Pure Storage (PSTG)

Data storage solutions provider Pure Storage (NYSE:PSTG) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 20.4% year on year to $1.06 billion. On top of that, next quarter’s revenue guidance ($1 billion at the midpoint) was surprisingly good and 8.1% above what analysts were expecting. Its non-GAAP profit of $0.69 per share was 7% above analysts’ consensus estimates.

Company Overview

Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE:PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.

The Hardware & Infrastructure sector will be buoyed by demand related to AI adoption, cloud computing expansion, and the need for more efficient data storage and processing solutions. Companies with tech offerings such as servers, switches, and storage solutions are well-positioned in our new hybrid working and IT world. On the other hand, headwinds include ongoing supply chain disruptions, rising component costs, and intensifying competition from cloud-native and hyperscale providers reducing reliance on traditional hardware. Additionally, regulatory scrutiny over data sovereignty, cybersecurity standards, and environmental sustainability in hardware manufacturing could increase compliance costs.

Pure Storage competes primarily with legacy data storage vendors including Dell EMC, NetApp, Hitachi Vantara, IBM, and HPE. The company also faces competition from cloud storage services offered by major public cloud providers like AWS, Microsoft Azure, and Google Cloud.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $3.66 billion in revenue over the past 12 months, Pure Storage is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Pure Storage’s sales grew at an incredible 16.8% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows Pure Storage’s demand was higher than many business services companies.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Pure Storage’s annualized revenue growth of 13.8% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Pure Storage reported robust year-on-year revenue growth of 20.4%, and its $1.06 billion of revenue topped Wall Street estimates by 2.5%. Company management is currently guiding for a 28.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.4% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will fuel better top-line performance.

Pure Storage was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.6% was weak for a business services business.

On the plus side, Pure Storage’s operating margin rose by 7.6 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q4, Pure Storage generated an operating margin profit margin of 8.2%, up 3.4 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Pure Storage’s EPS grew at an astounding 61.7% compounded annual growth rate over the last five years, higher than its 16.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Pure Storage’s earnings can give us a better understanding of its performance. As we mentioned earlier, Pure Storage’s operating margin expanded by 7.6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Pure Storage, its two-year annual EPS growth of 18.4% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q4, Pure Storage reported adjusted EPS of $0.69, up from $0.45 in the same quarter last year. This print beat analysts’ estimates by 7%. Over the next 12 months, Wall Street expects Pure Storage’s full-year EPS of $1.99 to grow 12.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Pure Storage has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 17.4% over the last five years. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Taking a step back, we can see that Pure Storage’s margin expanded by 2.7 percentage points during that time. This is encouraging because it gives the company more optionality.

Pure Storage’s free cash flow clocked in at $201.4 million in Q4, equivalent to a 19% margin. This result was good as its margin was 1.8 percentage points higher than in the same quarter last year, building on its favorable historical trend.

We were impressed by Pure Storage’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 4.1% to $76.87 immediately following the results.

Updated: February 25, 2026 at 4:17 PM EST

Before deciding whether to buy Pure Storage or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Pure Storage is an amazing business ranking highly on our list. For starters, its revenue growth was exceptional over the last five years, and analysts believe it can continue growing at these levels. And while its operating margins reveal poor profitability compared to other business services companies, its ARR growth has been marvelous. Additionally, Pure Storage’s powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

Pure Storage’s P/E ratio based on the next 12 months is 32.9x. Looking across the spectrum of business services businesses, Pure Storage’s fundamentals clearly illustrate it’s a special business. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $92 on the company (compared to the current share price of $76.87), implying they see 19.7% upside in buying Pure Storage in the short term.