Pure Storage (PSTG) 19 Nov 182019 Q3 Earnings call transcript

Company Profile

Participants

Matt Danziger	VP of IR
Charlie Giancarlo	CEO
David Hatfield	President
Tim Riitters	CFO
Matt Kixmoeller	VP of Product
Mark Murphy	JP Morgan
Alex Kurtz	KeyBanc Capital Markets
Katy Huberty	Morgan Stanley
Jason Ader	William Blair
Aaron Rakers	Wells Fargo
Wamsi Mohan	Bank of America Merrill Lynch
Simon Leopold	Raymond James
Rod Hall	Goldman Sachs
Andrew Nowinski	Piper Jaffray
Stephen Fox	Cross Research
David Rzyhik	Susquehanna
Eric Martinuzzi	Lake Street
Erik Suppiger	JMP Securities
Nehal Chokshi	Maxim Group

Call transcript

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Operator

Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the Pure Storage Third Quarter Fiscal 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions] I will now turn the call over to Matt Danziger, VP of Investor Relations.

conference. your begin may You

Matt Danziger

Thank you, QX the Storage Welcome good XXXX earnings afternoon. fiscal to conference Pure and call.

of Hatfield; Joining me Tim our David CFO, Giancarlo; Charlie Kixmoeller. VP and today are Riitters; our our CEO, Product, Matt our President,

current technology to and These Before you this competitive, include forward-looking which statements that make opportunity, various to and remind are we regarding will would subject management trends, risks during positioning I statements begin, our our like strategy, call and products, industry operations, margin growth for statements and future today prospects undertake obligation and based future forward-looking and model, and our operating of no are to business including Any assumptions make revenue guidance that update as we on them. and we periods. uncertainties.

may reported business materially in predicted performance. be we these public differ with should not filings. A results the uncertainties you the and to our SEC is and as risks results relating results an of and considered from to discussion contained Our indication future filings refer reported actual our and of

the playback days With our for a turn purposes. website call that, the Please and being Giancarlo. for it's Storage. new XXX and During Storage adopted revenue to release the of archive website will This this be property non-GAAP beginning is provided talking our performance press the results company's this available of year measures Also, slides. the on Investor is we measures IR the Charlie reconciliations comparable accounting and in standard see call current well our standard. being new over in broadcast discuss our this financial at with the stated accordance to earnings ASC as all Pure webcast live on for slides as I'll we about information. and more Pure recorded are CEO financial most quarter earnings in An Relations directly call, outlook are and least will the XX GAAP

Charlie Giancarlo

Thank of earnings and good everyone. Thank will and a begin our afternoon, detailed our on much today's outlook. this today's you results call week. our with a provide you, I'll very Data review Cloud us QX of call update, Matt Tim Thanksgiving summary for joining financials finally a will launch highlights the go-to-market give and and of new Services. of updated Hat the

our it reality shouldn't to be be a customers that choices to cloud. seamlessly on-prem should that and new Today, believe run that delivering This storage enable APIs of will it more consistent can than hybrid regardless cloud today based best hybrid have what's and new cloud, the between the of to where storage customers gives customers increased making make can they not lives. which everywhere, traction public it with These a the a services applications be world, them, choice to of cloud at products build of were end it the public alike. our and results results, on I'd products for set will our or were Pure. native execution based highest a we clouds on Customers the that the margins and announced of turn ranges. exceeded is Pure’s flexibility. growing voicing another in was flexibility at this unique Operating solution our These value year. significant new a of of increasingly important to our million earlier Cloud was quarter indicative the upper launch $XXX margins Services. the bottom strong This giving are across for natively strong data-centric leveraging Revenue First across guided for to Data number hybrid customers technology that both run the storage able and cloud, our clouds nowhere Cloud widely into demand cloud strategy In We of behind a is be announced infrastructure XX.X% Cloud are enterprise hybrid need data once Pure’s the do that a clear there of their forward lives. deployed we're QX what level. insight benefit quarter applications like that XX% year-over-year. is developed architecture focus evident Data a for line We On-prem and private Services cloud their remaining on seeing but vary divide capabilities all X.X%, outlined and Gross now. their customers Customers Storage businesses, these applications and way. for run technology the is build requiring seamlessly difficult that should Services. layer. few make everywhere. where this

on capabilities based on Store First, running enabling storage cloud, is industrial the expect snapshots, Store, natively block Block to replication, like capabilities end brings of storage availability Store Cloud from de-duplication and also high that Block scale Cloud critical Purity we strength the born-in-the-cloud storage arrays. new the in announced all offering beta AWS. run apps. to with mission they web Cloud Block which an applications software is enterprise of

to and public delivers flagship the it protection CloudSnap cloud build into use right based data we directly for snapshots FlashArray. Secondly, application cloud our which migration availability data to cases. both of announced copy easy makes CloudSnap, protection the

data architecture and first the we public low-cost, provides with flash-to-flash call the we retention. cloud This StorReduce, new a cost enabling simple When cloud beta is and rapid solution enable storage. both retention cloud cloud engine software for to of announced FlashBlade Third, in on-prem, a rapid combined designed to backup. a restore modern object effective availability de-duplication long-term backup, recovery,

Services data will cloud managed be solution. Lastly, all of PureX, Cloud by our management Data our

cloud a from all one is Pure cloud storage PureX place comprehensive all and control build extended products cloud, to our the now of day the products our enabling private solution. assets data from our because now one. for in provided one key customers manage manage PureX Pure to Pure to Already, our fact, With is automate being managed the In always on-prem mobility of products we seamlessly expansion has Pure data data our to end-to-end long in cloud infrastructure their delivers and hybrid have cloud clouds. cloud protection. the

it new management our Our cloud data enables customers hybrid comprehensive to enable and manage Services allowing cloud build Data Cloud Pure more powerful wherever to data solutions sits. customers

clouds. very Cloud provide Hat take quarter's excited deliver will now, better Services Hat, are to with our this response update. about and forward working And go-to-market hybrid away. partners, to to customers, early Data We it look from analysts. customers We the Pure's their

David Hatfield

was and continued new Thanks, Charlie. cycle, Pure. indeed on extended QX Services. well, Data suite partner Charlie for vision ecosystem We a as but and not noted, execute innovation cloud we of our our capitalized today announced Cloud strong unifying only quarter Pure's to

our First, customer in the exited strong. representing the than execution than more We XXX quarter quarter new with customers, additions. was more X,XXX

significantly public growth progress cloud, on our sector in now segments overall also XXX Federal our and focus and Cloud sector traction XX% and customers, improved the in public Our We results. Pure we yielded our our enterprise, Fortune saw company with outpaced U.S. business. the almost

overall contribution new trend pleased well. continue with Our productivity Repeat rates the were the purchases go-to-market customers. to continued teams teams We of from to and win held and perform sales the nicely, showcases how technology and to shifting This we multi-dimensional across management, Data Cloud single infrastructure, product a from portfolio, Services. best-of-breed on-prem our scale positively. reached portfolio a of company have cloud now

overall expand deliver ecosystem positive results. and continues Second, to partner our

as momentum GSIs across had and we quarter, national partners, our excellent FSIs. the and channel Global and During Integrators, technology Systems known alliances, Federal

Our leading announced integrations solutions. Veritas. NVIDIA with converged and with Cisco to thrive Splunk deeper continued both alliances and with And infrastructure we

two partner and resellers NVMe businesses. CEOs, specifically the was key strong, Our largest highlighting drivers as Flash notable for progress their with with national growth storage All

we on As and large including solid with and part the GSIs quarter. several markets, this our Accenture of FSIs progress made enterprise focus federal

we into a portfolio. with strategic Pure to Finally, service as with the a partnership solutions entered IBM deliver

routes the to come. our years these ecosystem market We partner will to in believe contribute and the will that fundamentally to invest in growth continue meaningfully additional to

product delight is to differentiated Third, and compared operating is our now highly portfolio continues our competition at scale. our to customers when significant

growth of file with this electronic Pure market five design strongest Synopsys players Siemens now traditional EDA, Specifically, customers notable particularly the quarters a three Mentor, counting in traction was industry FlashBlade both a In stronghold in including business. debut. automation its the one QX, top since had as the of and

for cases, including momentum dollar also industries. We represented to subscription model, in our all to market FlashArray in lead of across restore top companies significant artificial this deals more for a storage key saw We're segments seeing several global nice market also growing evergreen used quarter. rapid intelligence early wins quarter. multi-million across NVMe NVMe. XX based sales our and cloud shipments service. continues transition than number participation teams And the this we two-thirds key pricing the our added of both

Just ESX on customers like usage solutions on-prem the basis. to a cloud, flexible consume enables

most Cloud architecture the been up Today's cloud trade-offs our to with a public that organizations But on-premises Data perhaps now, Services. demand until between and a of cloud. forced to agility marks importantly, milestone Finally, launch key make have at the today modern the unified Pure customers and brings enterprise.

we have the their in work API's, We're our the automated cloud at industry and like an to for while same leading data both that are leading us. relationship in hybrid and thankful about We and delivering They customers and with revolutionizing the them protection our we now are applications the bridging we're these this on-prem at protection gap delivered Causeway public customers making cloud Pure. Pure the leading it services our love of XX.X time data building experience cloud. both time. with expand cloud given as the leading are IDT same the to summary, industries, all In hybrid exciting with net innovation two simple that their cloud. enabling that open to Essentially and edge by environments, hybrid Pure, score and agreed. well. at customers to bringing the our promoter easy of and use to And very are is excited public help for customers Capital data they strategies

Tim? enterprise global momentum we We over portfolio been to have the architectures, are sales and call partner and are cycle great Tim. and with ecosystem never With cloud stronger. our turn a I'll unifying in our that, innovation

Tim Riitters

was QX another for quarter Pure. strong Matt. Thanks,

end margin As we all margin. revenue, our gross guided and of of operating upper the measures surpassed

on Product range. United XX% guided the X international or the came for our QX of revenue year-over-year, quarter million growth of presentation revenues our Support revenue investor.purestorage.com. Revenue margin GAAP was as and as States QX XX% our note series the their the from A Total XX.X%, I gross Before driven adoption of operating of Total million upper $XX.X OpEx, end was Investor as exceeding my previous into quarter well specifics, I make from well of revenue noted. growth XX% and came non-GAAP dive Relations EPS of FlashBlade that gross XX% use are was otherwise of point available in and year-over-year. metrics margins, by in XX% execution full strong net reconciliation performance our $XXX.X comparables, I'll growth our are million to a year-over-year. these results non-GAAP was the up products. usual income, $XXX.X website numbers, Geographically, unless or markets. continued was at the one-tenth or free quarter. flow cash margin, as from will subscription

value industry consistent deliver point product performance gross differentiation. FlashArray the base two-tenth three-tenth Support deliver and our a Product largely a quarter-on-quarter point both XX.X%, to validates slightly FlashBlade to our and to lines. across sequentially XX.X%. driven decreased margins ability our gross leading of technological by subscription margins highlights strong margin of customer of gross increased Our we to

to continue our leading as invest industry team satisfaction. they customer in drive We support

of plan margin, three-tenth point operating was operating million quarter share the a quarter X,XXX quarter. or ago, in based X.X%, shares. with during and shares average share and QX share last of income $X.XX a to improvement XXX Turning same the of weighted improvement and XXX period over margin end on at year. the headcount at XXX of employees five-tenth positive another of or representing compares profitability, one-tenth positive the average on count a we a a point million of weighted four-tenth a per of operating count delivered year midpoint the an a margin This were and share to margin of income Net our the And employees, front $X.XX the contributors we momentum business. outperformance Revenue million us, period represents increase a the to to QX opportunity was net of aggressively our per beat. million $XX.X in capture continue our key to seeing invest over positive $XX.X which approximately of of we guidance. gross are based in Total to over in given

the slightly from negative cash stock from our quarter, ended plan. million positive free to This impact we our ago our million With to now our included turn $XX cash and cash up in during purchase cash the which quarter. a was negative sheet $X.X stock QX and employee plan. $XX.X Turning Free of we'll purchase a that, million a million guidance. was compares which employee of to including year $X.X flow flow $X.X quarter, investments flows, from impact positive balance with the billion, previous

full three of guided the ahead As all as we we of are are us such, and our enter QX, we for about raising year. measures the opportunities excited

of of our increase year, guidance on and $X.XXX from increase X/XXth guidance the a $X.XXX of and between X% million or and million Gross million the $XXX and the guidance. our previous at of of operating that, XX% positive a of we'll are midpoint; in we strong guided QX implied our was momentum at XX% and at in X.X% expect gross the now questions. the XX.X% launch represents excited between in hybrid and finally $XXX the XX.X% yearly range the X.X% from we midpoint, $XXX operating margins positive range about margin previously at range open range cloud the billion, a innovation full the Based or in call billion guidance. midpoint the quarter new in and which the And range or X.X% previous of and from the XX.X% For driving or XX% between the between of quarter of the expect the revenues Operator? and between midpoint, we seeing, point midpoint. X at $XX XX.X% With revenues our the XX.X% X.X increase and In midpoint. fourth billion, between $X.XXX levels midpoint; we a or the are we to our range positive point are: margins summary, are in an million margin offerings.

Operator

Mark first Murphy from Morgan. JP [Operator question instructions] from Your comes

Mark Murphy

of quite on congrats balance if the with it results. correlation timing new Tim, curious Yes, and anything the is in in mainstream a revenue early is your robust I'm of deferred like your else more words, bookings on of the or QX, Storage of In in offerings thank that you unusual some there's just and something strong subscription or there the the Evergreen Service? traction possibly growth other sheet there looks renewals like performance? it is

Tim Riitters

so the question. couple a a Yes, deferred happening more things for thanks longer-term trend. Mark, On revenue there, of of

base renewals really starting to a seeing We’re build.

their we're us. starting three And for see are on so, nice, been healthy, business when and years renewal several year to this folks we've these renewal for robust obviously now at cycles,

faster we obviously number deferred And unique in which then that's growth. of the building a more little overall quarter than So saw quarter, support elongation bit for an revenue a was this contracts. us, revenue

a that means great are making for is support a bit us what They’re buying Pure. well. more So for as contracts, bet is which longer-term little people longer

over nicely, XX% year-on-year. deferred So balance both revenue built those the of

So long-term of it's the a business. really potential the healthy in indicator

Mark Murphy

us Amazon, it's Charlie, any into it maybe StorReduce StorReduce might overall Microsoft, looks through your your going relationships kind and evolve potential accelerate could strategy. to just a cloud as or product Thank if of cetera change fit you. you your of followup with et of how Google, Wondering how And the roadmap? the to has like acquisition walk

Charlie Giancarlo

upload last Yes, as from quarter already built with data because to of StorReduce effectively their we a had separate highly Amazon an AWS, had into great relationship environment. de-duplicated mentioned us really ability

the but ability was a that, data So about also FlashBlade to Amazon backup not we on platform. for were use very case, that for excited just to directly dedupe as

customers where flash-to-flash as in some very flexibility recovery So go model innovated as real AWS other we their with that which call data. storage. have well low-cost, of think an as we And to event rapid both cloud, well long-term which new terms a gives as backup this of our we we from allows hyperscalers as forward place they the with here,

Mark Murphy

Thank much. you very

Operator

Your next question Capital comes Markets. from Alex from Kurtz KeyBanc

Alex Kurtz

Thanks guys, lots to unbundle here.

for I First these and Fed order hoping U.S. congrats color this on channel in today. meant what the go year? quarter also contribution for so momentum strong Cloud about think And into work in XXXX? great out profile, we how on the in margin could big AI, as launch indicated two start flow Tim, any provide in and quarter strong into it look leverage Your a to product you Hat, verticals obviously our we as business? operating quarter we the was during and operating additional margin the just should next some

Charlie Giancarlo

Hey, it’s our working We a We've and been about been uptick saw and and quarters sector Fed that, strategic and in Hat. several business. talking civilian. the and community both intelligence in were the on nice for progress public some with pleased Alex, we we've wins that

and really large as trend, to a and had AI So that that's wins quarter cases, we're a providers, continue for and there, we use nice rapid to the so significant driven did but building we terrific restore confident make by there. backup. that, in us quarter going of some combination one it traction AI going was doesn't have keep cloud and we to so feel a and focusing we're it's mentioned, And focus FlashBlade then

Tim Riitters

on QX into last almost with next And we're as on both in question, about at high the us think bottom certainly multiplier call, of very the a your is I overperformance have but obviously as overperformance On here of of Pure. Tim. your lot line. couple pleased today a performance. strong guiding think year, of quarters for terms this a Industry Really of as and question bottom the revenue part but even well leading I seen is going overperformance good one. on very, not a point the that gross line, And Alex, the margin as the obviously thinking at second

two right in so quarter. multiply given drop numbers bottom and any line typically And to those the

to as as QX aggressively, launched QX prepared And innovation saw so, I the overperformance at are our next in said the we here read Really, into that remarks, continues we you we pipeline. year. that wouldn't on or that something until in what looking go today investing and

We’re really invest we excited aggressively the against the we lead about have that. business in and will

about year. So that's think next how I

Alex Kurtz

Thank you.

Operator

question Huberty Stanley. from next from Your Morgan comes Katy

Katy Huberty

Thank great you are with you. up. on infrastructure conversation traditional is be how picking Good I afternoon. follow offerings questions the the a talking then really so helpful today the would announced And offering me, couple momentum, can up about? what it have Congrats multi A is hybrid if differentiated Pure’s from particularly versus data summarize cloud quarter. players, around center others

Charlie Giancarlo

in can in number is, Right. both really X demanding an focused used and they enterprise cases, most on we've really we What, of do and differentiated of that we used we're cloud. now, where One challenging performance on-prem tier the ways. And environment think of a cases. created some most the

quickly. purpose product. cloud ratios this that's something infrastructure. is high management And data software of in a to mean, able to earlier to Pure X of And in cloud, bring can flash-to-flash tier the unique get for best storage like as as comment, anything they're of natively cloud and this de-duplication was finally, storage, what occur that's our where mean, And I this on as, from a is I of was for then entire our kind, And AWS it's mentioned Second then first we looking quite plus third resiliency, advantages, an cost we're day offering, spectrum running cloud think all analytics and the first -- of events rapid one. for, high we of terms them. on-site block from its built is, the reduction was, from and customers which example long-term I the bring low that. the that's availability everything a the recovery that well very to market

differentiated. highly we're think we So

Katy Huberty

the flexibility time go you, [ph] period? evergreen helpful. do in of Where penetration What's over think today? Thank might year you a that's that three smartphones

Charlie Giancarlo

you Katy, in. came were question? sorry. Could the I'm But repeat you you garbled as

Katy Huberty

the asking where model. usage and was evergreen penetration years. Where about I flexible in might three is today that just go

Charlie Giancarlo

Perfect. that I'm to going give to Hat.

David Hatfield

Yes, Katy.

there, been really success we've serving. where we that on So markets propensity in to fashion a were really had nice buy that the markets to incremental that focusing early were they

we well. saw wins We GSI. nice So within in saw as some multi-million a uptick healthcare nice dollar

nice in, incremental so for still -- into to as build we'll we about guidance as it and saw and traction. talk provide some embed overall the then being and early QX So next mix our see as It’s it we year it's that embedded days, we’ll we well.

Katy Huberty

Great, thank you so much.

Operator

next Jason Your from William Ader Blair. comes question from

Jason Ader

thanks. Yes,

Just guess Tim, receivable, the the on and happening like I on And a forward? right -- about sorry. the looks DSL, housekeeping think level that what's going to trending it's is accounts for, why one up been

Tim Riitters

a couple of Jason Yes, things.

for all being this our has bit It DSL very to and quarter, versus earlier a mentioned Mark thing support little equal on it in the quarter overall revenue the quicker locked boost elongate question product gets from your a AR did on company. that's I that's money and going in balance people revenue. longer, revenue good basically or contract but in else this deferred So

commercial dynamics of negotiators one they selective customers more hard of terms then, our in be So in business. tend that's we'll of some seeing terms to there. a our bit little of a And more with more the little you're extended be some enterprise bit

saw that's off that's an business. well. trade given we grow little continue -- a bit that's the terms as easy of our sheet the why But so, rise to And some you as balance

Jason Ader

up? skewed linearity Wasn’t any or loading drove backend the that particular quarter end to that of the

Tim Riitters

that which No, enterprise again I support as contracts, we some see. terms business is really to nice that as are overall said happy and really well a of thing the extended elongation of

Jason Ader

I skittishness from market are you point? for, What just great. And I'm terms behavior at noticeable have the then Okay, this perspective obviously. Charlie, I changes know lot of in demand any in today a guess of seen you customer seeing

Charlie Giancarlo

speak sense on to our to tenor know us. of maybe we Overall minority I But the you of for the the market was finance small are the extent deals I a we similar of a so results, If the an Yes, for extra and keep no, to themselves, at did And that had something. jitteriness very every look attune -- quarter. think I see side to look of of open it. didn't it the quarter eyes really some quarter really was Jason, and expecting was course, the pretty to push very certainly house. and good my possibly this other

as said themselves. I and macro speak think yet. So, a didn't the I I of lot think, for results We well see executed

Jason Ader

you. Thank great. Okay,

Operator

Wells Aaron Fargo. Your next from from Rakers comes question

Aaron Rakers

on And I have should out just up. AWS, I play the curious quarter. two, the launched base? to in Yes, can start a I'm with see I Cloud follow Platform? relationships services think a as got taking for across we as to thanks the guys opportunity think Google the also level the this how I've just cloud congratulations curious us believe at I'm Azure, how appreciate we Microsoft your expect questions. can, high And if for of about you help When if then that with customer and existing you about monetization you've then we well today

David Hatfield

this the I’ll is part Aaron, Kix. over hand I’ll Hey, take to first Hat. it

and of I looking our our strategy. are cloud customers think view a a lot hybrid for multi-cloud on

our is to increases what just executives with does organization. think, conversation their what it It in I expands so, And senior mostly start relevancy. strategic

So storage Number a we we cloud one. AWS move overall be subscription monetize independent portfolio, the forward number able of software for as to think is they'll to own that's our box positive just to positive two, in for contracts. with our in starting us incremental future. think That's opportunity generally show speaking, And real have terms signs. ESX I the opportunities of maintained their as

if So to want meet to the in we can they the way the buy want for agnostic we're to multi-cloud. they cloud that? a we anything and to to they provide customer in on-prem, it want them Kix for buy add want really complete solution buy

Matt Kixmoeller

just customers great fact customers. would signs that think really I as the of feedback type both native enterprise well I from as add Yes, we're seeing traditional cloud

Now say enterprise modernize application move entire That's for they workflow. we I’d an is that finally backup the storage opportunity seamlessly from customers, resiliency cloud modernizing then, every and mission of And build past being the this apps in that point and much after for have opportunity haven't have can into it a opportunity the and opportunity. in their and the flash-to-flash it's view to can is this gone critical web we real more largely huge don't a go to in and customers to layers the them help traditional simply they scale that built to cloud develop create.

Aaron Rakers

follow product at question, particularly as gross a margin on Perfect. we look And as quick your the solid up just execution curious, I'm line.

of current through? passing the how seeing coming far pricing seen you're you've some flash Just curious how trends you're managing through as that that as pricing and

Tim Riitters

this so Yes, Tim. Aaron, is

some we're starting As to we expected, see flash declines.

bit that in here quarters we about anticipated a as continues the to several think it I last talked play quarter well back. little way and out we

differentiated and value plus. we to company of see we've But obviously as a will cost of if ourselves declines. selling sort So you on as always those opposed thought

materials deliver us about in we of the so, of margin, remarks, might as value we've able regardless because prepared what ROI looking heard in can talk them nicely, bill gross to cost the you've are ASPs customers to that the saw maintain been and you as for and be. And the overall

Aaron Rakers

Perfect, thank you.

Charlie Giancarlo

GXK I'd a add forward. when The down ways, win aggressive benefit is, in to a that sure value the only for to to aggressive of we’ll go both business get which especially it past we've we or thing said point customer, comes our make we new kind and demonstrate from that the and

the So win of to flexibility lot us gives future. it in a

Aaron Rakers

Thank you much. very

Operator

Lynch. Mohan comes question from Bank Merrill next from America Your Wamsi of

Wamsi Mohan

the are to of $X.X billion on us know the follow elaborate clearly you a and competitors yours of you guys this see size with you partly do you're if some net AWS a about can longer unification about here. you have all Charlie, And you. if; opportunity, few wondering is A, posts cloud revenue sort it Pure’s when spoken years Wondering articulated your you of sort proposition out thank term. I perspective, I thinking willing like or Yes, a cannibalistic? additive a from and just the that up. goal opportunity opportunity give

Charlie Giancarlo

of that we second components to your envisioned opportunity this, And, the that of It's with the money, an win here. see a a which win, I’ll our the we've AWS money, is first, way both of of your situation. companies as make for partner saving it's is which customers amazing. while start products win, with are part great our associated pretty it, AWS question both

we're this excited development about products. us very early has in of And that. with So a partner been good AWS the these

get not their where money there's excited a of yet here, workloads. be. their know doing there. the from early not call what it ready think fact think the to we to but doing how I to it it's because about -- In it entire best I we're will this I'm terms just first comfort we're how can the customers this and will it's Obviously, real gives the too early, the they that project a this bit resources the customers industry; we're roadmap. least Where to made press -- can your at products, exactly we that and deploy might question, quickly bit Pure, release, go be it's they as for about a put regardless we're of you to But excited of think part of like hear our

Wamsi Mohan

as it thanks it Okay, a for that. like got trajectory or about much somewhat up looks the going Thank CapEx has year? investments here something And CapEx follow-up, in ticked how And we this next you. with pertaining do cloud else? the to to should think how the of quarter-on-quarter, into is

Tim Riitters

going And that to seeing; that just in uptick A investments. both well rolling expect is one I couple for ongoing certainly some facility were on out were things there what is new the make those Yes, here cloud, we're as CapEx doing to our CapEx innovation Mountain that there we're Tim. one-time this with engineering of -- to There View. on R&D as continue dollars We're Wamsi, CapEx, continue. efforts. we're

And touches on so, putting the we're that. finishing

more So of overall anything part shot that than of to tended be you’d CapEx. on see a G&A that one-time the else,

Wamsi Mohan

thanks Okay, a lot.

Operator

next Instructions] Simon [Operator comes James. The Raymond question Leopold from from

Simon Leopold

you wanted question. to a quick thank question. I a more my clarification taking Great, trending get for of then

to be you of the levels, issues. other down you decline, some terms related October. just or we tariffs particular and understand whether sequential quarter And from July that there's gross are In if to will in that understand January should margin the leading enjoyed suggesting to wanted forecast factors were there anything

that milestones question, to if metrics certain trending broader some not the But to understand to forward you or dollar I Cloud of you. progress? give you're terms validate In see, the milestones. prepared are us I should wanted Thank thoughts there regarding us your Data we help could forecast. offer Services look a

Tim Riitters

terms So, flexibility, like a that about Simon, absolutely a earlier it us margin, on we we same the to heard the margin to this even mid. last gross the for able just guide margin that and it margin. quarter differentiated as to. have talked the when flexibility take work talk us right, you're we of, And On be put gross question you QX thing if want XX% to take product in few first gross about well. questions It the gives we in the gross at is I'll

And we we here was it well. QX in as thing did back we did same what that why guided so and the that's

we high margin right So we as us now, but for flexibility to retain the continue really want enjoying gross the obviously, grow we're to business.

Charlie Giancarlo

Yes. the products as part the that. the And we'll them on be on question second obviously about and we doing put out keeping of tabs

management think, because callers the towards they available manage today are based do being products in this to launch on we're three of as That a Cloud we Block one we overall. of Cloud individual year. Store fan call StorReduce subscription announce first available as of the to CloudSnap Two mid half these Block, the services. the next in announced and is be we identifying line for consistent know, As I go top especially not out said, new

by So, we'll on know month basis. month based service as paid you out but with we subscription a get contracts,

provide we'll we'll on up things. color these them. So, of And all take hopefully good quarter-to-quarter see

Simon Leopold

Thank you.

Operator

Hall Your Sachs. from Goldman from Rod next question comes

Rod Hall

where could for the guys, us thanks come growth wonder back or to And the about to like to an give just of kind to Hi, well, going to it. question. quantify hard there strong. very how us help a of stand I I It how would but you I commented guess, any kind sounds that wanted if think that FlashBlade, model you was it's feeling you for there. get that update

that color like give size us have then a follow anything relative that help? up. that I in or other terms any you And there is might So of could

Tim Riitters

this proportion on can that FlashBlade not I would Well, you products, we're guidance specific now a of again that point total individual say our as sales. that know out you assume substantial but at giving our is of

David Hatfield

a thing, Yes, AI there repeatability is Rod, longtime commented stronghold cases generation terrific a our that and restore, We market uptick rapid in the add analytics for the been file seeing the on for used that's I'd EDA next only we're competitors. Oracle. across of that the

are size of deals with if top in the the three have just momentum of our in of of to just very you teams global so overall of sales those going in EDA the at look segment, getting trending And all pleased for segment. And the that we're attach deals and right then kind number direction. and the five the

So very encouraging.

Rod Hall

that, point at catching FlashArray. and got like or said of Okay. it this, X know of I below originally you you sounds accelerating. be it re fell And it that times had pace but back on on up one it to caught from you that away know kind had it's at curious commenting Is the to to FlashArray track you up guys it whether expected I with just I'm may

Charlie Giancarlo

commented time the had quarters that five just I Rod, on think we was last in. Yes, ago I the come when quarter

So, go that down not path. to no, we're going

overall can XX% quarter what at the our is I said, this sales tell it are you sales As overall a growing portion alone. substantial just think, year-over-year is and that I that of we

the of rate growth good is that. FlashBlade on very a portion we’re So substantial

Tim Riitters

just thing niche QX. reasons of it's I'd FlashBlade, specific as a well, thing, itself I cases that's lot you in have momentum Rod, conversations rapid exciting saw -- the us other seeing more used of of The about Tim. I us that. I’d one in this this think is quarter restore it's a did out sort the this one On in our maybe to and what's we to here customers than is you're not played more with existing think And add the more case allowing that numbers lot is

Rod Hall

an -- on planning there? much NVMe think sure just I give you can't last, is to then fabric, could over year. or said that update of were of you'd that the us since And I guys end the guess, question wanted track just by plan okay launching on you one just say the kind one. that or I make about

Matt Kixmoeller

ship working. and just with is, fabric of on this Kix track strategy NVMe track, this piece on final the Overall the absolutely Yes, of year. now two-thirds say NVMe over Over we're NVMe puzzle shipments is way. are to the our I’d the by

out So competition. feeling that just to very differentiated leadership good continuing extraordinarily and the when see the in to be field there about versus our we go

Rod Hall

it. Thanks Kix. appreciate thank, Great, guys,

Operator

from comes Piper Jaffray. question Nowinski next Your from Andrew

Andrew Nowinski

as new more the customers. Getting deployed view getting view you you new being Cloud new a each thank as by Great, want accelerate existing quarter congrats as it to I fairly had Cloud flat your XXX, customer just Data into accounts I'm you just growth. been at Services that way Services the customer you the around today. and these adds Data if launch to you've ask on wondering your

David Hatfield

Andy, Dave feel expectations. great who five customer adding about with our competition in Hatfield. customers talking hey, compared actually net stopped adds, adds. per right their new We're it's day, the We Yes, the line to about

in contracts about our enter buying product we segment we It's GSI portfolio there. and the centers pleased segment contribution may and with in gives and as things [ph] us SX quarter. with still great saw opportunities accelerate we the So into well. are mix healthcare but early days, different the the to really the based what different the feel in overall usage expanding Obviously,

Charlie Giancarlo

effort emphasis largest this as for Andy, I'll important the of to customer. seeing of start additional a is beginning to thing The X,XXX of remember and may and let's XXX, Fortune you one just say will, you And us, quality larger takes if than companies a occur more course, commercial that. we But, were, that more just the Global bit as year, that customers adds on thousand cloud we're the add and from putting

the with And we're of them. very Hat, we're mentioned we as so, very and the -- new happy have with adds quality

Andrew Nowinski

share quarter, market their Thanks. Can growth product just above think, And competitive where on flash it growth you XX% very give taking for modestly an reported the revenue. good. you're what the update considering regard above and us this rate? Okay, NetApps all then the I year-over-year landscape your with to just is fairly well at seem rate

David Hatfield

stayed win Yes, our we're rates quarter. think heavy, so the I the stable still competitive for landscape

great feel competitors. all about of we so, across our differentiation And the major

want else change don't I material Kix, no know their. So, add? you anything

Matt Kixmoeller

we see many get that we is when to about working out out product, we we And, continue when we've our we in there. great showcase differentiation knock No, challenge we win, find as on and we our since keep sure product can. making can to continue doors biggest

Andrew Nowinski

thank Great, you.

Operator

from comes question Research. next from Stephen Cross Your Fox

Stephen Fox

good Hi, afternoon.

Just like year-to-date. with productivity for me, one question sales and in the you're sounds the it satisfied very force quarter

Thanks. about sales And similar portfolio implications next year we for as we year as you are about then investments described year? -- longer of with is expanding would quarter productivity next what the product think think force as this investments on this you call year the of first near-term term? a this and had As

David Hatfield

is to most from way continue this expectations to our line on. with our outpace out cohorts improve, biggest cohorts that Productivity Hat. in our Steve, productive the is Hey, classes set latest earlier continue we

quarter their was Moving time. the with to attached products, new pleased motion it takes a pull-through best significant teams breed by the the platform Very sale in obviously portfolio. FlashBlade that's bringing product versus and point of our largely and the a of into attach driven and portfolio sales of takes work

So to absolutely that is to starting is see repeatable. we and pull-through motion wanted that kick-in

we're their the products you to productivity add at So that will look as seeing as confident we're portfolio, continue. we more that, trends

Stephen Fox

sales of And year? in next in terms investments

Tim Riitters

Yes.

for marketing. year. is look Tim at year, on where years at we Steve, from do QX I next So and investment in think hire them We coming the if good the a us sales they're lot several competitors. is off you Obviously seasonal quarter pattern get but years, not past the this guiding in, our

And to have them get up here trained We four seasonally see early. half. second here. you're strong three, hit play have continue We them the We to think years going out. for it that done get them I in great now. to up years dynamic We've

Charlie Giancarlo

And our Kix to said and consider marketing Tim to add going limitation just what together, best, we sales we're significantly that be the be line. said and in investing

Stephen Fox

Great, thanks so much.

Operator

Mehdi from Susquehanna. Hosseini from Your next comes question

David Rzyhik

for Thanks taking This for is thanks. Hi, David question. Rzyhik Mehdi. the

macro touch I to and had then wanted the follow-up. a Just

that is continued So, gains some it for a compensate share And factoring macro that? Charlie, softening in just safe going of the to had outlook? outlook, any you're follow include I up. back to Jan to kind And assume it in does your quarter

Charlie Giancarlo

and quarter, we're say of the customers’ et pipeline, from only for Yeah, we're we I cetera. we're defining would including our -- -- what what not looking in we're the that guidance only market, see in hearing at terms the

sudden so, from within our that's we control. course, that's the quarter, take last were But incorporated our control. saw macro a if basically And to beyond change everything what we of

David Rzyhik

you with adding Services traditional consider the talked get announcing And that in well? Sure. love FlashBlade to to Data space. Thanks. compete Block, sets would Cloud storage you much. to better an there? context Thanks about And some so in in regards regarding FlashBlade services update Would the announce past feature you've file as file to

Matt Kixmoeller

I'll the pretty of around to the continue we FlashBlade diverse and us Look to that's away. the cases. first encouraging just Kix, is question I is see think progress used repeatability this number on really Yes, features to thing nicely make take been

swap the from on AI everything a highest the analytics wide and covers pretty data through in of So backup center.

the we'll more And just more about where as and so, we of more are we address good features, feeling market. add and I think, we're of course,

David Hatfield

our the to on things don't And can them we're then we on like bring that question, assume market, to radar. before files you ready announce to file but

David Rzyhik

so thanks Great, much.

Operator

Eric comes from question next from Street. Your Martinuzzi Lake

Eric Martinuzzi

like Yes, of I I the the of would we're offering to My Services as want about discuss Data like be spot of kind for your talking sweet pyramid, kind customers top and added smaller resellers your Cloud to frame a sell base. we're assumption the software the partners. customer larger the the the the because it. typically value there end midsize to and What education about box they about in now Is talking cloud? training down any and and

Matt Kixmoeller

is I'll this so Kix, start Yes, there.

really think First off, our tack and said, tier important with. as a in started you after we actually X wanted really critical workloads competition the that's going by most we to start different

seamless part goal. greatest the to of in the Pure bringing on-prem cloud so key was And it making and our the experience

though Secondly, I'd XXX% company. really we philosophy this we're approached channel with a channel first as the say

our that partners wanted And a take really allowed value. add so, we this to market in way channel to to

be to Amazon the customers also of most And, And will transact to component are software resell buying this, component. able the be so, course, they they'll able of also on-prem.

solution. So together cohesive into unique a that the channel stitch is really position one in all to of

Eric Martinuzzi

it, thanks. Got

Operator

Erik Your comes next Securities. question from Suppiger from JMP

Erik Suppiger

for the Yes, question. taking thanks

Who services? see you solution landscape shares proportion the its XX% your noise And us can that -- off, dual in Is any going give competitive the total there, made listing. then, approach of cloud. has secondly, to updates cloud up you VMware at First you your can a this do envision lot shares NetApps own discuss against? class the of for with shares B class starting of point? on you the

Matt Kixmoeller

is Kix, with competitive landscape. a start this So I'll

entering still is it's at who there behind. have this you you opening first the space look if far because kind I customer traction kind dollar excited mean, demand we're now. we're out of up say about of thing market, the our we're really the starting really in think, competitors very that really is announced And early. I when not

you ecosystem a between our the VMware VMware, underscoring thing the say. and we offerings two first great we greater at of that’s actually any the to that's part lot partners. And cloud natural launch nicely So event companies. commitment we're of I'd look a When mentioned is one. see our

key the whole make cloud can vision. ecosystem think, we I that ultimately, have that of so is that sure and seamlessly. both the to That's partners so, on-prem transfer take on-prem customers to advantage and And our can cloud the

Tim Riitters

continue have that, come Class over and to to Erick naturally XX% great quality then through VCs on watch rolled market we our your and to time down question threshold, moved as And on has B that investors. public yes,

continue we'll track to as to and closely of that get obviously XX% that sort point. so, updates And we give

Erik Suppiger

you. thank good, Very

Operator

last Nehal from Group. question comes The from Chokshi Maxim

Nehal Chokshi

Yes, thanks.

for year-over-year not quarter Q in significantly to half, over and sales expenses that it's the your I up would and October Your marketing Q going tendency first given only the quarter. anticipate be to for X% up invest January a a

line your year and XXXX not sales say So XXXX. I'm ramp in that concerned that you going will going improvement get XX% that sales would into more imply is marketing for fiscal year than significant year-over-year and productivity a marketing and to fiscal

that the that will mature you the is and if productivity should about big right for confidence to sales your get sales think and ramp so we B, A, So; why a in that; teams? get marketing way

Charlie Giancarlo

Yes.

a couple on thoughts that question. have we So

in to read sales particular that marketing. first wouldn't to invest of say we would and So I I quarter. continue any are going And, all,

middle part In the here of year, of fact, given the business. increase hiring the to seeing in we were we that continue in pace momentum the the

we to performing begin really faster margin So performing have side, that than, would thought the side. And over over I us enabled were with. even on we on we gross revenue go were the to think,

of focused But certainly and I late business. now, So, QX, in very seeing on some come the take we think, QX but those does light hiring you're to it some QX time. investments remain early

of of at on focus lot as those see that's they into mature that to key continue sort our full to folks jobs of areas room continue sort their those here grow We've like that the the obviously on company. to so a of tenure key And seasoning the and we here. overall folks one ground, And working got we're trends. existing on of are

David Hatfield

of and them is to this confident, very Nehal, focused cycle, is reason continuing there adding are a innovation products continuing thing focused say to great our multiple we they I in. best purchases our competitive proven the remaining a addition strong, board. are the identify in remaining capacity. that. Yes, would The and and out have differentiated The win I sales that rates adding we're with was hyper mean, is we're products. from are is, on to mean, on Hat, steady Cloud on There I scale bring very the puzzle But rest why are just the completely seasonal key impact people to the the can Data piece repeat we're productivity the I'm teams only that Services the on sell

continue. just were we've So, as year, going next seen into the going that to think, productivity the I at look I trends

Nehal Chokshi

expect you go mature? win up these Services rates Do to Data as your Cloud

David Hatfield

actually would bets. mind a cloud about into bit getting I our wouldn't saw go or rates more if more actually little more win down seeing our we fights. It's

chances. about to and to So, like additional the more market we we're get can the If fights, our the relationship I really excited into more routes and pleased We're with with really into FSIs. the with fights. continuing GSI IBM get

Nehal Chokshi

then last quarter question. my is if you may, that said he FlashBlade, That for was you. I his on Thank Q-over-Q a And strongest basis? had that or year-over-year Okay.

David Hatfield

we we quarter. a it to strong I it. was think you said, it's the way strongest but saw whichever measure want when very And growth quarter,

Tim Riitters

nice very year-on-year Very year-on-year nice growth. growth. Very,

Nehal Chokshi

you. thank Okay,

Operator

call will the Charlie now for I remarks. turn closing to over Giancarlo

Charlie Giancarlo

all. our can cloud, customers the in new quarter. centric public especially Pure introduced, business you or us. want global proud our solutions edge, last progress we've cloud seamlessly and dedication entire the you to in merry all their manage this private in the also trust the of U.S. team Thank I their on thank data I to of announcement and all for very And We're want with their SaaS, Thanksgiving. PureX. with cloud And to and I a and work on it quarter. and Thank And the our our the efforts happy for want and wish this thank you. partners call customers tireless their around

Operator

today's conference concludes call. This

may now disconnect. You

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