Q2 2025 Pure Storage Inc Earnings Call

Speaker Change: Good day and welcome to the peer storage second quarter fiscal 2025 financial results conference call. Today's conference is being recorded.

Operator: Adolf's Conference Call. Today's conference is being recorded. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end.

Speaker Change: All lines we needed during the presentation portion of the call, with an opportunity for questions and answers at the end.

Operator: If you would like to ask a question, please press star one on your telephone keypad.

Paul Diet: At this time, I'd like to turn the call over to Paul Diet, Vice President of Investor Relations. Please go ahead. Thank you. Good afternoon, everyone, and welcome to Pure's second quarter fiscal year 2025 earning conference call. On the call. We have Charlie Giancarlo, Chief Executive Officer; Kevin Chrysler, Chief Financial Officer; and Rob Lee, Chief Technology Officer. Following Charlie's and Kevin's prepared remarks, we will take questions. Our press release was issued after close of market and posted on our website, where this call is being simultaneously webcast. The slides of the company, this webcast can be downloaded at investor.purestorage.com.

Speaker Change: If you'd like to ask a question, please press star 1 on your telephone keypad.

Paul Ziots: At this time, I'd like to turn the call over to Paul Ziots, Vice President of Investor Relations. Please go ahead.

Speaker Change: Thank you, good afternoon everyone and welcome to pure second quarter fiscal year 2025 earnings conference call. On the call we have Charlie Giancarlo Chief Executive Officer, Kevin Krysler Chief Financial Officer and Rob Lee Chief Technology Officer. Following Charlie's and Kevin's prepared remarks, we will take questions.

Speaker Change: Our press release was issued after close-up market and posted on our website where this call is being simultaneously webcast. The slides at a company this webcast can be downloaded at investor.purestorage.com. On this call today we will make forward-looking statements which are subject to various risks and uncertainties.

Paul Diet: On this call today, we will make forward-looking statements, which are subject to various risks and uncertainties. These include statements regarding our financial outlook and operations, our strategy, technology, and its advantages, our current and new product offerings, and competitive industry and economic trends. Any forward-looking statements that we make are based on facts and assumptions as of today, and we undertake no obligation to update them. Our actual results may differ materially from the results forecasted, and reported results should not be considered as an indication of future performance. A discussion of some of the risks and uncertainties related to our businesses contained in our filings with the SEC, and we refer you to these public filings.

Speaker Change: These include statements regarding our financial outlook and operations, our strategy, technology and its advantages, our current and new product offerings in competitive industry and economic trends.

Speaker Change: Any forward-looking statements that we make are based on facts and assumptions as of today and we undertake no obligation to update them.

Speaker Change: Our actual results may differ materially from the results forecasted and reported results should not be considered as an indication of future performance. A discussion of some of the risks and uncertainties related to our businesses contained in our filings with the SEC, and we refer you to these public filings.

Paul Diet: During this call, all financial metrics and associated growth rates are non-GAAP measures, other than revenue, remaining performance obligations, or RPO, and cash and investments. By conciliations, to the most directly comparable gap measures are provided in our earnings press release and slides. This call is being broadcast live on the Pure Storage investor relations website and is being recorded for playback purposes, and our type of the webcast will be available on the IR website and is the property of Pure Storage.

Speaker Change: During this call, all financial metrics and associated growth rates are non-gap measures other than revenue, remaining performance obligations or RPL and cash and investments. Frequency liations to the most directly comparable gap measures are provided in our earnings press release and slides.

Speaker Change: This call is being broadcast live on the Pure Storage Investor Relations website and is being recorded for playback purposes. And our type of the webcast will be available on the IR website and is the property of Pure Storage.

Paul Diet: Our third quarter, fiscal 2025 quiet period begins at the close of business Friday, October 18, 2024.

Charlie: Our third quarter, fiscal 2025 quiet period begins at the close business Friday, October 18, 2024. With that, I'll turn it over to Charlie.

Paul Diet: With that, I'll turn it over to Charlie. Thank you, Paul.

Charlie Giancarlo: Good afternoon, everyone, and welcome to our Q2 FY 25 earnings call. We were pleased with our Q2 revenue growth of 11% year over year. The Americas, Europe, and Asia Pacific, where thousands of customers and partners learned about our platform strategy and fusion vision, as well as pure as offerings in AI, virtualization, and application modernization. Specifically, we introduced the next generation of fusion, a first of its kind storage cloud architecture, soon to be available as a non-disruptive upgrade to all of our global customers. Fusion allows businesses to transform their pure storage systems into an automated data storage cloud that eliminates the data silos of existing enterprise data storage systems. We also unveiled the industry's first AI Storage as a Service for GPU cloud.

Charlie: Thank you, Paul.

Charlie: Good afternoon everyone and welcome to our Q2 FY25 earnings call. We are pleased with our Q2 revenue growth of 11% year over year. Your continues to pick up market share and outpaste the industry, both in innovation and in growth.

Speaker Change: During the quarter we hosted customers and partners at our annual Accelerate Conference.

Speaker Change: Art Las Vegas Accelerate held in June, picked off a series of local events across the Americas, Europe and Asia Pacific.

Speaker Change: where thousands of customers and partners learned about our platform strategy and fusion vision. As well as pure offerings in AI, virtualization and application modernization.

Unknown Executive: as well as a conference call.

Speaker Change: Specifically, we introduce the next generation of fusion, a first of its kind, storage, cloud architecture, soon to be available as a non-disruptive upgrade to all of our global customers.

Unknown Executive: Today's conference is being recorded. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad.

Speaker Change: Fusion allows businesses to transform their pure storage systems into an automated, data storage cloud that eliminates the data silos of existing enterprise data storage systems.

Paul Ziots: At this time, I'd like to turn the call over to Paul Diet, vice president of investor relations, please go ahead. Thank you, good afternoon, everyone, and welcome to Pure's second quarter fiscal year 2025. Earnings conference call on the call. We have Charlie Giancarlo, Chief Executive Officer, Kevin Chrysler, Chief Financial Officer and Rob Lee, Chief Technology Officer, following Charlie and Kevin's prepared remarks. We will take questions. Our press release was issued after close of market and posted on our website where this call is being simultaneously webcast.

Speaker Change: We also unveiled the industry's first AI storage as a service for GPU Clouds, rolling GPU and AI Clouds need flexibility in their infrastructure as they are uncertain of their future growth and the type of workloads that they will need to address.

Charlie Giancarlo: Growing GPU and AI clouds need flexibility in their infrastructure as they are uncertain of their future growth and the type of workloads that they will need to address. Pure's Evergreen 1 for AI provides them flexibility in both their consumption and price performance needs and matches cost to their revenue growth. Our Evergreen 1 service offering remains strong. Evergreen 1 removes the hard work, expense, and risk of operating a storage environment from enterprise IT organizations. It provides flexibility. It avoids over provisioning and rigid planning, and it simplifies customers' operations with solid and guaranteed SLAs. It also significantly boosts efficiency in terms of capital costs, energy, and labor.

Stewart: Stewart's Evergreen 1 for AI provides them flexibility in both their consumption and price performance needs and matches cost to their revenue growth.

Paul Ziots: The slides of the company this webcast can be downloaded at investor.purestorage.com. On this call today, we will make forward looking statements, which are subject to various risks. These include statements regarding our financial outlook and operations, our strategy, technology and its advantages, our current and new product offerings and competitive industry and economic trends. Any forward looking statements that we make are based on facts and assumptions as of today, and we undertake no obligation to update them.

Stewart: Our Evergreen One Service Offering Remains Strong, Evergreen One removes the hard work, expense, and risk of operating a storage environment from enterprise IT organizations.

Stewart: It provides flexibility, it avoids over-provisioning and rigid planning, and it simplifies customer's operations with solid and guaranteed SLAs.

Stewart: It also significantly boosts efficiency in terms of capital costs, energy and labor.

Paul Ziots: Our actual results may differ materially from the results forecasted and reported results should not be considered as an indication of future performance. A discussion of some of the risks and uncertainties related to our businesses contained in our filings with the SEC, and we refer you to these public filings. During this call, all financial metrics and associated growth rates are non-gap measures, other than revenue, remaining performance obligations or RPO and cash and investments.

Charlie Giancarlo: Options Technology, a financial technology company, started with one small Evergreen 1 subscription back in 2019 and has grown over the last five years to 18 petabytes of storage across multiple sites globally. Through Evergreen 1, Pure regularly enhances the delivery of their SaaS services, improving resiliency, efficiency, and overall performance. While the lengthening of large enterprise deal times impacted Evergreen 1 growth in the first half, we continue to see strong deal activity. Artificial intelligence continues to be of great interest to our customers. Specifically, customers continue to study both the potential areas for AI use as well as how to accommodate AI in their infrastructure.

Options Technology: Options Technology, a financial technology company, started with one small Evergreen One subscription back in 2019 and has grown over the last five years to 18 petabytes of storage across multiple sites globally.

Speaker Change: Through Evergreen One, you are regularly enhances the delivery of their staff services.

Paul Ziots: My congratulations to the most directly comparable gap measures are provided in our earnings press release and slides. This call is being broadcast live on the pure storage investor relations website and is being recorded for playback purposes. And our type of the webcast will be available on the IR website and is the property of pure storage.

Speaker Change: Improving resiliency, efficiency, and overall performance.

Speaker Change: While the lengthening of large enterprise deal times impacted evergreen one growth in the first half, we continue to see strong deal activity.

Paul Ziots: Our third quarter fiscal 2025 quiet period begins at the close business Friday, October 18, 2024.

Speaker Change: Artificial Intelligence continues to be of great interest to our customers. Specifically, customers continue to study both the potential areas for AI use, as well as how to accommodate AI in their infrastructure.

Paul Ziots: With that, I'll turn it over to Charlie. Thank you, Paul.

Charlie Giancarlo: We were pleased to have had Nvidia join us at Accelerate to announce our expected Nvidia DGX Superpod certification by the end of this year. The AI market for data storage has progressed as we have consistently predicted. Pure sees three separate AI opportunities for our solutions. First, storage for machine learning and training environments where Pure provides high performance storage for public and private GPU farms. This quarter, we signed a deal with Soft Bank Corporation, one of the big four telecommunication services in Japan. Pure is providing the storage layer behind many of SoftBank's cutting-edge services, including their new generative AI platform created specifically to develop the market-leading large language model for the Japanese language.

Charles Giancarlo: Good afternoon, everyone, and welcome to our Q2 FY 25 earnings call. We were pleased with our Q2 revenue growth of 11% year over year. Pure continues to pick up market share and outpace the industry both in innovation and in growth. During the quarter, we hosted customers and partners that are annual accelerate conference. Our Las Vegas Accelerate held in June picked off a series of local events across the Americas, Europe and Asia Pacific, where thousands of customers and partners learned about our platform strategy and fusion vision as well as pure as offerings in AI virtualization and application modernization.

Speaker Change: We were pleased to have had Nvidia join us at Accelerate to announce our expected Nvidia DGX SuperPog certification by the end of this year.

Speaker Change: The AI market for data source has progressed as we have consistently predicted.

Dora: Dora sees three separate AI opportunities for our solutions.

Dora: First, storage for machine learning and training environments where pure provides high-performance storage for public and private GPU farms.

Dora: This quarter, we signed a deal with SoftBank Corporation, one of the big four telecommunication services in Japan.

Charles Giancarlo: Specifically, we introduced the next generation of fusion, a first of its kind storage cloud architecture. Soon to be available as a non disruptive upgrade to all of our global customers. Fusion allows businesses to transform their pure storage systems into an automated data storage cloud that eliminates the data silos of existing enterprise data storage systems. We also unveiled the industry's first AI storage as a service for GPU cloud. Growing GPU and AI Clouds need flexibility in their infrastructure as they are uncertain of their future growth and the type of workloads that they will need to address.

Dora: Pure is providing these storage layer behind many of soft banks cutting edge services, including their new generative AI platform, created specifically to develop the market leading large language model for the Japanese language.

Charlie Giancarlo: The second AI opportunity we foresee focuses on tailored storage for enterprise inference or RAG environments. Many, if not most enterprises, will use commercial LLMs or other models to operate on their own proprietary data in-house. These systems will use relatively small GPU environments, provide AI insight from their data. Pure is working closely within video on a number of vertical market offerings to satisfy this market. We continue to believe that our largest opportunity open by AI is to address the silo nature of enterprises' existing data storage architect. Researchers, current data stores, sit behind application stacks, and generally have neither the performance nor the connectivity to serve data directly for AI engines and analytics.

Dora: The second AI opportunity we foresee focuses on tailored storage for enterprise, inference, or rag environments.

Dora: Many, if not most enterprises, will use commercial LLMs or other models to operate on their own proprietary data in-house.

Speaker Change: These systems will use relatively small GPU environments, provide AI insights from their data. Sure is working closely within video on a number of vertical market offerings to satisfy this market.

Speaker Change: We continue to believe that our largest opportunity, open by AI, is to address the siloed nature of enterprises existing data storage architectures.

Speaker Change: Current data stores sit behind application stacks, and generally have neither the performance nor the connectivity to serve data directly for AI engines and analytics.

Charles Giancarlo: It provides flexibility, it avoids over provisioning and rigid planning, and it simplifies customers' operations with solid and guaranteed SLAs. It also significantly boosts efficiency in terms of capital costs, energy, and labor. Options Technology, a financial technology company, started with one small Evergreen One subscription back in 2019 and has grown over the last five years to 18 petabytes of storage across multiple sites globally. Through Evergreen One, Pure regularly enhances the delivery of their SaaS services, improving resiliency, efficiency, and overall performance.

Charlie Giancarlo: Customers that are the most advanced in their AI investigations all acknowledge that data access and preparation are major barriers to AI deployment. Your fusion will allow customers to upgrade their enterprise storage, the function of the storage cloud, simplifying data access and management, and eliminating data silos to enable easier access for AI. The focus and uncertainty around AI has caused customers to begin to re-evaluate their planning on how they will invest their IT dollars. We're also seeing large organizations increase their focus on managing escalating costs from software, cloud, and SaaS services. Our pure cloud block store for Microsoft Azure VMware Solution is helping enterprises contain cloud storage costs, generally by more than 50%.

Speaker Change: Customers that are the most advanced in their AI investigations all acknowledge that data access and preparation are major barriers to AI deployment.

Speaker Change: Your fusion will allow customers to upgrade their enterprise storage, the function is a storage cloud, simplifying data access and management and eliminating data silos to enable easier access for AI.

Speaker Change: The focus and uncertainty around AI has caused customers to begin to reevaluate their planning on how they will invest their IT dollars.

Speaker Change: We're also seeing large organizations increase their focus on managing escalating costs from software, loud, and SaaS services.

Charles Giancarlo: While the lengthening of large enterprise deal times impacted Evergreen One growth in the first half, we continue to see strong deal activity. Artificial intelligence continues to be of great interest to our customers. Specifically, customers continue to study both the potential areas for AI use, as well as how to accommodate AI in their infrastructure. We were pleased to have had Nvidia join us at Accelerate to announce our expected Nvidia DGX Superpod certification by the end of this year.

Speaker Change: Our pure cloud block store, or Microsoft Azure VMware solution, is helping enterprises contain cloud storage costs, generally by more than 50%.

Charlie Giancarlo: But simply, cloud block store provides a more resilient and perform public cloud storage infrastructure for large enterprise cloud application deployments that is dramatically less expensive than cloud native services. Furthermore, cloud block store is fully compatible with enterprise storage interfaces and services, including disaster recovery and data protection. One case in point is a Fortune Global 500 food and beverage customer that faced a growing hyper-scaler data footprint and accelerating costs with limited visibility into its overall workload performance. By leveraging cloud block store, reducing thousands of cloud managed disks to just dozens of cloud block store volumes equipped with data protection, ransomware remediation features, and advanced workload performance reporting, the company is looking to save 50% of its total storage bill.

Speaker Change: But simply, Cloud Block Store provides a more resilient and performant public cloud storage infrastructure for a large enterprise cloud application deployments that is dramatically less expensive than cloud native services.

Speaker Change: Furthermore, five block store is fully compatible with enterprise storage interfaces and services, including disaster recovery and data protection.

Charles Giancarlo: The AI market for data storage has progressed as we have consistently predicted. Pure sees three separate AI opportunities for our solutions. First, storage for machine learning and training environments where Pure provides high performance storage for public and private GPU farms. This quarter, we signed a deal with Softbank Corporation, one of the big four telecommunication services in Japan. Pure is providing the storage layer behind many of Softbank's cutting edge services, including their new generative AI platform created specifically to develop the market leading large language model for the Japanese language.

Speaker Change: One case in point is a fortune global 500 food and beverage customer that face a growing hyperscaler data footprint and accelerating costs with limited visibility into its overall workload performance.

Speaker Change: by leveraging cloud block store, producing thousands of cloud managed disks to just dozens of cloud blocks or volumes.

Speaker Change: Equipped with data protection, ransomware remediation features, and advanced workload performance reporting.

Charlie Giancarlo: Our discussions with hyper-scalers replace their core storage with pure technology continues to progress positively. Our lead prospect has advanced from extensive evaluation of our core technology to testing an integrated solution, and we have been engaged in detailed contractual negotiations for many months. We remain confident that we will secure our first hyper-scaler design win by year end. The longer term opportunity for Pure with hyper-scalers is significant. To provide a sense of scale, the top 10 hyper-scalers are projected to buy almost 70% of all disk drives over 600 exabytes this year alone. Because of Pure's unique direct-to-flash technology, we can offer hyper-scalers better performance, reliability, and power and space saving than hard disks at a similar or better total cost of ownership.

Speaker Change: The company is looking to save 50% of its total storage bill.

Speaker Change: are discussions with high-press killers to replace their core storage with pure technology continues to progress positively.

Charles Giancarlo: The second AI opportunity we foresee focuses on tailored storage for enterprise inference or rag environments. Many, if not most enterprises, will use commercial LLMs or other models to operate on their own proprietary data in house. These systems will use relatively small GPU environments, provide AI insight from their data. Pure is working closely with Nvidia on a number of vertical market offerings to satisfy this market. We continue to believe that our largest opportunity, open by AI, is to address the siloed nature of enterprises existing data storage architecture.

Speaker Change: Our lead prospect has advanced from extensive evaluation of our core technology to testing an integrated solution, and we have been engaged in detailed contractual negotiations for many months. We remain confident that we will secure our first hyperscaler design win by year end.

Speaker Change: The longer-term opportunity for pure with hyperscalers is significant.

Speaker Change: To provide a census scale, the top 10 hyperscalors are projected to buy almost 70% of all drops over 600 eggs of bites this year alone.

Speaker Change: Because of purest unique, direct-to-flash technology, we can offer hyperscalers, better performance, reliability, and power and space savings in hard disks at a similar or better total cost of ownership.

Charles Giancarlo: Doctors. Current data stores sit behind application stacks and generally have neither the performance nor the connectivity to serve data directly for AI engines and analytics. Customers that are the most advanced in their AI investigations all acknowledge that data access and preparation are major barriers to AI deployment. Your fusion will allow customers to upgrade their enterprise storage, the function of the storage cloud, simplifying data access and management and eliminating data silos to enable easier access for AI.

Charlie Giancarlo: With nearly 15 years of experience with software and hardware flash management, we continue to far outdistance the industry in energy efficiency, density, and performance. Pure holds key intellectual property and unmatched multi-vendor, multi-process flash expertise that no other vendor can match and cannot be replicated with standard SSDs. Our latest 150 terabyte direct flash module shipping later this year is but the next stop on our robust industry-leading flash roadmap. Energy and space savings generated by our direct to flash advantage are significant. We reduce space, power, and cooling requirements by a factor of 5 to 10 compared to hard disks in a world of greater power demands and limited electrical supply.

Speaker Change: With nearly 15 years of experience with software and hardware flash management, we continue to far out distance the industry in energy efficiency, density and performance.

Speaker Change: to our whole key intellectual property and unmatched multi-vendor multi-process flash expertise that no other vendor can match and cannot be replicated with standard SSDs.

Speaker Change: Our latest 150 terabyte direct flash module shipping later this year is but the next stop on our robust industry leading flash roadmap.

Charles Giancarlo: The focus and uncertainty around AI has caused customers to begin to reevaluate their planning on how they will invest their IT dollars. We're also seeing large organizations increase their focus on managing escalating costs from software, cloud and SaaS services. Our pure cloud block store for Microsoft Azure VMware solution is helping enterprises contain cloud storage costs generally by more than 50%. But simply cloud block store provides a more resilient and perform public cloud storage infrastructure for large enterprise cloud application deployments that is dramatically less expensive than cloud native services.

Speaker Change: Energy and Space Savings generated by our direct-of-plash advantage are significant.

Speaker Change: We reduce space, power, and cooling requirements by a factor of 5 to 10 compared to hard disks.

Charlie Giancarlo: The savings on electricity alone provides a compelling incentive to switch from hard disks in both hyperscaler as well as enterprise data centers. Our E family of products focus on replacing enterprise hard disk systems with more efficient and higher performance. Pure technology continues to grow strongly. Enterprises increasingly recognize that pure direct flash technology has reached the price level where they can eliminate the last mechanical component from their data centers. As highlighted in our latest ESG report, power reduction on storage from pure direct flash technology can reduce total power usage in existing data centers by approximately 20%.

Speaker Change: In a world of greater power demands and limited electrical supply, the savings on electricity alone provides a compelling incentive to switch from hard disks in both hyperscaler as well as enterprise data centers.

Speaker Change: are E-family products, focus on replacing enterprise hard disk systems with more efficient and higher performance pure technology, continues to grow strongly.

Charles Giancarlo: Furthermore, cloud block store is fully compatible with enterprise storage interfaces and services, including disaster recovery and data protection. One case in point is a fortune global 500 food and beverage customer that faces a growing hyper scalar data footprint and accelerating costs with limited visibility into its overall workload performance. By leveraging cloud block store reducing thousands of cloud managed disks to just dozens of cloud block store volumes equipped with data protection, ransomware remediation features and advanced workload performance reporting.

Speaker Change: Enterprises increasingly recognize that pure direct flash technology has reached the price level where they can eliminate the last mechanical component from their data centers.

Speaker Change: As highlighted in our latest ESG report, power reduction on storage from pure direct flash technology can reduce total power usage in existing data centers by approximately 20%.

Charlie Giancarlo: Businesses are facing higher energy costs and greater power constraints while committing to the higher sustainability goals. BT, the British multinational service provider, has set a target to achieve net zero carbon emissions in its operations by the end of March 2031. As a foundational storage provider to BT, we directly support their data center energy reduction program. We have enabled BT to grow its data storage while reducing its energy usage. BT has measured your storage to be about 18 times more efficient than their legacy storage benchmarks. Looking back over this past quarter, we have not seen a significant change in the overall macro environment or our customers' intentions to buy.

Speaker Change: Businesses are facing higher energy costs and greater power constraints while committing the higher sustainability goals.

BT: BT, the British Multinational Service Provider, has set a target to achieve net zero carbon emissions in its operations by the end of March 2031.

Charles Giancarlo: The company is looking to save 50% of its total storage bill. Our discussions with hyperscalers to replace their core storage with pure technology continues to progress positively. Our lead prospect has advanced from extensive evaluation of our core technology to testing an integrated solution and we have been engaged in detailed contractual negotiations for many months. We remain confident that we will secure our first hyperscaler design win by year end. The longer term opportunity for pure with hyperscalers is significant.

Speaker Change: As a foundational storage provider to BT, we directly support their data center energy reduction program.

Speaker Change: We have enabled BT to grow its state of storage while reducing its energy usage.

Speaker Change: BT has measured your storage to be about 18 times more efficient than their legacy storage benchmarks.

Speaker Change: Looking back over this past quarter, we have not seen a significant change in the overall macro environment or our customers' intentions to buy. We have, however, seen customers look to manage increasing costs in cloud, software and SaaS.

Charlie Giancarlo: We have, however, seen customers look to manage increasing costs in cloud, software, and SaaS. We believe that the storage market will be resilient in this IT economy, but we have yet to see a positive inflection. Overall, we are well positioned in all of the segments in which we compete and believe we will continue to gain share in our market. We know we are gaining ground as our growing strength has forced competitors to intensify their efforts and mimic our messaging. It is clear now that legacy competitors in our market see Pure as the alpha competitor and have focused their messaging and strategies on us.

Charles Giancarlo: To provide a sense of scale, the top 10 hyperscalers are projected to buy almost 70% of all disk drives over 600 exabytes this year alone. Because of Pure's unique direct-to-flash technology, we can offer hyperscalers better performance, reliability and power and space savings than hard disks at a similar or better total cost of ownership. With nearly 15 years of experience with software and hardware flash management, we continue to far out distance the industry in energy efficiency, density and performance.

Speaker Change: We believe that the storage market will be resilient in this IT economy, but we have yet to see a positive inflection.

Speaker Change: Overall, we are well-positioned in all of the segments in which we compete and believe we will continue to gain share in our market.

Speaker Change: We know we are gaining ground, as our growing strength has forced competitors to intensify their efforts and mimic our messaging.

Speaker Change: It is clear now that legacy competitors in our market see pure as the Alpha competitor and it's focused their messaging and strategies on us.

Charles Giancarlo: Pure holds key intellectual property and unmatched multi-vendor multi-process flash expertise that no other vendor can match and cannot be replicated with standard SSDs. Our latest 150 terabyte direct flash module shipping later this year is but the next stop on our robust industry leading flash roadmap. Energy and space savings generated by our direct to flash advantage are significant. We reduce space, power and cooling requirements by a factor of 5 to 10 compared to hard disks.

Charlie Giancarlo: We appreciate the attention and look forward to the competition. We remain confident in our ability to expand our market share and maintain our strong leadership in storage.

Speaker Change: We appreciate the attention and look forward to the competition.

Speaker Change: We remain confident in our ability to expand our market share and maintain our strong leadership in storage. With that, I'll turn it over to Kevin.

Kevin Chrysler: With that, I will turn it over to Kevin. Thank you, Charlie. We are pleased to have delivered double-digit revenue growth during the first half of our fiscal year. And we continue to see strong sales performance for both our FlashArray E and FlashBlade E offerings. Revenue of 764 million in Q2 grew 11% year over year. In both revenue and operating profit of 139 million exceeded our guidance. Subscription services, annual recurring revenue, or ARR, grew 24% to over 1.5 billion, which continues to be driven by our Evergreen One service offering, in particular for a higher velocity business.

Kevin: Thank you, Charlie. We are pleased to have delivered double-digit revenue growth during the first half of our fiscal year, and we continue to see strong sales performance for both our flash array E and flash blade E offerings.

Kevin: Revenue of 764 million in Q2 grew 11% year over year in both revenue and operating profit of 139 million exceeded our guidance.

Charles Giancarlo: In a world of greater power demands and limited electrical supply. The savings on electricity alone provides a compelling incentive to switch from hard disks in both hyperscaler as well as enterprise data centers. Our E family of products focus on replacing enterprise hard disk systems with more efficient and higher performance pure technology continues to grow strongly. Enterprises increasingly recognize that pure direct flash technology has reached the price level where they can eliminate the last mechanical component from their data centers.

Kevin: Subscriptions Services Annual Recurring Revenue or ARR, root 24% to over 1.5 billion, which continues to be driven by our Evergreen One Service Offering, in particular for a higher velocity business.

Kevin Chrysler: As a reminder, subscription services, ARR excludes non-cancelled Evergreen subscription contracts, where the effective service date has not started, including non-cancelled subscription contracts, where the effective service date has not started. Subscription services, ARR, grew 25%. Total RPO, exiting Q2, which includes both subscription services and product orders, grew 24% year-over-year to $2.3 billion. As we have shared in previous quarters, product orders within RPO include a non-cancelled telco order from Q3 FY24, and orders relating to a 14.5 billion, which includes both subscription services and product orders, grew 24% year-over-year to $2.3 billion. At the end of Q2, RPO associated exclusively with our subscription service offerings grew by 21%.

Kevin: As a reminder, subscription services ARR excludes non-cancellable evergreen subscription contracts where the effective service date has not started.

Kevin: including non-cancimal subscription contracts, where the effective service date has not started. Subscription Services ARR, group 25 percent.

Charles Giancarlo: As highlighted in our latest ESG report power reduction on storage from pure direct flash technology can reduce total power usage in existing data centers by approximately 20%. Businesses are facing higher energy costs and greater power constraints while committing the higher sustainability goals. BT, the British multinational service provider has set a target to achieve net zero carbon emissions in its operations by the end of March 2031. As a foundational storage provider to BT we directly support their data center energy reduction program.

Kevin: Total RPO, exiting Q2, which includes both subscription services and product orders, through 24% year over year to $2.3 billion.

Kevin: As we have shared in previous quarters, product orders within RPO include a non-canceable telco order from Q3 FY24 and orders relating to a 14500 financial services company from Q4 FY24.

Kevin: At the end of Q2, RPO associated exclusively with our subscription service offerings grew by 21%.

Kevin Chrysler: Additionally, total contract value sales, or storage as a service offerings during Q2 reached 101 million, bringing TCB sales in the first half of FY25 to 157 million. Our evergreen one as a service business is strong, demonstrating robust pipeline growth and consistent success in converting opportunities valued at 5 million or less. This continues to underpin our confidence in the growth potential of our storage of the service offerings. Consistent with last quarter, we continue to experience extended closing timelines for larger evergreen one opportunities. Last year, we closed several large evergreen one deals in the first half, compared to three in the first half of this year.

Charles Giancarlo: We have enabled BT to grow its data storage while reducing its energy usage. BT has measured your storage to be about 18 times more efficient than their legacy storage benchmarks. Looking back over this past quarter, we have not seen a significant change in the overall macro environment or our customers intentions to buy. We have, however, seen customers look to manage increasing costs in cloud, software and SaaS. We believe that the storage market will be resilient in this IT economy but we have yet to see a positive inflection.

Kevin: Additionally, total contract value sales for storage as a service offerings during Q2 reached 101 million, bringing TCV sales in the first half of FY25 to 157 million.

Kevin: Our evergreen one as a service business is strong, demonstrating robust pipeline growth and consistent success in converting opportunities valued at 5 million or less.

Kevin: This continues to underpin our confidence in the growth potential of our storage of the service offerings.

Kevin: Consistent with last quarter, we continue to experience extended closing timelines for larger evergreen one opportunities.

Charles Giancarlo: Overall, we are well positioned in all of the segments in which we compete and believe we will continue to gain share in our market. We know we are gaining ground as our growing strength has forced competitors to intensify their efforts and mimic our messaging. It is clear now that legacy competitors in our market see pure as the alpha competitor and have focused their messaging and strategies on us. We appreciate the attention and look forward to the competition.

Kevin: Last year we closed several large-ever-green-one deals in the first half, compared to three in the first half of this year.

Kevin Chrysler: This impacts both year-over-year RPO growth and forecasted FY25 TCB sales for our storage of the service offerings, which we now expect to be 500 million, reflecting a growth rate of approximately 25%. US revenue for Q2 was $538 million, and international revenue was $226 million. Our new customer acquisition grew by 261 customers during Q2, and now we serve 62% of the Fortune 500. Total gross margins of 72.8% in Q2 continues to be very healthy and comparable year-over-year. Subscription services gross margins strengthened to 76.4% as we leverage increased automation of our service logistics workflows, supporting delivery of our evergreen subscription services.

Kevin: This impacts both year-over-year RPO growth and forecasted FY-25 TCB sales for our storage of the service offerings, which we now expect to be $500 million, reflecting a growth rate of approximately 25%.

Charles Giancarlo: We remain confident in our ability to expand our market share and maintain our strong leadership in storage.

Kevin: U.S. revenue for Q2 was $538 million in international revenue was $226 million.

Kevin Chrysler: With that, I will turn it over to Kevin. Thank you, Charlie. We are pleased to have delivered double-digit revenue growth during the first half of our fiscal year. And we continue to see strong sales performance for both our flash array E and flash blade E offerings. Revenue of 764 million in Q2 grew 11 percent year over year and both revenue and operating profit of 139 million exceeded our guidance. Subscription services, annual recurring revenue, or ARR, grew 24% to over 1.5 billion, which continues to be driven by our Evergreen One service offering, in particular for a higher velocity business.

Kevin: Our new customer acquisition grew by 261 customers during Q2 and now we serve 62% of the Fortune 500.

Kevin: Total gross margins of 72.8% in Q2 continues to be very healthy and comparable year over year.

Kevin: Subscription Services grows margin strengthened to 76.4% as we leverage increased automation of our service logistics workflows, supporting delivery of our evergreen subscription services.

Kevin Chrysler: Our product gross margin of 69.5% in Q2 underscores the strong sales growth of our Flash Blade E, Flash Array E, and Flash Array C solutions, driven by customers increasingly shifting their cost-sensitive workloads to all flash. As we aggressively pursue our efforts to help customers transition their workloads to our all-flash solutions, we anticipate a modest strategic decline in product growth margins during the second half of the fiscal year. Operating profit and margin strengths of approximately 18% were both positively impacted by revenue overachievement, strong gross margin performance, and operating expense discipline. Our headcount increased sequentially by nearly 250 to approximately 5,700 employees at the end of the quarter.

Kevin: Our product growth margin of 69.5% in Q2 underscores the strong sales growth of our flashbladie, Blasher AE and Blasher A C solutions driven by customers increasingly shifting the sensitive workloads to off-lash.

Kevin Chrysler: As a reminder, subscription services ARR excludes non-cancelled Evergreen subscription contracts, where the effective service date has not started, including non-cancelled subscription contracts, where the effective service date has not[inaudible] 100 financial services company from Q4 FY24. At the end of Q2, RPO associated exclusively with our subscription service offerings grew by 21%. Additionally, total contract value sales, or storage as a service offerings during Q2 reached 101 million, bringing TCB sales in the first half of FY25 to 157 million.

Kevin: As we aggressively pursue our efforts to help customers transition the workloads to our all-flash solutions, we anticipate a modest strategic decline in product growth margins during the second half of the fiscal year.

Speaker Change: Operating profit and margins strengths have approximately 18% were both positively impacted by revenue over achievement, strong gross margin performance and operating expense discipline.

Speaker Change: Our head count increased sequentially by nearly 250 to approximately 5,700 employees at the end of the quarter.

Kevin Chrysler: Here is balance sheet and liquidity remains very strong, including $1.8 billion in cash and investments at the end of Q2. Cash flow from operations during the quarter was $227 million, and capital expenditures were $60 million. Our most significant capital expenditures during the quarter were concentrated in engineering for new test equipment supporting key strategic growth initiatives. Including our pursuit of hyperscaler infrastructure opportunities. As part of our objective of partially offsetting delusion, we begin paying withholding taxes due on employee equity awards. In Q2, withholding taxes on equity awards was $76 million, which offsets dilution by approximately 1.1 million shares.

Speaker Change: Beer's balance sheet and liquidity remains very strong, including $1.8 billion in cash and investments at the end of Q2. Cash flow from operations during the quarter was $227 million in capital expenditures for $60 million.

Speaker Change: Our most significant capital expenditures during the quarter were concentrated in engineering for new test equipment supporting key strategic growth initiatives, including our pursuit of hyperscaler infrastructure opportunities.

Kevin Chrysler: Our evergreen one as a service business is strong, demonstrating robust pipeline growth and consistent success in converting opportunities valued at 5 million or less. This continues to underpin our confidence in the growth potential of our storage of the service offerings. Consistent with last quarter, we continue to experience extended closing timelines for larger evergreen one opportunities. Last year, we closed several large evergreen one deals in the first half compared to three in the first half of this year.

Speaker Change: As part of our objective of partially offsetting delusion, we begin paying with holding taxes do you want to employ equity awards? In Q2, with holding taxes on equity awards was $76 million, which offsets delusion by approximately 1.1 million shares.

Kevin Chrysler: We have approximately $395 million remaining on our existing repurchase authorizations.

Speaker Change: We have approximately $395 million remaining on our existing, repurchased authorizations.

Kevin Chrysler: Now turning to guidance. For Q3, we anticipate revenue of 815 million with an expected operating profit of 140 million, resulting in an operating margin of 17.2%. Projected operating profit takes into account a modest sequential decline in product growth margins that we expect during the second half of the fiscal year, driven by our expectations of continued sales growth of our e family solutions, which are successfully targeting cost-sensitive workloads. Turning to our annual guidance for FY 25, we are reaffirming our FY 25 revenue target of 3.1 billion, representing growth of 10.5%, and our operating profit guidance of 532 million, with an operating margin of 17%.

Kevin Chrysler: This impacts both year over year RPO growth and forecasted FY25 TCB sales for our storage of the service offerings, which we now expect to be 500 million. Reflecting a growth rate of approximately 25%. US revenue for Q2 was $538 million, and international revenue was $226 million. Our new customer acquisition grew by 261 customers during Q2, and now we serve 62% of the Fortune 500. Total gross margins of 72.8% in Q2 continues to be very healthy and comparable year over year.

Speaker Change: Now turning to guidance. For Q3, we anticipate revenue of 815 million with an expected operating profit of 140 million, resulting in an operating margin of 17.2%.

Speaker Change: Projected Operating Profit takes into account a modest sequential decline in product gross margins that we expect during the second half of the fiscal year.

Speaker Change: Driven by our expectations of continued sales growth of our E-family solutions, which are successfully targeting cost-incentive workloads.

Speaker Change: Turning to our annual guidance for FY-25, we are reaffirming our FY-25 revenue target of 3.1 billion, representing growth of 2.5 percent.

Kevin Chrysler: Subscription services gross margins strengthened to 76.4% as we leverage increased automation of our service logistics workflows, supporting delivery of our evergreen subscription services. Our product gross margin of 69.5% in Q2 underscores the strong sales growth of our flash blade E, flash array E, and flash array C solutions driven by customers increasingly shifting their cost sensitive workloads to all flash.

Speaker Change: and our operating profit guidance of 532 million with an operating margin of 17%.

Kevin Chrysler: The anticipated modest decline in product growth margins during the second half of the fiscal year validates our successful strategy of expanding into cost-sensitive workloads with our all-flash solutions and has been contemplated in our annual guidance.

Speaker Change: The anticipated modest decline in product gross margins during the second half of the fiscal year, validates our successful strategy of expanding into cost-sensitive workloads with our off-slash solutions. And has been contemplated in our annual guidance.

Kevin Chrysler: In closing, we are pleased to deliver strong financial performance, which reaffirms the effectiveness of our strategic initiatives. Our focus on innovation and customer centric solutions underscores our commitment to be a leader in the data storage industry. While we remain mindful of the broader macroeconomic environment, we are confident in our ability to capitalize on the growing demand for high performance, sustainable data storage solutions.

Speaker Change: In closing, we are pleased to deliver strong financial performance, which reaffirms the effectiveness of our strategic initiatives.

Kevin Chrysler: As we aggressively pursue our efforts to help customers transition their workloads to our all-flash solutions, we anticipate a modest strategic decline in product growth margins during the second half of the fiscal year. Our headcount increased sequentially by nearly 250 to approximately 5,700 employees at the end of the quarter. Here's balance sheet and liquidity remains very strong, including $1.8 billion in cash and investments at the end of Q2. Cash flow from operations during the quarter was $227 million and capital expenditures were $60 million.

Speaker Change: Our focus on innovation and customer-centric solutions.

Speaker Change: Under Scores our commitment to be a leader in the data, storage industry.

Speaker Change: While we remain mindful of the broader macroeconomic environment, we are confident in our ability to capitalize on the growing demand for high performance to sustainable data storage solutions.

Paul Diet: With that, I will turn it back to Paul for Q and A. Thanks, Kevin.

Speaker Change: With that, I will turn it back to Paul for Q&A.

Operator: Before we begin the Q and A session, I'll ask you to please limit yourself to one question consisting of one part, so we can get to as many people as possible. If you have additional questions, we kindly ask that you please rejoin the queue, and we'll be happy to take those additional questions as time allows. Operator, let's get started. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by one. Again, to ask a question, press star one.

Paul Ziots: Thanks, Kevan. Before we begin the Q&A session, I'll ask you to please limit yourselves to one question consisting of one part so we can get to as many people as possible.

Paul Ziots: If you have additional questions, we kindly ask that you please rejoin the queue and we'll be happy to take those additional questions as time allows. Operator, let's get started.

Paul Ziots: Thank you. If you would like to ask a question, please press star, followed by one on your telephone Thank you, Paul.

Kevin Chrysler: Our most significant capital expenditures during the quarter were concentrated in engineering for a new test equipment supporting key strategic growth initiatives, including our pursuit of hyperscaler infrastructure opportunities. As part of our objective of partially offsetting delusion, we begin paying withholding taxes due on employee equity awards. In Q2, withholding taxes on equity awards was $76 million, which offsets delusion by approximately 1.1 million shares. We have approximately $395 million remaining on our existing repurchase authorizations.

Paul Ziots: If for any reading you would like to remove that question, please press star, followed by one. Again to ask the question, press star one.

Amit Daryanani: As a reminder, if you're using a speaker phone, please remember to pick up your handset before asking your question. We'll pause here briefly as questions are registered. Our first question will come from Amit Daryanani from Evercore ISI. Please go ahead. Your line is open. Good afternoon, everyone. You know, I guess my question really is, and I think one of the things I think folks are trying to square away is the every one DCV target is getting lower from 600 to 500 million. I would have thought that a downtick here would have meant perhaps better cap expense on your customers.

Paul Ziots: As a reminder, if you are using a speaker phone, please remember to pick up your hand site before asking your questions.

Paul Ziots: We will pause here briefly as questions are registered.

Paul Ziots: Our first question will come from Amit Darianani from Evercore ISI. Please go ahead, your line is open.

Amit Darianani: Good afternoon everyone. You know, I guess my question really is, and I think one of the things I think folks are trying to square away is the evergreen one DCB target is getting lower from 600.

Kevin Chrysler: Now turning to guidance. For Q3, we anticipate revenue of 815 million with an expected operating profit of 140 million. Resulting in an operating margin of 17.2%. Projected operating profit takes into account a modest sequential decline in product gross margins that we expect during the second half of the fiscal year driven by our expectations of continued sales growth of our e family solutions, which are successfully targeting cost sensitive workloads.

Speaker Change: 500 million.

Charlie Giancarlo: That's better. Actually, help your fiscal year revenue growth profile. I've clearly not seen that happen based on the fiscal year guide. So you know, hoping you just unpack what's driving the downtick on the DCV expectations and how do you see that going into your revenue guide really. Thank you. Absolutely a bit. Well, I think your supposition would be correct. If customers, the same customer was switching from an evergreen one deal to a capex deal. What we've seen instead is large opportunities, a large evergreen one opportunity staying ever opportunities longer than we expected and therefore stretching out.

Speaker Change: You know, I would have thought that a down thick year would have meant perhaps better capex than to your customers.

Speaker Change: and I hope you just unpack what's driving the downtake on the TCV expectations and how do you see that the revenue guide really? Thank you.

Speaker Change: Yeah, absolutely a bit. Well, I think your supposition would be correct if customers, the same customer was switching from an evergreen one deal to a capex deal.

Speaker Change: What we've seen instead is large opportunities.

Kevin Chrysler: Turning to our annual guidance for FY 25, we are reaffirming our FY 25 revenue target of 3.1 billion representing growth of 10.5% and our operating profit guidance of 532 million with an operating margin of 17%. The anticipated modest decline in product gross margins during the second half of the fiscal year validates our successful strategy of expanding into cost sensitive workloads with our all flash solutions and has been contemplated in our annual guidance.

Speaker Change: A large-ever green one opportunity staying opportunities longer than we expected in that force stretching out.

Charlie Giancarlo: You know, a little bit whether that's, you know, based on caution or whether that's based on by the customer or whether that's based on, you know, other. We had indicated that customers are, you know, looking very closely at their subscription expenses now, given increases in software and staff expenses that were raised over the year. We've yet to really fully diagnose that. But what we're seeing is a lengthening of large, large deal size evergreen one opportunities. And I'll just add on to that, you know, we did see three opportunities closest quarter that we're larger and we're defining larger as greater than 5 million.

Speaker Change: You know, a little bit, whether that's based on caution or whether that's based on, by the customer or whether that's based on, you know, other, we've indicated that customers are, you know, looking very closely at their subscription expenses now given increases and software and SaaS expenses that were raised over the year. We've yet to really fully diagnose that, but what we're seeing is a lengthening of large.

Speaker Change: Large Deal size Evergreen One Opportunities.

Kevin Chrysler: In closing, we are pleased to deliver strong financial performance, which reaffirms the effectiveness of our strategic initiatives. Our focus on innovation and customer centric solutions underscores our commitment to be a leader in the data storage industry. While we remain mindful of the broader macro economic environment, we are confident in our ability to capitalize on the growing demand for high performance sustainable data storage solutions.

Speaker Change: And I'll just add on to that, you know, we did see three opportunities close to this quarter that were larger and we're defining larger.

Charlie Giancarlo: And then just to reiterate, the question was really focused on why aren't we seeing an increase to our annual revenue guide. And I will point out to Charlie point these, these larger deals that are evergreen one are still being actively worked and they're just taking longer to close. If we saw those opportunities flip to a traditional product sale or capex. That's when we would be looking at an upward view of our annual guidance for revenue.

Speaker Change: as a greater than than 5 million.

Speaker Change: and then just to reiterate, the question was really focused on, why aren't we seeing an increase to our annual revenue guide and then I will point out to Charlie's point. These larger deals that are evergreen one are still being actively worked.

Charlie: and they're just taking longer to close. If we saw those opportunities flip to a traditional product cell or cap X, that's when we would be looking at an upward view of our annual guidance for revenue.

Paul Ziots: With that, I will turn it back to Paul for Q and A. Thanks, Kevin.

Michael Stadenoff: Thank you on it. Next question, please. Our next question comes from Aaron Rakers from Wells Fargo. Please go ahead. Your line is open. Hi guys. Thank you. This is Michael Stadenoff on behalf of Aaron. I just wanted to see if I can get any more color just on the hyperscale opportunity. You guys kind of mentioned sounds like you're continuing discussions with the customer; you know, you expect by the end of the year. I'm curious if anything has changed, or maybe ask it another way: like what's the biggest hurdle. You kind of need to overcome to get the deals on and then separately just on other opportunities you're pursuing if there's any kind of anything to note there for progress.

Paul Ziots: Before we begin the Q and A session, I'll ask you to please limit yourselves to one question consisting of one part so we can get to as many people as possible. If you have additional questions, we kindly ask that you please rejoin the queue and we'll be happy to take those additional questions as time allows operator, let's get started. Thank you.

Speaker Change: Thank you, Amit. Next question, please.

Speaker Change: Our next question comes from Erin Raiders from Wells Fargo, who's going ahead to line this open.

Speaker Change: Hi guys, thank you, this is Michael Studnaugh on behalf of Aaron. I just wanted to see if I can get any more color just on the hyperscale opportunity. You guys kind of mentioned sounds like you're continuing discussions with the customers.

Unknown Executive: If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by one again to ask a question, press star one. As a reminder, if you're using a speaker phone, please remember to pick up your hand site before asking your question. We'll pause here briefly as questions are registered.

Speaker Change: By the end of the year, I'm curious if anything has changed or maybe ask it another way, like, what's the biggest hurdle you kind of need to overcome to get the deal done? And then, separately, just on other opportunities you're pursuing, if there's anything to know there, for progress.

Charlie Giancarlo: You bet. The lead horse, I wouldn't say there's the largest hurdle. There's just lots of little hurdles. A lot of that is just aligning, aligning business models, economic improvements to them, to pricing and economics for us. And there's a lot of logistical elements that go into this as well, especially when you're speaking with large type of scalars, with large orders and large data centers and complex, complex, their own complex supply chains. So I would say just lots of little hurdles right now. Testing, testing's going well, conversations are going well, but a lot of detail that has to be worked out.

Speaker Change: You've had some elite horse. I wouldn't say there's a largest turtle. There's just lots of little hurdles, a lot of that is just a lining.

Amit Daryanani: Our first question will come from Amit Daryanani from Evercore ISI. Please go ahead. Your line is open. Good afternoon, everyone. You know, I guess my question really is in I think one of the things I think folks are trying to square away is the every one DCV target is getting lower from 600 to 500 million. You know, I would have thought that a downtick here would have meant perhaps better cap expense on your customers. That's better actually help your fiscal year revenue growth profile. Pretty nothing that happened based on a fiscal year guide.

Speaker Change: A Lightning Business Models are economic improvements to them, to pricing and economics for us.

Kevin Chrysler: So you know, hoping you just unpack what's driving the downtick on the DCV expectations and how do you see that going into your revenue guide really. Thank you. Yeah, absolutely a bit. Well, I think your supposition would be correct if customers, the same customer was switching from an evergreen one deal to a capex deal. What we've seen instead is large opportunities, a large evergreen one opportunity staying ever opportunities longer than we expected and therefore stretching out.

Speaker Change: and there's a lot of logistical elements that go into this as well, especially when you're speaking with large hyperscalers, with large orders and large data centers and complex their own complex supply chains.

Speaker Change: So, I would say just lots of little hurdles right now, testing, testing's going well, conversations are going well, but a lot of detail that has to be worked out.

Rob Lee: Yeah, this is Rob. Just to add to that, I would say overall our engagements with our lead prospects are progressing very well, as Charlie mentioned in his prepared remarks. What we've done over the last many months is really move forward on our testing and phases from initial proofs of concept to testing of that core IP to now extensive testing of really an integrated, I think of it as a co-engineered solution. And as you'd imagine, this involves detailed performance, operational testing, so on and so forth, and with that, as Charlie mentioned as well, you know, accompanied with that detailed contractual discussions around, you know, the commercial package.

Rob: Yeah, this is Rob, just to add to that, you know, I would say overall our engagements with our lead prospects, our progressing very well as Charlie mentioned in his prepared remarks. You know, what we've done over the last, you know, many months is really moved forward on our testing and phases from, you know, initial proofs of concept to testing of that core IT, to now extensive testing of really integrated, I think of it as a co-engineered solution. And as you imagine, this involves detailed performance, operational testing, so on and so forth. And with that as Charlie mentioned as well, you know, accompanied with that detailed, contractual discussions around, you know, the commercial package. And so, you know, overall, you know, engagement goes well and, and too.

Kevin Chrysler: You know, a little bit whether that's, you know, based on caution or whether that's based on by the customer or whether that's based on, you know, other we had indicated that customers are, you know, looking very closely at their subscription expenses now given increases and software and staff expenses that were raised over the year. We've yet to really fully diagnose that but what we're seeing is a lengthening of large, large deal size evergreen one opportunities. And I'll just add on to that, you know, we did see three opportunities closest quarter that we're larger and we're defining larger as greater than than 5 million.

Rob Lee: And so, you know, overall, you know, engagement goes well, and to the original question, I would say lots of little things as opposed to one big hurdle.

Howard Maugh: Thank you, Michael. Next question, please. Our next question comes from Howard Maugh from Guggenheim Securities. Please go ahead; your line is open. Great, thank you, and good afternoon, everyone. My question is, can you tell us who your lead horses? I'm joking; that's not my question. It's a variation of the question that Ahmed asked. So by lowering your as a service, TV sales estimate for keeping the total revenue outlook and change that obviously means you're getting less contribution from product sales, but Charlie, you just said that. Lower as service sales is not because more customers are opting to buy catback and said, so does that mean if we look at the product line, does that mean there's increased risk in the product line, or can you pointed, you know, certain demand drivers that give you more confidence that, you know, that guidance is appropriately set.

Speaker Change: The original question would say, lots of little things as opposed to one big hurdle.

Speaker Change: Thank you, Michael.

Speaker Change: Next question, please.

Speaker Change: Our next question comes from Howard Maugh from Google Time Security. Please go ahead your line it open.

Howard Maugh: Great, thank you and good afternoon everyone.

Kevin Chrysler: And then just to reiterate the question was really focused on why aren't we seeing an increase to our annual revenue guide. And I will point out to Charlie's point, these larger deals that are evergreen one are still being actively worked. And they're just taking longer to close if we saw those opportunities flip to a traditional product sale or capex that's when we would be looking at an upward view of our annual guidance for revenue. Thank you, Ahmed.

Howard Maugh: My question is, can you tell us who your lead horse is?

Speaker Change: I'm joking, that's not my question, that's not my question, that's not my question

Unknown Executive: Next question, please.

Speaker Change: It's a variation of the question that a Ahmed asked.

Speaker Change: So by lowering your as a service key TV sales estimate, but keeping the total revenue out looking changed, that obviously means you're getting less contribution from product sales, but Charlie, you just said that lower as service sales is not because more customers you're offing the buy, capback instead so...

Charlie: Does that mean if we look at the product line, does that mean there's increased risk in the product line or...

Aaron Rakers: Our next question comes from Aaron Rakers from Wells Fargo. Please go ahead. Your line is open. Hi guys. Thank you.

Speaker Change: Can you point to, you know, certain demand drivers that give you more confidence that, you know, that guidance is appropriately set. Thanks guys. So, yeah, as we, as we look at our, ourselves and the pipeline, etc., you know, we're seeing, uh, capex sales continue as we had expected.

Charlie Giancarlo: Thanks, guys. Yeah, as we, as we look at our sales and the pipeline, et cetera, you know, we're seeing catback sales continue as we had expected. We're seeing the base, if you will, what we call the velocity sales of Evergreen One progresses expected, but we've specifically seen, you know, deals that we've been tracking all along large deals for Evergreen One. And just length not coming in when we expected. And lengthening out, they haven't changed in character. In other words, they've not switched those same accounts; those same opportunities haven't switched from an evergreen one intention to a cat X intention, but they've also not closed.

Michael Stadenoff: This is Michael Stadenoff on behalf of Aaron. I just wanted to see if I can get any more color just on the hyperscale opportunity. You guys kind of mentioned sounds like you're continuing discussions with the customer, you know, you expect by the end of the year. I'm curious if anything has changed or maybe asking another way like what's the biggest hurdle. You kind of need to overcome to get the deals on and then separately just on other opportunities you're pursuing if there's any kind of anything to note there progress.

Speaker Change: We're seeing the base, if you will, what we call the velocity cells.

Charles Giancarlo: You bet. The lead horse, I wouldn't say there's the largest hurdle. There's just lots of little hurdles. A lot of that is just aligning, aligning business models, economic improvements to them, to pricing and economics for us. And there's a lot of logistical elements that go into this as well, especially when you're speaking with large type of scalars, with large orders and large data centers and complex their own complex supply chains. So I would say just lots of little hurdles right now, testing, testing's going well, conversations are going well, but a lot of detail that has to be worked out.

Speaker Change: of Evergreen One Progressives Expected.

Speaker Change: but we've specifically seen deals that we've been tracking all along large deals for evergreen one, just length, not coming in when we expected.

Speaker Change: and lengthening out. They haven't changed in character, in other words, they've not switched those same accounts, those same opportunities, haven't switched from an evergreen one intention to a capex intention, but they've also not closed. So that's...

Kevin Chrysler: So that's that's specifically what we're seeing. So the, you know, we're seeing good growth in the velocity business. And so the view there is that evergreen one continues to be of great interest, and the activity is good. It's just that the larger deals are taking longer. Yeah, I think it's really important this is Kevin to decouple what we're seeing with our larger evergreen one deals in the longer period of time from the demand overall that we're seeing, which, look, we're not seeing any significant change in demand that informs our annual guide, which is I think what you're asking as well, Howard.

Speaker Change: That's specifically what we're seeing so the, you know, we're seeing good growth in the velocity business and so the view there is that evergreen one continues to be of great interest and the activities good it's just as large your deals taking longer to close.

Speaker Change: Yeah, I think it's really important. This is Kevan to decouple what we're seeing with our larger evergreen one deals and the longer period of time from the demand overall that we're seeing which.

Rob Lee: Yeah, this is Rob, just to add to that, you know, I would say overall our engagements with our lead prospects are progressing very well as Charlie mentioned in his prepared remarks. You know, what we've done over the last, you know, many months is really move forward on our testing and phases from, you know, initial proof of concept to testing of that core IP to now extensive testing of really an integrated, I think of it as a co-engineered solution.

Speaker Change: Look, we're not seeing any significant change in demand that informs our annual guide, which is I think what you're asking as well, Howard.

Pinjalim Bora: Thank you, Howard. Next question, please. Our next question comes from Pinjalim Bora from J. P. Morgan, please go ahead. Your line is open. Great, this is J. Unknown for Pinjalim. Thanks for taking the question. How has the customer interest been on the new fusion offering, and do you see customers looking at it to unify their storage space as they prepare for AI in Princeton? Yeah, this is Rob. I'll take that one. Look, I mean, early interest has been great. As you know, we have been, you know, we have been out talking to customers, partners alike about the fusion vision for.

Speaker Change: Thank you Howard. Next question please.

Speaker Change: Our next question comes from Pendulum Borra from JP Morgan. Please go ahead, your line is open.

Rob Lee: And as you'd imagine, this involves detailed performance, operational testing, so on and so forth. And with that as Charlie mentioned as well, you know, accompanied with that detailed contractual discussions around, you know, the commercial package. And so, you know, overall, you know, engagement goes well and to the original question, I would say lots of little things as opposed to one big hurdle.

Jay None: Gray, this is Jay None for Pendulum. Thanks for taking the question. How have the customer interest been on the new Fusion offering? And DC Cosmise looking at it to unify their storage space as they prepare for AI in print.

Speaker Change: Yeah, this is where I'll take that one. Look, I mean, early interest has been great. As you know, we have been, you know, we have been out talking to customers, partners alike about the fusion vision for, you know, the last year. I think what, you know, we're really looking forward to and really what we've seen coming off of our accelerates user conference is the demand and I think the ability for customers in the existing install base with existing arrays to go and take a look at what we've seen coming off of our accelerates user conference is the demand and I think the ability for customers in the existing install base with existing arrays. The advantage of that fusion technology later this year with our latest release of fusion coming later this year, we'll be able to deliver all of this capabilities that fusion is designed for being able to fully automate the management multiple.

Rob Lee: You know, the last year, I think what you know, we're really looking forward to and really what we've seen coming off of our Accelerate user conference is the demand and I think the ability for customers in the existing install base with existing arrays to go and take advantage of that Fusion technology later this year with our latest release of Fusion coming later this year. We'll be able to deliver all of those capabilities that Fusion is designed for, being able to fully automate the management of multiple environments, allow customers to manage their, you know, Pure Storage estate through policy declaration as opposed to individual operational steps, and really step back and unify that as one pool of resources, one storage cloud, if you will.

Michael Stadenoff: Thank you Michael.

Howard Moss: Next question, please. Our next question comes from Howard Moss from Guggenheim Securities. Please go ahead, your line is open. Great. Thank you and good afternoon everyone. My question is, can you tell us who your lead horse is? I'm joking, that's not my question. It's a variation of the question that Ahmed asked. So by lowering your as a service, TV sales estimate for keeping the total revenue outlook and changed, that obviously means you're getting less contribution from product sales. But Charlie, you just said that lower as service sales is not because more customers are opting to buy catback and said so.

Speaker Change: Environment, allow customers to manage their, you know, pure storage estate through policy declaration as opposed to individual operational steps and really step back and unify that as one pool of resources, one storage cloud, if you will. Later this year, customers will be able to, you know, take advantage of all of this capabilities on all of their existing a raising and data storage estates.

Rob Lee: Later this year, customers will be able to, you know, take advantage of all this capabilities on all of their existing arrays and data storage estates. So, you know, early interest has been great. I think as we roll into the later, the release coming out later this year, it'll make it that much easier for customers to take advantage of those capabilities. Yeah, I'll also say that the beta users that have been involved in this have been very pleased, and we've been very pleased by the fact that we see strong interest and utility in fusion by both large customers and small.

Charles Giancarlo: Does that mean if we look at the product line, does that mean there's increased risk in the product line, or can you pointed, you know, certain demand drivers to give you more confidence that, you know, that guidance is appropriately set. Thanks guys. Yeah, as we, as we look at our sales and the pipeline, et cetera, you know, we're seeing catback sales continue as we had expected. We're seeing the base, if you will, what we call the velocity sales of evergreen one progress is expected.

Speaker Change: So, you know, early interest has been great. I think as we roll into the later, the release coming out later this year, it'll make it that much easier for customers to take advantage of those capabilities. Yeah, I'll also say that the...

Charles Giancarlo: But we've specifically seen, you know, deals that we've been tracking all along large deals for evergreen one just length not coming in when we expected. And lengthening out they haven't changed in character. In other words, they've not switched those same accounts, those same opportunities haven't switched from an evergreen one intention to a cat X intention, but they've also not closed. So that's that's specifically what we're seeing. So the, you know, we're seeing good growth in the velocity business. And so the view there is that evergreen one continues to be of great interest. And the activity is good. It's just that the larger deals taking longer.

Speaker Change: But the beta users that have been involved in this have been very pleased and we've been very pleased by...

Speaker Change: The fact that we see a strong interest and utility.

Mike Seacos: So, you know, even small customers are seeing a great benefit in being able to manage even their relatively smaller fleets through policy and further reduce the amount of labor that it takes to operate that at almost every level. Thank you, Jayden. Next question, please. Our next question comes from Mike Seacos from Needham. Please go ahead; the line is open. Hey, thanks for taking the question, guys. I just want to circle up because it seems like customers are continuing to choose maybe more of a cat backside purchase, which is a little bit counterintuitive in this environment given the macro, and I'm just trying to get a better understanding on the customer preference.

Speaker Change: Infusion by both large customers and small.

Speaker Change: So, you know, even small customers are seeing a great benefit in being able to manage, even their relatively smaller fleet through policy and further reduce the amount of labor that it takes to operate at a, at almost every level.

Speaker Change: Thank you, Jayden. Next question, please.

Speaker Change: Our next question comes from Mike Seiko from Needham, please go ahead and line it open.

Mike Seiko: Hey, thanks for taking my question, guys. I just wanted to circle up because it seems like...

Kevin Chrysler: Yeah, I think it's really important. This is Kevin to decouple what we're seeing with our larger evergreen one deals in the longer period of time from the demand overall that we're seeing, which look, we're not seeing any significant change in demand that informs our annual guide, which is I think what you're asking as well Howard.

Mike Seiko: Customers are continuing to choose maybe more of a cat-back type purchase, which is a little bit counterintuitive in this environment, given the macro, and I'm just trying to get a better understanding.

Kevin Chrysler: Does it tie in any way to potentially customers thinking about data repatriation to their on-prem environments to help handle some of the ballooning costs behind these gen AI workloads if they move into production? Yeah, I'll start this and then have Charlie come on. This is Kevin. Look, I think the what we're seeing with our evergreen one demand is actually quite strong, and we're really seeing that in our velocity opportunities. So these are opportunities that are less than five million, and they are tracking strongly and tracking with our expectations that we set at the beginning of the year.

Speaker Change: on the customer preference.

Speaker Change: Does it tie in any way to potentially customers thinking about data repatriation to their on-prem environments, to help handle some of the ballooning claws behind the Chen AI workload as they move in a production environment?

Howard Moss: Thank you Howard.

Unknown Executive: Next question please.

Pinjalim Bora: Our next question comes from Pinjalim Bora from J. P. Morgan, please go ahead, your line is open.

Speaker Change: Yeah, I'll start this and then have Charlie come on, this is Kevin, look, I think what we're seeing with our evergreen one demand is actually quite strong.

Rob Lee: Great, this is Jayden, known for Pinjalim. Thanks for taking the question. How has the customer interest been on the new fusion offering and do you see customers looking at it to unify their storage space as they prepare for AI in Princeton? Yeah, this is Rob, I'll take that one. Look, I mean, early interest has been great. As you know, we have been, you know, we have been out talking to customers, partners alike about this fusion vision for, you know, the last year, I think what, you know, we're really looking forward to and really what we've seen coming off of our accelerators or conference is the demand and I think the ability for customers in the existing install base with existing arrays to go and take advantage of that fusion technology later this year with our latest release of fusion coming later this year, we'll be able to deliver all of this capabilities that fusion is designed for being able to fully automate.

Rob Lee: The management multiple environments allow customers to manage their, you know, pure storage estate through policy declaration as opposed to individual operational steps and really step back and unify that as one pool of resources, one storage cloud, if you will, later this year customers will be able to, you know, take advantage of all this capabilities on all of their existing arrays and data storage estates. So, you know, early interest has been great, I think as we roll into the later the release coming out later this year, it'll make it that much easier for customers to take advantage of those capabilities.

Charlie: and we're really seeing that in our velocity opportunities, so these are opportunities that are less than 5 million. And they are tracking strongly and tracking with our expectations that we set at the beginning of the year.

Kevin Chrysler: So I really think the dynamic comes back to these larger evergreen one arrangements, and there's probably a few dynamics that are probably a play there, but it's less about demand signals of preference to and as a service offering versus a traditional offering or CapEx. And look, you know, customers are continuing to evaluate managing their costs in the cloud, software, and SaaS. And I think when customers are evaluating larger as a service offerings, that certainly could be part of the consideration as well. And why we're seeing more time being taken as that evaluation is taking place.

Charlie: So I really think the dynamic comes back to these larger evergreen-one arrangements. And there's probably a few dynamics that are probably a play there.

Charlie: but it's less about demand signals of preference to an as a service offering versus a traditional offering or cap X.

Charlie: and look, you know, customers are continuing to evaluate managing their costs in the cloud, software and SaaS, and I think...

Charlie: When customers are evaluating larger as a service offerings, that certainly could be part of the consideration as well and why we're seeing more time being taken as that evaluation is taking place. Charlie, any other thoughts on that? Yeah, no, Kevan, I think you answered it well. Okay.

Charlie Giancarlo: Charlie, any other thoughts on that?

Charlie Giancarlo: Yeah, no, Kevin, I think you answered it well. Okay. Thanks.

Jason Aitor: Thank you, Mike. Next question, please. Our next question comes from Jason Aitor from William Blair. Disco head. Your line is open. Yeah, thank you. Hey guys, I just wanted to ask about the competitive environment. I know we've seen an increase in two LC based arrays from some of your competitors. Can you just comment on how that has impacted or not some of the deals and some of the opportunities. And then also, can you comment on the man pricing environment right now, which I know is rising? Yeah, let me, let me start on that. You know, I would say there aren't leading QLC, you know, remains, you know, as strong as it ever has been.

Charlie: Thank you Mike, next question please.

Speaker Change: Our next question comes from Jason Ader from William Blair, Francisco Hadjard line is open.

Speaker Change: Yes, thank you. Hey guys, I just wanted to ask about the competitive environment. I know we've seen an increase in two L.C. based arrays from some of your competitors. Give me a comment.

Jason Ader: How that has impacted or not, some of the deals and some of the opportunities and that also can you comment on the NAND pricing environment right now, which I know has been rising.

Rob Lee: Yeah, I'll also say that the the beta users that have been involved in this have been very pleased and we've been very pleased by the fact that we see strong interest and utility in fusion by both large customers and small. So, you know, even small customers are seeing a great benefit in being able to manage even their relatively smaller fleets through policy and further reduce the amount of labor that it takes to operate that at a at almost every level.

Jason Ader: Yeah.

Speaker Change: Let me start on that. I would say there aren't leading QLC remains as strong as it ever has been. So I wouldn't say, and that's, I think, identified by the fact that we're that are E family of products.

Charlie Giancarlo: So I wouldn't say, and that's I think identified by the fact that we're that are e family of products, you know, that is really targeting the low end has been very, very successful. So I wouldn't say that QLC has changed the competitive environment very much at all. I would say that competitions are as tough as it's ever been. I think we are clearly everybody's pop competitor right now that's in this market, you know, we really do feel that the sites are squarely on us, and we are competing appropriately, but I don't think it's a QLC activity at all.

Speaker Change: You know, that is really targeting the low end has been very, very successful.

Rob Lee: Thank you, Jayden, next question, please.

Speaker Change: So, I wouldn't say that QLC has changed the competitive environment very much at all. I would say that competition this tough as it's ever been. I think we are clearly everybody's...

Mike Seacos: Our next question comes from Mike Seacos from Needham, please go ahead, your line is open. Hey, thanks for taking the question guys, I just want to circle up because it seems like customers are continuing to choose maybe more of a cat backside purchase, which is a little bit counterintuitive in this environment given the macro and I'm just trying to get a better understanding. On the customer preference, does it tie in any way to potentially customers thinking about data repatriation to their on-prem environments to help handle some of the ballooning costs behind these gen AI workloads as they move into production.

Speaker Change: Pop competitor right now, that's in this market, you know, we really do feel that the sites are squarely on us and we are competing appropriately, but I don't think it's a QLC activity at all, I'd take it to size and scale and effectiveness.

Charlie Giancarlo: I think it's a size and scale and effectiveness situation with respect to us. I mean, if you look at our progress, now we're now the number two vendor of all-flash systems into the enterprise, you know, firmly in that spot and only a few points behind the number one in that area. And I think that I think everybody is feeling it at the moment. So, so competitions tough, but our leading QLC remains. And then I'll just touch on that the name pricing, which is really consistent with what our previous commentary, and you know, flash pricing from our lens really is affecting top line.

Speaker Change: a situation with respect to us.

Speaker Change: I mean, if you look at our progress now, we're now the number two.

Speaker Change: Vendor of all flash systems into the enterprise, you know, firmly in that spot and only a few points behind the number one in that area, and I think that everybody is feeling it at the moment. So, so competition's tough, but our leading QLC remains.

Mike Seacos: Yeah, I'll start this and then have Charlie come on. This is Kevin. Look, I think the what we're seeing with our evergreen one demand is actually quite strong and we're really seeing that in our velocity opportunities. So these are opportunities that are less than 5 million and they are tracking strongly and tracking with with our expectations that we set at the at the beginning of the year. So I really think the dynamic comes back to these larger evergreen one arrangements and there's probably a few dynamics that that are probably a play there, but it's less about demand signals of preference to an as a service offering versus a traditional offering or cap ex.

Speaker Change: and then I'll just touch on that the name pricing, which is really consistent with our previous commentary and you know flash pricing from our lens really is affecting top line.

Charlie Giancarlo: And you know, the volatility again is highlighting the differentiated advantages we're seeing with our purity software and our direct flash technology, and that becomes more evident when we see the volatility in am pricing such as the current environment. And look, we're having a lot of success in winning workloads across price-sensitive workloads for our customers, and that would be our E family as well as C. And that will have an impact on gross margins as well.

Speaker Change: And you know the volatility again is highlighting the differentiated advantages we're seeing with our purity software and our direct flash technology and that becomes more evident when we see the volatility and ampricing such as the current environment.

Speaker Change: and look, we're having a lot of success in winning workloads across price sensitive workloads for our customers, and that would be our E-family as well as C. And that will have an impact on growth margins as well.

Mike Seacos: And look, you know, customers are continuing to evaluate managing their costs in the cloud, software and SaaS and I think when customers are evaluating larger as a service offerings. That certainly could be part of the consideration as well and why we're seeing more time being taken as that evaluation is taking place. Charlie any other thoughts on that? Yeah, no, Kevin, I think you answered it well. Okay, thanks.

Asiya Merchant: Thank you, Jason. Next question, please. Our next question comes from Asiya Merchant from City Group. Please go ahead. Your line is open. Great. Thank you for the question. The screen grant expected in the second half. Maybe you can just again go back into some confidence that you have recognizing that these deals are taking longer to close given macro and other dynamics that you talked about. So it can be the confidence that we ran from 157 here in the first half to 500 million for the full year. Thank you. Yeah, I appreciate the question. This is Kevin.

Speaker Change: Thank you Jason, next question please.

Speaker Change: Our next question comes from Agia Merchant from City Group, please go ahead and your line is open.

Agia Merchant: Great, thank you for the question. We have a green ramp expected in the second half. Maybe you can just, again, dial back into some confidence that you have.

Kevin Chrysler: Thank you, Mike.

Unknown Executive: Next question, please.

Jason Aitor: Our next question comes from Jason Aitor from William Blair. Disco head. Your line is open. Yes, thank you. Hey guys, I just wanted to ask about the competitive environment. I know we've seen an increase in two LC based arrays from some of your competitors. Can you just comment on how that has impacted or not some of the deals and some of the opportunities. And then also, can you comment on the man pricing environment right now, which I know is rising?

Speaker Change: Recognizing that these deals are facing longer to close given macro and other dynamics that you talked about. So, we'll see the confidence that we ramped from 157 here in the first task, it's 500 million for the full year. Thank you.

Kevin Chrysler: You know, look, we certainly believe that the adjusted forecast for TCV sales of our as-a-service offerings at 500 million. Growing 25% is achievable and considers the dynamic that we're seeing with larger deals. Our current forecast. Of TCV sales does assume less contribution throughout the year from larger deals, but also assumes the continued higher velocity business, continuing to track strongly similar to what we've seen in the first half. And so the implied second half ramp of TCV sales is only slightly higher than what we typically seen from our traditional seasonality with our capex sales or traditional sales.

Speaker Change: Yeah, I appreciate the question. This is Kevan, you know, look, we certainly believe that the adjusted forecast for TCV sales of our as a service offerings at 500 million.

Speaker Change: Growing 25%

Speaker Change: is a chief of law and considers the dynamic that we're seeing with larger deals.

Jason Aitor: Yeah, let me, let me start on that, you know, I would say there aren't leading QLC, you know, remains, you know, as strong as it ever has been. So I wouldn't say and that's I think identified by the fact that we're that are e family of products, you know, that is really targeting the low end has been very, very successful. So I wouldn't say that QLC has changed the competitive environment very much at all.

Speaker Change: Our current forecast of TCB sales does assume less contribution throughout the year from larger deals. But also assumes that the continued higher velocity business continuing to track strongly, similar to what we've seen in the first half.

Speaker Change: and so the implied second half ramp of TCV sales.

Speaker Change: is only slightly higher than what we typically see from our traditional seasonality, with our capex sales or traditional sales. So look, there's obviously work to do, and we need to execute in the back half, but we absolutely expect to achieve this work-est.

Kevin Chrysler: So look, there's obviously work to do, and we need to execute in the back half, but we absolutely expect to achieve this work.

Jason Aitor: I would say that competitions as tough as it's ever been. I think we are clearly everybody's pop competitor right now that's in this market, you know, we really do feel that the sites are squarely on us and we are competing appropriately, but I don't think it's a QLC activity at all. I think it's a size and scale and effectiveness. Situation with respect to us. I mean, if you look at our at our progress, now we're now the number two vendor of all flash systems into the enterprise, you know, firmly in that spot and only a few points behind the number one in that area and I think that I think everybody is feeling it at the moment.

Quentin: Thank you, Asiya. Next question, please. Our next question comes from Jim Fish from Piper Sampler. Please go ahead. Your line is open. Hey guys, this is Quentin on for Jim Fish. Thanks for taking on question. Understand it. It's still pretty early, but as you think about the backlog or your order book for the 150 terabit slash module, how is that compared to kind of what you were seeing from the last upgrade cycle at this point in time. And I know it's a little bit apples and oranges here, but it seems like we're facing scrutiny. In transformational budgets, you're seeing it in EG One.

Speaker Change: Thank you, Asia. Next question, please.

Speaker Change: Our next question comes from Jim Fish from Piper Sandlar. Please go ahead. Your line is open.

Speaker Change: Hey guys, this is Quinton on Perjump Fashion. Thanks for taking a question.

Quinton: Understand, it's still pretty early, but as you think about the backlog or your order book for the 150-tribut slash module, how is that compared to kind of what you were seeing from the last upgrade cycle at this point in time? And I know it's a little bit apples and oranges here, but it seems like we're facing scrutiny in transformational budgets you're seeing in ED1.

Charlie Giancarlo: Is there any concern that that would impact customers' willingness or ability to kind of transform and move to this new module, or are people so focused on performance that's not really in your kind of concern list here. Thanks. Yeah, thanks for the question. It's an interesting question. I don't think it would be very much in our concern list for the following reason. What the 150 really does is open up new opportunity for us at lower price points and to reduce our cost to reduce our purest cost at similar price points for existing, you know, E series transaction.

Jason Aitor: So so competitions tough, but our reading QLC remains. And then I'll just touch on that the name pricing, which is really consistent with what our previous commentary. And you know, flash pricing from our lens really is affecting top line. And you know, the volatility again is highlighting the differentiated advantages we're seeing with our purity software and our direct flash technology and that becomes more evident. When we see the volatility and am pricing, such as the current environment and look, we're having a lot of success in winning workloads across price sensitive workloads for our customers, and that would be our E family as well as see and that will have an impact on on gross margins as well.

Speaker Change: Is there any concern that that would impact customers' willingness or ability to kind of transform and move to this new module or are people so focused on performance that's not really in your kind of concern list here. Thanks.

Charles Giancarlo: Thank you, Jason.

Unknown Executive: Next question, please.

Speaker Change: Yeah, thanks for question. It's an interesting question. I don't think it would be very much in our concern list for the following reason. What the 150 really does is open up new opportunity for us at lower price points and...

Speaker Change: to reduce our cost and to reuse our purest cost.

Speaker Change: at similar price points for existing E.

Rob Lee: So put it another way. If we're satisfying a particular performance point with 75 today that we could also satisfy with 150s, the cost to us will be less, even if the price is the same. So I think it's a margin enhancement for us as well as allowing us then to get into even less expensive hard disk environments. And so I think we see it as a positive, not as, and you know, it's not something that if we don't ship is going to hurt us in any way. I it's not something customers would wait for. So I don't see it as if you will be endangering any revenue opportunity.

Speaker Change: Series Transaction, so put it another way.

Speaker Change: If we're satisfying a particular performance point with 75 today that we could also satisfy with 150s, the cost to us will be less, even if the price is the same. So I think it's a margin enhancement for us as well as allowing us then.

Asiya Merchant: Our next question comes from Asiya Merchant from City Group. Please go ahead. Your line is open. Great. Thank you for the question. The green ramp expected in the second half. Maybe you can just again, go back into some confidence that you have. Recognizing that these deals are taking longer to close given macro and, you know, other dynamics that you talked about. So it can be the confidence that we, you know, ran from 157 here in the first half to 500 million for the full year. Thank you.

Speaker Change: to get into even less expensive hard-disc environments, and so I think we see it as a positive knot as an end.

Speaker Change: You know, it's not something that if we don't ship is going to hurt us in any way, I'm not something customers would wait for. So I don't see it as if you will endangering any revenue opportunity.

Rob Lee: Yeah, and this is Rob. Just add to that, you know, I think it's important to step back and look at the 150 terabyte drive as just. The next step in Charlie mentioned this prepared remarks, a robust roadmap that we have on the flash. The direct flash end of the portfolio. Each step along the way, each density improvement that we make allows us to do two things. One is aggressive more aggressively compete for lower cost disk-based systems on an acquisition cost basis. But also remember it reduces the power and space requirements, and obviously the associated operating costs with those for our customers.

Rob: Yeah, this is Rob just added that, you know, I think it's important to step back and look at the 150's Harrow by Drive is just the next step, and Charlie mentioned in his prepared remarks, a robust roadmap that we have on the flash, the direct flash, end of the portfolio.

Kevin Chrysler: Yeah, I appreciate the question. This is Kevin. You know, look, we certainly believe that the adjusted forecast for TCV sales of our as a service offerings at 500 million. Growing 25% is achievable and considers the dynamic that we're seeing with larger deals. Our current forecast. Of TCV sales does assume less contribution throughout the year from larger deals, but also assumes the continued higher velocity business, continuing to track strongly, similar to what we've seen in the first half.

Speaker Change: Each step along the way, each density improvement that we make allows us to do two things. One is a more aggressively compete for lower cost-dispay systems on an acquisition cost-bases. But also, remember, it reduces the power and space requirements and obviously the associated operating costs with those for our customers.

Rob Lee: The drivers for this are quite simple. You know, the denser modules that we ship require less common equipment to support. Removing that common equipment obviously reduces the cost structure associated with that. But also reduces the space and power associated with it. And so, you know, executing on this density and efficiency roadmap is what has allowed us to go aggressively, so aggressively to date after the most cost-sensitive disk-based systems in the enterprise.

Speaker Change: is the drivers for this are quite simple, you know, the denser modules that we ship require less common equipment to support, removing that common equipment, obviously reduces the cost structure associated with that, but also reduces the space and power associated with it. And so, you know, executing on this density and efficiency roadmap is what is allowed us to go aggressively, so aggressively to date, after the most cost sensitive disk-based systems in the enterprise. And of course, as we've been discussing with you all, it really opens up the opportunity set as we look to the hyper-scaler infrastructure environments.

Kevin Chrysler: And so the implied second half ramp of TCV sales is only slightly higher than what we typically seen from our traditional seasonality with our cappex sales or traditional sales. So look, there's obviously work to do and we need to execute in the back half, but we absolutely expect to achieve this work.

Asiya Merchant: Thank you, Asiya.

Meta Marshall: Thank you, Clinton. Next question, please. Our next question comes from Meta Marshall from Morgan Stanley. Please go ahead; your line is open. Great, thanks. Maybe just diving into these evergreen one deals. This one in a good sense, or some of those kind of with tier two customers, or these really kind of enterprise customers that we're talking about. You know, or you know, is the quantum a handful? Or is this really kind of just a couple of deals that are hung up?

Unknown Executive: Next question, please.

Eric Martinuzzi: Our next question comes from Jim fish from Piper sampler, please go ahead. Your line is open. Hey guys, this is Quentin on for Jim fish. Thanks for taking on question. Understand it. It's still pretty early, but as you think about the backlog or your order book for the 150 terabit slash module, how is that compared to kind of what you were seeing from the last upgrade cycle at this point in time.

Speaker Change: Thank you, Clinton. Next question, please.

Speaker Change: Our next question comes from Mita Marshall from Morgan Stanley. Please go ahead and your line is open.

Mita Marshall: and great thanks.

Mita Marshall: Maybe just diving into these evergreen, one deal. This isn't a big enough sense. Or some of those kind of with tier two customers, or these really kind of enterprise customers that we're talking about.

Eric Martinuzzi: And I know it's a little bit apples and oranges here, but it seems like we're facing scrutiny in transformational budgets. You're seeing an EG one. Is there any concern that that would impact customers willingness or ability to kind of transform and move to this new module or are people so focused on performance. That's not really in your kind of concern list here. Thanks. Yeah, thanks for question. It's an interesting question. I don't think it would be very much in our concern list for the following reason.

Speaker Change: You know, you know, is the quantum a handful or is this really kind of just a couple of deals that are hung up, thanks.

Charlie Giancarlo: Thanks. Yeah, Meta, it is enterprise customers because we're talking about large deals, and it does tend to be just a handful, you know, a handful per quarter. So, because it's a handful per quarter and they're not always easily predictable in terms of exactly when they'll transact, it does make it more challenging to forecast.

Speaker Change: Yeah, it is enterprise customers because we're talking about large deals and it does tend to be just a handful, you know, a handful per quarter.

Speaker Change: So because it's a handful per quarter and they're not always...

Speaker Change: Easily predictable in terms of exactly when they'll transact. It does make it more challenging to forecast.

Betty: Thank you, Meta. Next question, please. Our next question comes from Mary Hossini from Susquejana. Please go ahead; your line is open. Yes, thanks. Excuse me, thanks for taking my question, Charlie. Over the past earning conference call, you have talked about engaging 10 or up to 10 data centers, including hyper skaters. Could it be your traction with these data centers, large and small, be more focused on selling products, which you're capturing in your product revenue, and until enterprise and evergreen one and evergreen two were to pick up to hit that 500 million run rate, you're not really going to be able to scale that subscription model, but you are penetrating data centers, large and small, and that's captured in product revenue either the right way of thinking about the current dynamics.

Eric Martinuzzi: What the 150 really does is open up new opportunity for us at lower price points and to reduce our cost to reduce our purest cost at similar price points for existing, you know, E series transaction. So put it another way. If we're satisfying a particular performance point with 75 today that we could also satisfy with 150's. The cost to us will be less even at the price is the same. So I think it's a margin enhancement for us as well as allowing us then to get into even less expensive hard disk environments.

Meera: Thank you, Meera.

Speaker Change: Next question, please.

Speaker Change: Our next question comes from Mary Hosini from South Guahana. Please go ahead, your line is open.

Mary Hosini: Thanks for taking my question, Charlie. Over in the past earning conference goals, you have talked about engaging 10 or up to 10 data centers, including hyperskaters.

Speaker Change: Could it be your traction with these data centers, large and small, be more focused on selling products which you're capturing in your product revenue and until.

Charles Giancarlo: And so I think we see it as a positive not as and you know, it's not something that if we don't ship is going to hurt us in any way, I it's not something customers would wait for. So I don't see it as if you will, um, endangering any revenue opportunity.

Speaker Change: Interplies and Evergreen wanted Evergreen to work to pick up.

Speaker Change: To hit that 500 million run rate, you're not really going to be able to scale that subscription model, but you are penetrating data centers, large-en spawn, and that's captured in product revenue. Either the right way of thinking about the current dynamics. Thank you.

Rob Lee: Yeah, and this is Rob just add to that. You know, I think it's important to step back and look at the 150 terabyte drive is just. The next step in Charlie mentioned this prepared remarks a robust roadmap that we have on the flash. The direct flash end of the portfolio each step along the way each density improvement that we make allows us to do two things. One is aggressive more aggressively compete for lower cost, disk based systems on an acquisition cost basis.

Charlie Giancarlo: Thank you. Yeah, thanks, Betty. I would say if we're speaking about evergreen one, we're evergreen one is being is being sold into both large and small environments. You know, as Kevin put it, large deals and small deals, actually the run rate of, you know, in what I'd call the commercial market small deals of evergreen one is very is very strong and very good. In it's very good as well in large environments and even into, you know, cloud cloud environments were selling quite a few into into MSPs and other clouds as well, so that's going well. All of that goes into our evergreen one when we classify the 500 million, for example, you know, those are all regardless of who they fell into identified as evergreen one.

Speaker Change: Yeah, thanks, Medi. I would say, I've been speaking about Evergreen 1. Evergreen 1 is being sold into both large and small environments.

Speaker Change: and Kevin Porter, large deals and small deals.

Speaker Change: Actually, the run rate of, you know, in what I'd call the commercial market, small deals of evergreen one is very, is very strong and very good.

Rob Lee: But also remember it reduces the power and space requirements and obviously the associated operating costs with those for our customers. The drivers for this are quite simple, you know, the denser modules that we ship require less common equipment to support removing that common equipment obviously reduces the cost structure associated with that. But also reduces the space and power associated with it. And so you know executing on this density and efficiency roadmap is what has allowed us to go aggressively so aggressively to date after the most cost sensitive disk based systems in the enterprise. And of course as we've been discussing with you all really opens up the opportunity set as we look to the hyperscaler infrastructure and bar.

Speaker Change: is very good as well in large environments, and even into cloud environments, we're

Unknown Executive: Thank you, Clinton.

Speaker Change: and MSPs.

Speaker Change: and other clouds as well. So that's going well. All of that goes into our Evergreen One. When we classify the 500 million, for example, those are all regardless of who they fell into, identified as Evergreen One. I hope that answers your question.

Charlie Giancarlo: I hope that answers your question.

Jeff Colhey: Thank you, Betty. Next question, please. Our next question comes from Jeff Colhey from Raymond James. Please go ahead, your line is open. Yeah, thanks. This is Jeff Koshy and Chris Simon Leopold. Maybe you can give us an update on how what percentage of revenue at this point is AI and maybe, more importantly, like given all the AI tailwind, how does the order book? Like what percentage of the order book is starting to become AI? Thank you. Well, we've not put out AI, but let's give you a little bit of a flavor on AI. It's identified in my prepared remarks.

Speaker Change: Thank you very much. Next question, please.

Speaker Change: Our next question comes from Jeff Kohade from Raymond James. Please go ahead, your line is open.

Meta Marshall: Next question please. Our next question comes from Meta Marshall from Morgan Stanley. Please go ahead. Your line is open. Great. Thanks. Maybe just diving into these evergreen one deals. This one in a good sense or some of those kind of with tier two customers, or these really kind of enterprise customers that we're talking about then. You know, or you know, is the quantum a handful? Or is this really kind of just a couple of deals that are hung up? Thanks.

Speaker Change: Yeah, thanks. This is Jeff Cochian, Chris Simon, Leopold. Maybe you can give us enough data and like how what percentage of revenue at this point is AI and maybe more importantly, like given all the AI tailwinds, how does the order book?

Speaker Change: Like what percentage of the order book is starting to become a act, really? Thank you, sir.

Speaker Change: Well, we've not spread on AI, but let's give you a little bit of a flavor on AI, as I identified my own prepared remarks.

Charlie Giancarlo: We really do foresee three, you know, three major segments. And it's really just the first one that has become real, I would say, real revenue at this point in time, not just for us, but for some other players out there as well. And that is the training environment. Now, we've been selling into training environments for over five years, probably closer to six years right now. Of course, the training environment really hit the news once it became a large LLM, right? But there's been training environments for self-driving cars, for drug discovery, for various different medical technologies, as well as high-speed trading.

Speaker Change: We really do foresee three major segments.

Charles Giancarlo: Yeah, Mita. It is enterprise customers because we're talking about large deals and it does tend to be just a handful, you know, a handful per quarter. So because it's a handful per quarter and they're not always easily predictable in terms of exactly when they'll transact. It does make it more challenging to forecast. Thank you, Mita.

Unknown Executive: Next question.

Speaker Change: and it's really just the first one that has become real, I would say real revenue at this point in time, not just for us, but for some other players out there as well.

Speaker Change: and that is the training environment. Now, we've been selling into training environments for over five years, probably closer to six years right now. Of course, the training environment really hit the news once it became a large LLM's.

Mary Hossini: Please. Our next question comes from Mary Hossini from Susquehana. Please go ahead. Your line is open. Yes, thanks. Excuse me. Thanks for taking my question. Charlie, over the in the past earning conference call. You have talked about engaging 10 or up to 10 data centers, including hyper skaters.

Speaker Change: Right, but there's been training environments.

Speaker Change: for self-driving cars, for drug discovery, for various different medical technologies as well as high speed training. That's all been training models, typically what are known as parameter-based models.

Charlie Giancarlo: That's all been training models, typically what are known as parameter-based models. More recently, obviously, there are generative AI models that have been getting a lot of the news. You know, our view is that in total, the total market or storage for large language type models training models less than a billion dollars a year currently. I would say that we're getting our fair share of that, you know, considering where we are. So that gives you sort of an order of magnitude, but we haven't broken it out specifically. The other two areas are the inference or RAG model inside of enterprises.

Charles Giancarlo: Could it be your traction with these data centers are large and small be more focused on selling products, which you're capturing. In your product revenue and until enterprise and evergreen one and evergreen two were to pick up to hit that 500 million run rate, you're not really going to be able to scale that subscription model, but you are penetrating data centers large and small and that's captured in product revenue either the right way of thinking about the current dynamics.

Speaker Change: More recently, obviously there are generative AI models that have been getting a lot of the news.

Speaker Change: You know, our view is that in total the total market or storage for large language type models, training models.

Speaker Change: is less than a billion dollars a year, currently.

Speaker Change: I would say that we're getting our fair share of that.

Speaker Change: you know, considering where we are.

Speaker Change: So that gives you sort of an order of magnitude, but we haven't broken it out specifically. The other two areas are the inference or rag model inside of enterprises.

Charlie Giancarlo: That's just starting to be discussed and investigated. I did not really started yet in terms of revenue, but we expect soon. And then the third area is a general we believe up leveling of existing storage environments to make a data that's sitting currently in data silos inside of organizations much more available for use for inference. And as you might imagine, that's third a third on the list in terms of in terms of order of when revenue will appear, but we think it's the largest overall in the enterprise space. And you know, a lot of what we've been working on has been in preparation to enable organizations to take advantage of that.

Charles Giancarlo: Thank you. Yeah, thanks, Metti. I would say if we're speaking about evergreen one where evergreen one is being is being sold into both large and small environments, you know, as Kevin put it, large deals and small deals. Actually, the run rate of, you know, in what I'd call the commercial market, small deals of evergreen one is very is very strong and very good. In it's very good as well in large environments and even into you know cloud, cloud environments were selling quite a few into into MSPs and other clouds as well.

Speaker Change: That's just starting to be discussed and investigated. I did not really start it yet in terms of revenue, but we expect soon.

Speaker Change: And then the third area is a general we believe.

Speaker Change: up leveling of existing storage environments to make a data that's sitting currently.

Speaker Change: in data silos inside of organizations much more available.

Speaker Change: for use for inference and as you might imagine.

Speaker Change: That's third on the list in terms of, in terms of order of when revenue will appear, but we think it's the largest overall in the enterprise space. And, you know, a lot of what we've been working on has been in preparation to enable organizations to take advantage of that.

Charles Giancarlo: So that's going well. All of that goes into our evergreen one when we classify the 500 million, for example, you know, those are all regardless of who they fell into identified as evergreen one. I hope that answers your question. Thank you, Metti.

Unknown Executive: Next question, please.

Charlie Giancarlo: Thank you, Jeff. Next question, please. Our next question comes from Krish Sankar from PV Securities. Please go ahead. Your line is open. Hi, this is Robert Martinz on for Krish. Thanks for taking my question. I'm just with the reiterated for your guide, assuming the midpoint of October, we're outlook. That would imply the January quarter growth decelerates a bit to mid single digits. It's yarn year, but you just speak towards some of the puts and takes and the guide if fans and industry and inflection is mid to high single digit growth, the new norm. And is there any sort of seasonality headwinds to expect in the January quarter?

Speaker Change: Thank you Jeff, next question, please.

Speaker Change: Our next question comes from Chris Hankars from PD Security's please go ahead and your line is open.

Robert Merden's: This is Robert Merden's on for Chris. Thanks for taking my question. Just with the reiterated for your guide, assuming the midpoint of the October for Outlook.

Jeff Cohen: Our next question comes from Jeff Cohen from Raymond James, please go ahead. Your line is open. Yeah, thanks.

Jeff Cohen: This is Jeff Koshy and Chris Simon Leopold. Maybe you can give us an update on how what percentage of revenue at this point is AI and maybe more importantly, like given all the AI tailwind, how does the order book? Like what percentage of the order book is starting to become AI? Thank you.

Speaker Change #100: Now it implied that January quarter growth accelerates a bit to mid-single digits, you are near. Could you just speak towards some of the posts and takes and they guide if fans and industry in the section?

Speaker Change #101: is mid to high-singled digital growth, the new norm, and is there any sort of seasonality headwinds to expect in the January quarter?

Charles Giancarlo: Well, we've not played out AI, but let's give you a little bit of a flavor on AI as I identified in my prepared remarks. We really do foresee three, you know, three major segments. And it's really just the first one that has become, you know, real, I would say real revenue at this point in time. Not just for us, but for some other players out there as well, and that is the, you know, the training environment.

Robert Martinz: Yeah, I appreciate the question that this is Kevin and look glad to see that our total revenue is tracking with our expectations for the year, which, again, is double digits. And it's tracking as well. In terms of what we sell for the first half of the year, but you got it. The primary factor in terms of what you see in terms of growth in the first half and second half is largely due to seasonality. That would be the primary driver. And that's been consistent historically for many years, with the exception, maybe a one year following COVID.

Speaker Change #101: Yeah, I appreciate the question that this is Kevan.

Kevan: and look glad to see that our total revenue is tracking with our expectations for the year.

Speaker Change #103: which, again, has doubled digits and it's tracking as well in terms of what we saw for the first half of the year. But you got it, did the primary factor in terms of what you see in terms of growth in first half and second half is largely due to seasonality, that would be the primary driver.

Charles Giancarlo: Now, we've been selling into training environments for over five years, probably closer to six years right now. Of course, the training environment really hit the news once it became a large LLM. Right, but there's been training environments for self driving cars for drug discovery for, you know, various different medical technologies, as well as high speed training. That's all been training models, typically what are known as parameter based models. More recently, obviously, there are generative AI models that have been getting a lot of the news.

Speaker Change #103: and that's been consistent historically for many years with the exception maybe of one year following COVID.

Kevin Chrysler: But another consideration as well is that, you know, we are expecting a sales ramp of our as-a-service offerings, especially with a higher velocity business in the second half of the year. And you know, this would create some headwind as well to our expected total revenue growth. And that's been considered as well in our annual guide for total revenue.

Speaker Change #103: But another consideration, as well, is that we are expecting a sales ramp of our as-a-service offerings, especially with a higher velocity business in the second half of the year.

Speaker Change #103: and this would create some headwind as well to our expected total revenue growth and that's been considered as well in our annual guide for total revenue.

Eric Martinuzzi: Thank you, Robert. Next question, please. Our next question comes from Eric Martin, Newsy, from Lake Street Capital Market. Please go ahead. Dylan is open. Yeah, I want us to see if we could put a finer point on the gross margin commentary for the product cabinet. I think you said that you know the 69 and a half was down year on year. And then, you know, for the camera call, if it was the whole year or just the back cap with the modest strategic decline in product gross margin, would you care to comment on that? Sure, and thanks, Eric.

Speaker Change #103: Thank you, Robert. Next question, please.

Charles Giancarlo: You know, our view is that in total, the total market for storage for large language type models, training models less than a billion dollars a year currently. I would say that we're getting our fair share of that, you know, considering where we are. So that gives you sort of an order of magnitude, but we haven't broken it out specifically.

Speaker Change #104: Our next question comes from Eric Martin Newsy from Lake Street Capital Market, please go ahead to London's Open.

Eric Martin: Yeah, I wanted to see if we could put a finer point on the Gross Martin commentary for the product Kevin, I think he said that

Speaker Change #106: The 69.5 was down year on year, and then, you know, before they can't recall if it was the full year or just the back cap, but the modest strategic decline in product growth margin, and you'd care to comment on that.

Jeff Cohen: The other two areas are the inference or rag model inside of enterprises. That's just starting to to be discussed and investigated. I did not really started yet in terms of revenue, but we expect soon. And then the third area is a general we believe up leveling of existing storage environments to make a data that's sitting currently in data silos inside of organizations much more available for use for inference. And as you might imagine, that's third on the list in terms of in terms of order of when revenue will appear, but we think it's the largest overall in the enterprise space. And, you know, a lot of what we've been working on has been in preparation to enable organizations to take advantage of that. Thank you, Jeff.

Unknown Executive: Next question, please.

Kevin Chrysler: Look, you know, we've been talking for some time about our sweet spot for product gross margins, really being in the high 60s, and it's taken us a long time to achieve that. And so I actually think this is quite a positive for us in terms of what we're seeing in the high 60s. Now, we are seeing and looking at a modest sequential decline that I talked about in my prepared remarks. And that's really coming from the strong momentum and demand from customers shifting their cost-sensitive workloads to our all-flash solutions, whether that's our family of e solutions or FlashArray C.

Speaker Change #107: Sure, and thanks Eric, let's look, you know.

Speaker Change #108: We've been talking for some time about our sweet spot for product gross margins, really being in the high 60s and it's taken us a long time to achieve that. And so I actually think this is quite a positive for us in terms of what we're seeing in the high 60s.

Speaker Change #108: Now we are seeing in looking at a modest sequential decline that I talked about in my prepared remarks.

Speaker Change #108: and that's really coming from the strong momentum and demand.

Speaker Change #108: from customers shifting their costs instead of workloads.

Speaker Change #108: to our all-flash solutions, whether that's our family of E-Solutions or Flasheray C. And look, we'll continue to aggressively pursue this transition.

Kevin Chrysler: And look, we'll continue to aggressively pursue this transition. And that's really what's driving our expectation of seeing a modest reduction in our product gross margin margins in the back half of the year. And as well, this has been considered in our annual guide for operating profit as well.

Krish Sankar: Our next question comes from Krish Sankar from PV Securities. Please go ahead, your line is open. Hi, this is Robert Martinz on for Krish. Thanks for taking my question. I'm just with the reiterated for your guide, assuming the midpoint of October we're outlook. That would imply the January quarter growth decelerates a bit to mid single digits. It's yarn year, but you just speak towards some of the puts and takes in the guide if fans and industry and inflection is mid to high single digit growth, the new norm.

Speaker Change #108: and that's really what's driving our expectation of seeing a modest reduction in our product roast margin in the back half of the year and as well this has been considered in our annual guide for operating profit as well.

Kevin Chrysler: Thank you, Eric. We have one more question.

David Vogt: So this will be the last question. Our last question will come from David Vogt from UBS. Please go ahead; Dylan is open. Great thanks, guys, thanks Charlie, thanks Kevin for all the detail. I just had a thematic question about the hyperscaler opportunity. We appreciate all the color. Can you maybe talk to you how the hyperscalers are viewing your solution. What I mean by that is what kind of workload, what kind of application, kind of what are the use cases that they're thinking about as you have these expensive discussions so we can think about sort of how you're going to do the product with dovetail with their existing architecture.

Speaker Change #109: Thank you, Eric. We have one more question, so this will be the last question.

Speaker Change #110: Our ask question will come from David Volt from UBS. Please go ahead to line us open.

David Volt: Great, thanks guys. Thanks Charlie. Thanks Kevin for all the detail. I just had a dramatic question about the hyperscaler opportunity. We appreciate all the color. Can you maybe talk to you?

Kevin Chrysler: And is there any sort of seasonality headwinds to expect in the January quarter. Yeah, appreciate the question that this is Kevin and look glad to see that our total revenue is tracking with our expectations for the year, which, which again is double digits. And it's tracking as well. In terms of what we sell for the first half of the year, but, but you got it that the primary factor in terms of what you see in terms of growth in first half and second half is largely due to season alley, that would be the primary driver.

David Volt: How the hyperscalers are viewing your solution? What I mean by that is we'll kind of work load, we'll kind of application, kind of what are the use cases that they're thinking about as you have these extensive discussions. So we can think about sort of how your product would double tell what they're existing architecture is. Thank you.

Charlie Giancarlo: Thank you. Yeah, let me start, and I think Rob will add some color to this. Honestly, it's a very broad, it's a fundamental architecture shift for them. And the more you know, and obviously we're at different stages in the conversation with different hyperscalers, but the further we go down the path with any one of them, they're looking to make it an architectural shift in their infrastructure. Whereby, it would replace not only, you know, higher performance workloads, but lower performance workloads, including disk. And once implemented, no reason for it not to replace, for example, even their use of SSDs.

Speaker Change #112: Yeah, let me start and I think Robo had some color to this. Honestly, it's a very broad, it's a fundamental architecture shift for them.

Robo: and the more, you know, and obviously we're at different stages in the conversation with different hyperscalers.

Kevin Chrysler: And that's been consistent historically for many years with the exception maybe of one year following COVID, but another consideration as well is that, you know, we are expecting a sales ramp of our as a service offerings, especially with a higher velocity business in the second half of the year. And you know, this would create some headwind as well to our expected total revenue growth. And that's been considered as well in our annual guide for total revenue.

Speaker Change #114: But the further we go down the path with any one of them.

Speaker Change #114: They're looking to make it an architectural shift in their infrastructure whereby it would replace

Speaker Change #114: Not only, you know, higher performance workloads, but lower performance workloads, including disk. And once implemented, no reason for it not to replace, for example, even their use of SSDs.

Robert Martinz: Thank you, Robert.

Unknown Executive: Next question, please.

Charlie Giancarlo: So, you know, fairly broad. Now, you know, knock on wood, we haven't, nothing's been signed yet, but the longer, you know, the further in we are in conversations. With hyperscaler, the more they test us, the more they we discuss terms and conditions and structures, the broader the use case cases are in those discussions. Yeah, David, and this is Rob. Just add on to that, you know, really want to emphasize a point that Charlie made, which is really going after this and looking at this as a broad set of workloads targeted at various performance and architectural replacement points.

Speaker Change #114: So, you know, fairly broad. Now, knock on wood, we haven't. Nothing's been signed yet, but the longer, you know, they further in we are in conversations.

Eric Martinuzzi: Our next question comes from Eric Martin, Newsy from Lake Street Capital Market. Please go ahead. Dylan is open.

Kevin Chrysler: Yeah, I want us to see if we could put a finer point on the gross margin commentary for the product. Kevin, I think you said that, you know, the 69 and a half was down year on year. And then, you know, for the camera call, if it was the whole year or just the back cap with the modest strategic decline in product gross margin, did you care to comment on that? Sure, and thanks Eric.

Speaker Change #114: with I-Perscaler, the more they test us, the more they we discuss terms and conditions and structures. The broader the use case cases are in those discussions.

Speaker Change #114: David, and this is Rob, just to add on to that, you know, really want to emphasize point the Charlie made, which is...

Rob: really going after this and looking at this as a broad set of workloads targeted at.

Kevin Chrysler: Look, you know, we've been talking for some time about our sweet spot for product gross margins, really being in the high 60s and it's taken us a long time to achieve that. And so I actually think this is quite a positive for us in terms of what we're seeing in the high 60s. Now, we are seeing and looking at a modest sequential decline that I talked about in my prepared remarks. And that's really coming from the strong momentum and demand from customers shifting their cost sensitive workloads to our all flash solutions, whether that's our family of e solutions or flash array C. And look, we'll continue to aggressively pursue this transition.

Rob Lee: And what I mean by that is, you know, these hyperscalers operate a so many workloads, so many different environments; they get economies and simplicity of scale and operations by standardizing the infrastructure largely to serve all of those workloads. They generally don't build out special purpose infrastructure for each workload one by one. And so certainly within, you know, within and under that umbrella, they've got higher performance workloads, typically being served by flash today, all the way to lower performance workloads, largely being served by disk. You know, we think in the long term, we've got an opportunity to go provide value across the board with our direct flash technology, but certainly, as an initial step, you know, would be focusing on the replacement of the disk-based environments in that infrastructure.

Rob: Various performance and architectural replacement points. What I mean by that is these hyperscalers operate so many workloads, so many different environments.

Speaker Change #115: They get economies and simplicity of scale and operations by standardizing the infrastructure largely to serve all of those workloads.

Speaker Change #115: They generally don't build out special purpose infrastructure for each workload one by one.

Speaker Change #115: and so certainly within and under that umbrella, they've got higher performance workloads, typically being served by flash today, all the way to lower performance workloads, largely being served by disk.

Speaker Change #115: You know, we think in the long term, we've got opportunity to go provide value across the board with our direct flash technology, but certainly as an initial step, you know, would be focusing on the replacement of the disk based environments in that infrastructure. So hopefully that's helpful for you, David.

Rob Lee: So hopefully that's helpful for you, David. Yeah, David, that's great.

Kevin Chrysler: And that's really what's driving our expectation of seeing a modest reduction in our product gross margin margins in the back half of the year. And as well, this has been considered in our annual guide for operating profit as well.

Charlie Giancarlo: Great question to end on. Charlie has some final comments. Yeah, I want to thank you all again, as always, for joining us today on today's our new call. You know, our platform strategy on our innovation is once again transforming the storage industry. We empower enterprises to address their fragmented data silos, which is going to be a critical step in unlocking their full potential of analytics and artificial intelligence. And we believe that by providing a unified, versatile, and energy-efficient platform, we're going to enable businesses to embrace the technical, the technological change that they face and seamlessly integrate their data centers with their cloud environments as well.

David Volt: Yeah, thank you for that. Thanks Rob, that's great.

David Volt: Great question to end on. Charlie has some final comments.

Eric Martinuzzi: Thank you, Eric.

Speaker Change #116: I want to thank you all again as always for joining us today on today's earnings call. Our platform strategy on our innovation is once again transforming the storage industry. We empower enterprises.

Unknown Executive: We have one more question.

David Vogt: So this will be the last question. Our last question will come from David Vogt from UBS. Please go ahead, Dylan is open. Great thanks guys, thanks Charlie, thanks Kevin for all the detail. I just had a thematic question about the hyperscaler opportunity. We appreciate all the color. Can you maybe talk to you how the hyperscalers are viewing your solution? What I mean by that is what kind of workload, what kind of application kind of what are the use cases that they're thinking about as you have these extensive discussions so we can think about sort of how you're going to do the product with dovetail with their existing architecture. Thank you.

Charlie: to address their fragmented data silos, which is going to be a critical step in unlocking their full potential of analytics and artificial intelligence.

Charlie: and we believe that providing a unified, versatile, and energy efficient platform, we're going to enable businesses to embrace the technological change that they face and seamlessly integrate their data centers with their cloud environments as well.

Charlie Giancarlo: I want to thank everyone, particularly our customers, employees, partners, our suppliers, and our investors. Your dedication, collaboration, and trust are the driving forces behind our success. Thank you all for your continued support and commitment. Bye bye.

Charles Giancarlo: Yeah, let me start and I think Rob will add some color to this. Honestly, it's a very broad, it's a fundamental architecture shift for them. And the more, you know, and obviously we're at different stages in the conversation with different hyperscalers, but the further we go down the path with any one of them, they're looking to make it an architectural shift in their infrastructure whereby it would replace not only, you know, higher performance workloads, but lower performance workloads, including disk.

Speaker Change #117: I want to thank everyone, particularly our customers, employees, partners, our suppliers and our investors. Your dedication, collaboration and trust are the driving force behind our success. Thank you all for your continued support and commitment.

Charles Giancarlo: And once implemented, no reason for it not to replace, for example, even their use of SSDs. So, you know, fairly broad. Now, yeah, knock on wood, we haven't nothing's been signed yet, but the longer, you know, they further in we are in conversations with hyperscaler, the more they test us. The more they they we discuss terms and conditions and structures. The broader the use case cases are in those discussions.

Operator: That concludes the Pure Storage second quarter fiscal 25 financial results conference call. Thank you for your participation.

Speaker Change #117: Goodbye.

Speaker Change #118: Back includes the peer storage second quarter fiscal 2025 financial results conference call. Thank you for your participation. You may now disconnect your line.

Operator: You may now disconnect your line.

Rob Lee: Yeah, David, and this is Rob just to add on to that, you know, really want to emphasize a point that Charlie made, which is really going after this and looking at this as a broad set of workloads targeted at various performance and architectural replacement points. And what I mean by that is, you know, these hyperscalers, operate so many workloads, so many different environments, they get economies and simplicity of scale and operations by standardizing the infrastructure largely to serve all of those workloads.

Rob Lee: They generally don't build out special purpose infrastructure for each work load one by one. And so certainly within, you know, within and under that umbrella, they've got higher performance workloads, typically being served by flash today, all the way to lower performance workloads, largely being served by disk. You know, we think in the long term, we've got opportunity to go provide value across the board with our director flash technology, but certainly as an initial step, you know, would be focusing on the replacement of the disk based environments in that infrastructure. So hopefully that's helpful for you, David. Yeah, David, that's great.

Charles Giancarlo: Great question and on Charlie has some final comments.

Charles Giancarlo: Yeah, I want to thank you all again as always for joining us today on today's our new call. You know, our platform strategy on our innovation is once again transforming the storage industry. We empower enterprises to address their fragmented data silos, which is going to be a critical step in unlocking their full potential of analytics and artificial intelligence. And we believe that by providing a unified versatile and energy efficient platform, we're going to enable businesses to embrace the technical, the technological change that they face and seamlessly integrate their data centers with their cloud environments as well.

Charles Giancarlo: I want to thank everyone, particularly our customers, employees, partners, our suppliers and our investors, your dedication, collaboration and trust are the driving forces behind our success. Thank you all for your continued support and commitment.

Unknown Executive: That concludes the Pure Storage Second Quarter Fiscal 25 Financial Results Conference call. Thank you for your participation.

Unknown Executive: You may now disconnect your lines.