Pure Storage Inc. and Nutanix Inc. showed that data center hardware is still a big growth business even as they both strive to move their businesses toward software, with both companies reporting strong financial results that surpassed Wall Street’s expectations today.

First up was Pure Storage, which broke even on fiscal first-quarter revenue of $413 million, up 12% from one year ago. That was well ahead of Wall Street’s model of a six-cent loss on revenue of $406 million.

“We had a great Q1, which is a great start for the year,” Pure Storage Chief Executive Charlie Giancarlo (pictured) told SiliconANGLE in an interview.

Pure Storage is best known for its flash memory-based hardware products, which are a fixture in many data centers and increasingly in the cloud. More recently, though, the company has been expanding into the software side, with new businesses such as its Kubernetes-based cloud storage service Portworx that was set up after acquiring Portworx Inc. in September 2020.

At its Accelerate 2021 virtual conference earlier this month, Pure Storage announced some big updates to Portworx, with new capabilities for customers including code-directed storage and data management along with unified visibility and support using the Kubernetes orchestrator for portable operating platforms called containers.

Giancarlo said the company is seeing great demand for all of its products, both hardware and software, and that its double-digit revenue growth was the first since a year ago. He highlighted the company’s subscription service revenue, which includes the Portworx business and rose 35% year-over-year, to $162.8 million.

Giancarlo added that much of the company’s growth was thanks to demand from mid-market customers.

“We’re seeing a resurgence of Commercial,” he said, using the company’s name for customers that sit below the global 2000. “We saw 330 net new logos, first time up year-over-year since COVID began.”

Moor Insights & Strategy analyst Steve McDowell told SiliconANGLE that Pure Storage had executed well across the board, with earnings per share higher than anyone had expected and strong profit margins. “That speaks well both to customer demand and Pure’s operational discipline,” the analyst said.

McDowell was especially pleased to see growth in Pure Storage’s cloud storage-as-a-service offerings. “Pure’s been expanding its business beyond simply storage arrays for a while,” he said. “It was early in cloud storage and as-a-service, and that segment is showing good strength. Pure’s offerings here are really strong and now it has moved beyond just storage with Portworx as-a-service.”

The analyst said Pure’s mainstream flash array business is still core to its earnings, though, and that it’s going well because its FlashArray//C product is one of the few QLC NAND solutions available on the market. “It’s performing extremely well for the company, and I remain a little bit flummoxed as to why a stronger competitive market hasn’t yet emerged,” he added.

Constellation Research Inc. analyst Holger Mueller said it was good to see Pure Storage’s subscription revenue passing the 50% mark of its total product revenue.

“Pure’s management now needs to find a way to accelerate subscription services even more and conclude its business transformation at high speed if it’s to sustain a profit,” Mueller said. “It is going to be an interesting year for Pure, that’s for sure.”

For the current quarter, Pure Storage is guiding revenue of $470 million, well above the consensus estimate of $455.85 million in revenue.

Giancarlo suggested this might be thanks to the large number of prospects the company has. He noted that its Accelerate 2021 event saw 60% higher attendance than the previous year. “It shows the growing strength of our brand,” he said.

McDowell said he was not surprised at Pure Storage’s confidence as its end-to-end portfolio and its moves into cloud-native and as-a-service are working. “Charlie will happily tell you that he wants to simplify storage, and he’s investing in the pieces that will fill out that vision,” he said. “So far that’s working really well.”

Data center infrastructure firm Nutanix reported a third-quarter loss of 41 cents per share on revenue of $345 million, up 8.2% from a year ago.

It was another success, however, as Wall Street’s analysts had the company down for a 49-cent loss on revenue of $335 million.

Nutanix President and CEO Rajiv Ramaswami (pictured, adjacent) said in a statement that he was “delighted” with the company’s results as it outperformed all guided metrics, demonstrating its ability to execute consistently.

Nutanix sells a software-defined hyperconverged infrastructure or HCI stack that integrates compute, storage and networking components into a single appliance or cloud service. The company has, like Pure Storage, been trying to transition to a subscription-based business model that provides a more consistent revenue stream than product sales do. Today’s results show it has made good progress in that direction.

The company reported record annualized contract value billings of $159.9 million, up 18% from a year ago and ahead of its own forecast of $150 million to $155 million.

Ramaswami told SiliconANGLE in an interview that more than 90% of the company’s business now comes from subscriptions and that it’s expecting to see a big benefit from renewals of those contracts over the coming years.

“As we sell subs to our customers, we see renewals as they expire,” he said. “We’re still very early in the renewal cycle, so we haven’t benefits from them yet. Over the next few years the renewals will come in and, along with new customers, that will drive significant revenue growth.”

Nutanix also showed strong customer growth, expanding its user base by 17% in the quarter.

Analyst McDowell said one of the reasons for Nutanix’s success this quarter was the strength in its original equipment business business that sells gear to companies that bundle it up under their own brand, particularly with Hewlett Packard Enterprise Co. The analyst said that Dell Technologies Inc.’s vxRail product that runs VMware Inc.’s vSAN software sets the bar for HCI platforms, and that the OEMs that aren’t Dell look instead to Nutanix as a counter to that offering.

“All indications are that HPE is selling a lot of Nutanix product,” he revealed. “Dell and VMWare’s close relationship, in this regard, helps Nutanix be successful.”

Mueller said that Nutanix had a good quarter and did well by cutting more than $100 million from its sales and marketing expenditure in the quarter, but that didn’t help it cut its losses by very much. “Nutanix will have to grow its services segment as successfully as it has done this quarter with over 20% growth to stop the bleeding, and that’s something people will be looking out for in the next quarter,” he said.

For the current quarter, Nutanix said it sees ACV billings of between $170 million to $175 million, above Wall Street’s forecast of $164 million. McDowell said that optimistic forecast was not surprising, since the HCI market is currently on fire, with its rival VMware also showing very strong growth in recent months.

“We won’t know until VMware announces its earnings tomorrow just how successfully Nutanix has really been in competing in the overall market, but there’s no question that the company’s products are in strong demand,” the analyst said. “Nutanix’s products are resonating, and the company is showing good execution. I’m bullish on its future.”

With reporting from Robert Hof and Paul Gillin

Photos: SiliconANGLE