Pure Storage Inc. and NetApp Inc. both had a surprise in store for shareholders today, posting quarterly financial results that beat Wall Street’s expectations despite ongoing weakness in their primary data center storage hardware market.

Pure Storage, which is best known for its flash memory-based hardware and software storage products, reported fiscal fourth-quarter earnings before certain costs such as stock compensation of 13 cents per share on revenue of $502.7 million. Analysts had modeled the company’s earnings at just 9 cents per share on lower revenue of $480 million.

Charles Giancarlo (pictured), chief executive officer of Pure Storage, told investors that his company had finished the year with “great strength and growth, setting new revenue and sales records” for both the fourth quarter and the full year.

“We’re really pleased with the quarter and the year as a whole,” Giancarlo told SiliconANGLE in an interview. “It’s a proof point of our strategy.”

The CEO said the company saw strength in all its product lines, even in on-premises data centers. “Enterprises have figured out largely how to operate under COVID,” he said, and their spending is stable or grown a bit, including eight deals of more than $10 million in the quarter.

“We made a major investment in enterprise a couple years ago, and that’s paying off now,” he said. “Expect that to continue, maybe not every quarter, but we should expect more large deals.”

Pure said a large part of its success was down to its new Kubernetes-based cloud storage service Portworx. The company acquired Portworx Inc. for $370 million in September, and it was expected to have a big impact on its fortunes as there’s no overlap with Pure’s other products.

“In Q4, we saw significant growth of in-cloud deployments of Portworx and traction through the IBM partnership both in-cloud and on-prem via our best-in-class support for Red Hat OpenShift,” Giancarlo said.

Pure Storage said Portworx helped to push its annual subscription revenue to the half-a-billion-dollar mark, up 33% from a year ago. In addition, the company reported record quarterly sales of its FlashBlade and newer FlashArray/C server products.

Analyst Steve McDowell of Moor Insights & Strategy told SiliconANGLE that Pure Storage has been consistent in its execution, posting its fourth successive estimate-beating quarter and showing strong growth both in the quarter and the year overall.

The analyst pointed to several bright spots in the company’s quarter. Notably, he said Pure Storage’s QLC-based FlashArray//C line continues to see strong demand. And its Pure as-a-service offerings are also hitting internal goals, he said.

“QLC is a market-expanding technology,” McDowell said. “It’s one that brings all-flash technology to a market that has, until now, been completely serviced by mechanical hard drives. Pure Storage remains largely alone in the QLC storage array market, with NetApp only recently announcing a competing product.”

McDowell’s colleague Patrick Moorhead said Pure Storage’s growth in the quarter was especially encouraging given the challenges it faces in the enterprise infrastructure market, which has struggled as companies focus their spending more on personal computers and collaboration tools to support remote work.

“I was also surprised by the growth as enterprise IT got conservative and bought from the incumbents,” Moorhead said. “As expected, Pure-as-a-Service is driving growth as well as the company’s QLC-based offering where the company is still unique.”

And the company is expecting good things for the current quarter too. It said it expects first-quarter revenue of $405 million, well ahead of Wall Street’s forecast of $394 million. And it’s predicting a revenue gain of 14% to 15% for the fiscal year, well above 2020.

“We really see ourselves clear to double-digit growth this year,” Giancarlo said, adding that it depends on when COVID dissipates and economy starts to return. “Our guess is around May-June for COVID impacts to dissipate.”

Investors showed their appreciation, with Pure Storage’s stock gaining more than 5% in after-hours trading.

NetApp CEO George Kurian

Meanwhile NetApp, which bills itself as a hybrid cloud data services and data management company, reported a fiscal third-quarter profit of $1.10 per share on revenue of $1.47 billion. That came in ahead of Wall Street’s forecast too, with analysts modeling just $1.01 per share in earnings and $1.43 billion in revenue.

NetApp Chief Executive George Kurian can be excused for feeling somewhat jealous though, as his company’s stock declined more than 7% after-hours, even though it also offered guidance for the next quarter above Wall Street’s consensus.

“We delivered another strong quarter with revenues at the top of our guidance range and operating margin and EPS above the high end of our expectations,” Kurian said in a statement. “We have sharpened our execution and Q3 fiscal year 2021 marks our third consecutive quarter of revenue and billings growth.”

NetApp highlighted a few aspects of its quarter, saying its billings rose 6% year over year to $1.6 billion. Investors see billings as one of the most important metrics to keep tabs on, since it’s a strong indicator of the revenue a company expects to collect from customers over a certain period of time.

In addition, NetApp said its public cloud services’ annualized revenue came to $237 million, up almost 300% from the same quarter one year ago.

McDowell told SiliconANGLE that NetApp had now posted three strong quarters in a row, overcoming his own skepticism that it would be able to fix a number of systemic problems in its business. He said this was down to a flurry of executive leadership changes, topped by Kurian’s smart decision to bring in Cesar Cernuda as the company’s new president.

“NetApp’s all-flash storage business, which has underperformed in the past, was a bright spot,” Mc Dowell said. “I’m also encouraged by the growth numbers we’re seeing in its cloud business.”

Still, McDowell said he was still cautious on NetApp’s overall execution of a long-term strategy, which is dependent on its ability to deliver competitive cloud-native storage solutions.

“It’s too early to know if NetApp will be successful in its efforts to expand beyond its traditional comfort zone in enterprise storage,” McDowell said. “I like the growth in its cloud services, but it remains a small number relative to NetApp’s traditional storage business. Only time will tell.”

All in all, McDowell said it was an encouraging day for the overall enterprise storage market, but he said we won’t know the full story until Dell Technologies Inc. and Hewlett-Packard Enterprise Co. report their earnings over the next week. “Nonetheless, these are really strong early signals,” he said.

For the fourth quarter, NetApp said it’s expecting a profit of between $1.06 and $1.14 per share on revenue of $1.44 billion to $1.54 billion. That’s just ahead of Wall Street’s forecast of $1.09 per share in earnings and $1.47 billion in revenue.

With reporting from Robert Hof

Photos: SiliconANGLE