Pure Storage, Inc.’s PSTG shares delivered an impressive 58.5% gain in the past year, significantly outpacing the Computer Storage Devices industry’s decline of 9.2%. It has also outperformed the Zacks Computer and Technology sector and the S&P 500 composite’s growth of 22% and 22.2%, respectively.

PSTG has also outperformed its peers like NetApp NTAP, Western Digital Corporation WDC and Netlist NLST. NTAP and WDC registered gain of 34.3% and 19.9% in the same time frame while NLST has declined 53.9%.

Price Performance

Image Source: Zacks Investment Research

The stock closed at $67.25 in the last trading session, down 8.7% from the 52-week high of $73.67. The company is trading above its 50-day moving average, indicating a bullish sentiment among investors.

With such a stellar performance, investors are likely to contemplate whether to cash out or stay invested.

Momentum in FlashBlade to Boost PSTG’s Prospects

Accelerating demand for FlashBlade solutions, including FlashBlade//E is a tailwind. All-Flash Arrays (AFA) are gradually becoming the preferred storage choice of data center operators as they have become more cost-effective compared with traditional data storage systems. FlashBlade//E is an unstructured data repository solution for large-capacity data stores. Customers can also deploy the new FlashBlade solution through a new service tier of Pure's Evergreen//One Storage as-a-Service subscription. Moreover, FlashBlade is designed to handle and process the enormous data created for large-scale AI training environments and extend support to AI-connected applications.

In the last reported quarter, revenues jumped 9% from the year-ago quarter’s reported number to $831.1 million, beating the Zacks Consensus Estimate by 2%. Subscription services revenues (45.3%) of $376.4 million rose 22%, driven mainly by strong renewals of Evergreen subscriptions. This transition to a recurring revenue model enhances the company’s financial stability and visibility, making it an attractive investment for long-term growth.

The rapid advances in AI technology are opening up several market opportunities for Pure Storage in various market segments. It has announced several critical new platform features aimed at addressing the evolving needs of enterprise customers amid a rapid proliferation of AI. 

Frequent product launches will also aid PSTG in capturing further market share. The launch of Pure Storage GenAI Pod simplifies the deployment of generative AI projects by providing full-stack solutions that reduce the time, cost and expertise required for implementation. It’s useful for organizations looking to harness the potential of generative AI without the usual complexities.

Image Source: Zacks Investment Research

Driven by a surge in Evergreen//One opportunities valued at under $5 million and transitioning to traditional sales, management has raised its revenue forecast for fiscal 2025. It now expects $3.15 billion in revenues, with 11.5% growth year over year, surpassing the prior estimate of $3.1 billion with 10.5% growth. However, this dynamic shift has hurt Evergreen//One TCV’s sales outlook. 

The company also increased non-GAAP operating income guidance to $540 million from $532 million predicted earlier. It continues to estimate a non-GAAP operating margin of 17%.

PSTG’s Strategic Collaborations & Deal Wins

One of the major highlights for Pure Storage in the third quarter of fiscal 2025 was a transformational design win for its DirectFlash technology with a top-four hyperscaler. This milestone allows it to become the standard for hyperscaler online storage, offering top performance, scalability, lower costs and reduced power use. Pure Storage’s DirectFlash technology will become integral to this hyperscaler's data storage standard, with full-scale production deployments expected in calendar 2026.

PSTG also deepened its partnership with Kioxia, a global leader in NAND Flash technology, to accelerate the development of high-performance, scalable storage solutions for the future. It signed a deal with CoreWeave, providing its storage solutions as a standard option within CoreWeave’s dedicated cloud environment.

PSTG recently extended its partnership with Micron Technology. Pure Storage and Micron have partnered to integrate Micron’s advanced NAND technology into Pure Storage’s data solutions. The partnership has spanned seven generations of NAND technology, including the recently qualified Micron G8 QLC NAND used in Pure Storage’s 150TB DirectFlash Module.

PSTG Faces Several Headwinds

Pure Storage faces intensifying competition in the flash-based storage market. Stiff competition can result in a decline in the average selling price (“ASP”). Any decline in ASP is likely to impact the results if shipments do not improve considerably. 

Moreover, the overall market and macro environment remained consistent with the subdued IT spending amid intense competition observed throughout fiscal 2025. Customers continue to face challenges with rising costs in software, SaaS and cloud services, along with uncertainty around AI spending, putting unexpected strain on operating budgets. These factors limited the anticipated performance of Evergreen//One during the fiscal third quarter.

Unchanged Estimates for PSTG

In the past 60 days, analysts have kept their earnings estimates unchanged for the current quarter and current year.

Image Source: Zacks Investment Research

PSTG’s Expensive Valuation is a Concern

PSTG’s stock is trading at a premium, with a forward 12-month Price/Earnings of 34.89X compared with the industry’s 16.42X. Though the lofty valuation indicates high expectations for growth, the company's near-term prospects remain somewhat muddled.

Image Source: Zacks Investment Research

How to Strategize Investment in PSTG

PSTG has a solid growth opportunity driven by demand for its FlashBlade solutions and the rapid proliferation of AI. However, stiff competition and subdued IT spending, along with expensive valuation warrant caution.

Therefore, we believe new investors should wait for a better entry point, and existing investors should retain PSTG stock, which currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NetApp, Inc. (NTAP) : Free Stock Analysis Report

Western Digital Corporation (WDC) : Free Stock Analysis Report

Pure Storage, Inc. (PSTG) : Free Stock Analysis Report

Netlist, Inc. (NLST) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research