Pure Storage Inc. reported better-than-expected second-quarter earnings today, but it slashed revenue guidance for the next three months because of ongoing oversupply issues in the flash storage market.

The company, which sells a mix of flash-based data storage hardware and software products, reported earnings before certain costs such as stock compensation of a penny a share on revenue of $396.3 million, up 28% from a year ago. Wall Street had pegged Pure Storage’s earnings at a loss of 4 cents per share on revenue of $392.5 million.

The promising results were tempered, however, by Pure Storage’s revised outlook for the third quarter. The company said it’s expecting sales of $434 million to $446 million over the next three months, well below the $466.3 million forecast by Wall Street analysts.

Lower guidance normally leads to a sharp selloff in a company’s shares, but that didn’t happen today, as Pure Storage’s shares rose just after 2% in after-hours trading.

Moor Insights & Strategy analyst Steve McDowell said this was likely because Pure Storage was still outperforming its rivals in the storage market. The company’s product revenue growth was in stark contrast to its rival NetApp Inc., which recently reported a sales decline on its all-flash products, he said.

As for the lower guidance, McDowell said that was the result of price pressure from the current oversupply of NAND flash.

“IT buyers know what’s happening in that market and are asking for corresponding price breaks,” McDowell said. “This is hurting Pure Storage’s revenue.”

Still, this is likely to be just a temporary blip for Pure Storage as McDowell said all the signs point to the oversupply correcting itself within the next two quarters.

“Every flash vendor is working very hard to manage supply,” he said. “Micron, Intel and SK Hynix all said publicly that they’re cutting back production to help manage inventory, while Toshiba and Western Digital experienced a power outage at their joint fab in Japan which managed to damage enough wafer to help minimize production. Once these reductions kick in, the market will stabilize and revenues will rise for everyone in the flash market.”

Pure Storage gave investors further reason for optimism during a conference call, hinting at new business with Amazon Web Services Inc. Executives said they would provide more details about that at the firm’s Pure Accelerate event in Austin next month.

On the downside, investors may have been worried to learn that Chief Financial Officer Tim Ritters will soon be leaving. He’ll hang on for the next few months while a replacement is found, the company said.

Ritters’ departure comes after a five-year spell during which Pure Storage increased revenue its revenue by 10 times.

“Tim has been an integral part of the Pure Storage leadership team for the last five years,” said Pure Storage Chairman and Chief Executive Officer Charles Giancarlo. “As our CFO, the success of his tenure is in the numbers and the numbers speak for themselves.”

Photo: Robert Hof/SiliconANGLE