In a sign of strength in enterprise storage hardware and services despite the slowing economy, shares of the data storage pioneers Pure Storage Inc. and NetApp Inc. rose in extended trading today after they posted solid financial results that surpassed Wall Street’s expectations.

Pure Storage reported a fiscal first-quarter net loss of $67.4 million, rising from a loss of just $11.5 million a year earlier. However, its earnings before certain costs such as stock compensation came to eight cents per share, ahead of the analysts’ consensus estimate of four cents. Revenue declined 5%, to $589.3 million, but still came in well ahead of the $559.8 million forecast.

Pure Storage is a leading provider of enterprise-grade flash-based data storage hardware and software that’s designed to replace traditional hard drives. The company sells flash-based capacity storage, entry-level storage, and file and object storage systems. In addition, it offers cloud-based storage-as-a-service, as well as software for managing data storage.

Charles Giancarlo (pictured), chairman and chief executive of Pure Storage, oozed confidence as he insisted that his company is now the “clear leader in data storage,” with a portfolio that can address the vast majority of enterprises’ storage needs. “The superior economics, performance, and operational and environmental efficiencies of Pure’s product portfolio over both hard disk and SSD-based, all-flash competitive offerings are now undeniable,” he stated.

The company revealed a string of impressive numbers that seem to back up those claims, with subscription services revenue rising 28% from a year earlier, to $280.3 million, subscription-based annual recurring revenue rising 29% to $1.2 billion, and remaining performance obligations up 26% to $1.8 billion.

Analyst Steve McDowell of NAND Research told SiliconANGLE that Pure Storage would have actually grown its revenue by 5% if not for an accounting issue that skewed its numbers in the prior year. He said one of the main reasons for its ongoing growth is its continually updated portfolio of flash storage products.

“Two years ago Pure had a narrow range of products, but today it can service nearly all of the flash storage market and, with its QLC offerings, push into traditional hard-drive territory,” McDowell said. “Pure is also seeing good lift from the current generative AI boom. Its FlashBlade is designed for high-performance AI workloads, and Pure already had strong presence in AI applications. It has a solid competitive differentiation, so I expect that it will disproportionately benefit in the current market.”

Looking to the second quarter, Pure Storage forecast $680 million in revenue, well above the analyst’s target of $658 million. It also said it expects to see “mid- to high-single-digit sales growth” for the full fiscal year.

Investors liked what they saw, as Pure Storage’s stock climbed more than 6% in extended trading.

NetApp offers positive long-term outlook

NetApp CEO George Kurian

It was a similar story at NetApp, with the company’s stock ticking up more than 7% after-hours. NetApp reported a fiscal fourth-quarter net income of $245 million, down slightly from a profit of $259 million a year ago. Its earnings, excluding stock-based compensation expenses and other items, came to $1.54 per share, while revenue dropped 6%, to $1.58 billion.

They were strong numbers, as Wall Street had been targeting earnings of just $1.35 per share on sales of $1.54 billion.

NetApp also reported its full-year fiscal 2023 results, posting revenue of $6.36 billion, up about a single percentage point from the $6.32 billion in sales it generated a year ago.

Like Pure Storage, NetApp is a provider of high-end enterprise-grade storage systems. Once upon a time, the company was strictly focused on storage hardware, but these days it sees itself as more of a hybrid cloud data services and management player, with the bulk of its sales derived from the public cloud. NetApp works closely with public cloud infrastructure players such as Amazon Web Services, Google Cloud and Microsoft Azure, and also sells NetApp Ontap file storage software as a managed cloud service.

NetApp CEO George Kurian said the company’s ongoing success is due to the fact that digital transformation projects involving business analytics, artificial intelligence and application modernization remain a top priority for enterprises. The implication is that NetApp’s storage services play a key role in that digital transformation.

“We deliver significant value to customers on their transformation journeys with a modern approach to hybrid, multicloud infrastructure and data management,” Kurian said. “We are entering FY24 with substantial new innovations and a more focused operating model to better address the areas of priority spending.”

NetApp’s investors are clearly buying into that argument, for not even a conservative forecast for the coming quarter would put them off. For the first quarter of fiscal 2024, NetApp said it’s expecting earnings of between $1 and $1.10 per share on sales of between $1.33 billion and $1.48 billion. Wall Street is targeting earnings of $1.20 per share on sales of $1.47 billion.

The full-year picture is looking a little better though. NetApp forecast fiscal 2024 earnings of between $5.65 and $5.85 per share and a low-to-mid single-digit revenue decline. That compares to Wall Street’s forecast of $5.58 per share in earnings on revenue of $6.22 billion, which would represent a decline of about 2% from fiscal 2023.

McDowell said NetApp is clearly enjoying a resurgence, with today marking its fourth consecutive earnings beat. He noted that the company is now looking to refresh its portfolio of all-flash storage arrays, and said that’s something that will improve its prospects for the coming year.

“There’s good demand for QLC-based arrays to replace legacy hard-drive based storage, and that’s going to help NetApp moving forward,” he said. “Kurian indicated that he’s working on refocusing his sales force to push all-flash arrays. NetApp took its eye off the ball on flash for a while as it aggressively ramped up its cloud business. But the declining flash revenue is a solvable problem, and George is great at solving the problems he focuses on.”

Photos: SiliconANGLE