Two companies disrupting the traditional data center today reported revenue growth of more than 40 percent in their latest quarters, pointing to accelerated interest in new storage technologies by both cloud computing providers and companies moving quickly into artificial intelligence applications.

The companies, Pure Storage Inc. and Nutanix Inc., approach the data center market with starkly different strategies. Pure sells all-flash-memory storage systems, which are rapidly replacing disk-based storage devices because they’re so much faster. Nutanix sell so-called “hyperconverged” systems that combine storage, computing and networking, but it’s moving away from hardware to focus on selling its “enterprise cloud operating system” that can run on many kinds of hardware.

Both are in highly competitive markets, so their stock prices are volatile as investors watch closely for even small changes in growth prospects. In after-hours trading today, Pure Storage initially saw shares plunge more than 10 percent, though that loss was halved later. Nutanix’s shares rose about 2 percent in extended trading. But both companies’ results and outlooks appeared to signal continued high growth in 2018.

Pure Storage reported fourth-quarter revenue up 48 percent, to $338.3 million, above the $332 million analysts on average had projected. The company reported a profit before certain costs such as stock compensation of $31.8 million, or 13 cents a share, well above analysts’ forecast of 7 cents. For the year, it passed $1 billion in revenue, which was a goal for the past year.

For the current quarter, the company predicts revenue between $246 million and $254 million, compared with analysts’ estimate of $247 million. And for the full year, the company sees revenue of $1.31 billion to $1.36 billion, the midpoint slightly above the average analyst estimate of $1.33 billion, implying about 30 percent growth.

Chief Executive Charles Giancarlo said in an interview with SiliconANGLE that the company is seeing a lot of demand from two areas: public software-as-a-service cloud providers, which accounted for a quarter of revenues, as well as private clouds operated by individual companies, and companies using Pure’s new FlashBlade product for their AI and machine learning workloads.

“It’s competitive market in the data center, but in machine learning and artificial intelligence, we’re often the only alternative in terms of performance,” Giancarlo said. The machine learning applications include self-driving cars as well as security and threat detection and rapid data restoration.

“This positive performance can be attributed to the company’s focus on high-performance flash, high-performance software integration, and winning in AI workloads, side by side with Nvidia,” said Patrick Moorhead, president and principal analyst with Moor Insights & Strategy. “Pure has a real knack for expanding their revenue footprint after the first purchase, so I directly correlate the number of customer wins with longer-term revenue, not just ‘one and done.’”

So why the investor worry? On the earnings conference call, analysts had a lot of questions about competition such as Hewlett Packard Enterprise Co. and NetApp, as well as a determined Dell EMC. Pure, however, professed little worry. “Our win rates are ticking up,” said President David Hatfield. “Storage has always been a very competitive market, but our ability to compete has never been better.”

Analysts also questioned the apparent slowdown in growth in full-year 2018 both from last year and from the current quarter. Chief Financial Officer Tim Riitters said analysts “shouldn’t read too much” into that. But investors apparently are.

Their worries may be excessive, Barclays Bank PLC analyst Mark Moskowitz wrote in a note to clients. “Investor concerns relating to increased competitive intensity appear to be overblown with product gross margin holding steady and growing focus on workloads where the company can add value (AI), said Moskowitz, who added that Pure “left room for upside with guidance that could prove to be conservative.”

As for Nutanix, it beat forecasts for its second fiscal quarter across the board. It reported an adjusted loss of 14 cents a share on a 44 percent rise in revenue, to $287 million, both above consensus estimates. Analysts had expected a loss of 20 cents on sales of $283 million for the period ended Jan. 31.

For the current quarter, Nutanix said it expects a loss of 20 cents on revenue of $277.5 million at the midpoint of its guidance. Analysts had forecast a 23-cent loss on revenue of $267 million.

The company cited 57 new deals worth more than $1 million, more than double a year ago. Nutanix now has 57 customers with more than $5 million in lifetime bookings, 15 with more than $15 million in lifetime billings.

“Software-defined infrastructure is gaining tremendous ground in the enterprise data center,” CEO Dheeraj Pandey said on the earnings conference call. “Our software is increasingly becoming ubiquitous” on a wide array of computer and cloud platforms.

The results are the company’s second since it announced at its Nutanix .NEXT EU conference last fall that it was effectively rebranding itself as a “complete enterprise cloud company” rather than a provider of infrastructure products and services. Although that’s likely to produce higher profit margins, sales growth is also likely to slow during the transition. The fact that it didn’t slow significantly this quarter is seen as a positive.

Shareholders reacted positively to the news, as Nutanix’s share price rose about 2 percent in after-hours trading. It closed down about two-thirds of a point, to $36.20.

“Wall Street likes this software move and now gives Nutanix a much higher multiple than Pure which has similar revenue, but is an ‘infrastructure player,’” said Stu Miniman, senior analyst at Wikibon, owned by the same company as SiliconANGLE.

Nutanix also announced today that it’s acquiring Minjar Inc., the maker of the public cloud cost control service Botmetric, for an undisclosed amount. After the acquisition, Nutanix said, its Enterprise Cloud OS will offer customers new capabilities to manage multicloud deployments. It also plans to use Minjar’s technology to bolster its Nutanix Calm automation and lifecycle management product and its Xi Cloud Services.

Photo: Pure Storage