When asked by a financial analyst about Pure Storage's opportunities with other hyperscalers, Giancarlo said that alliances such as the one with Meta take up to two years as next-generation data centers are designed. "It goes well beyond just the storage portion of it," he said. "It goes to compute, software, networking, all of the services that they plan to provide on that infrastructure as well," he said. "And so, if you will, the evaluation and the testing of the storage part runs along that entire process. It's not a separate process, but it runs in that process. That process is just about on time for Meta, and it's proceeding along the path that we that we imagined really almost a year ago." Pure Storage is making steady progress at about the pace expected with other hyperscalers, Giancarlo said. "It's hard to predict when one of those would turn into what we would call a fully validated design, when we are in some PoCs (proofs of concept)," he said. "That should be an indicator. But we like to have certain, if you will, guarantees or knowledge in place that we are fundamentally part of a next-generation design before we would say so in an earnings call such as this. We think we're on track, but there's still more work to be done before we can declare victory." The company Tuesday also unveiled a new collaboration with SK Hynix to deliver flash storage optimized for the energy-efficient demands of data-intensive hyperscale environments, Giancarlo said. This comes on top of similar partnerships already in place with Kioxia and Micron, he said. Pure Storage By The Numbers For its first fiscal quarter 2026, which ended May 4, Pure Storage reported total revenue of $778.5 million, up 12 percent over the $693.5 million the company reported for its first fiscal quarter 2025. This included product revenue of $372.1 million, up 6.3 percent, and subscription revenue of $406.3 million, up 17.4 percent. Pure Storage's total revenue beat analyst expectations by $8.1 million, according to Seeking Alpha. Pure Storage also reported a GAAP net loss of $14.0 million, or 4 cents per share, a significant improvement over the net loss it reported last year of $35.0 million or 11 cents per share. On a non-GAAP basis, the company reported net income of $97.6 million or 29 cents per share, down from last year's $107.3 million or 32 cents per share. Non-GAAP earnings beat analyst expectations by 4 cents per share, according to Seeking Alpha. Looking ahead, Pure Storage reiterated its full fiscal year 2026 revenue and operating margin guidance despite the elevated macroeconomic uncertainties it expects to persist in the second half. For its fiscal second quarter 2026, Pure Storage expects revenue of $845 million, which would be up by 10.6 percent year-over-year. The company also expects operating profit of $125 million and operating margin of 14.8 percent.