Main content

Pure Storage making the shift from CapEx to subscription revenue as demand for Evergreen//One grows

Derek du Preez Profile picture for user ddpreez November 30, 2023
The performance of Evergreen//One, Pure Storage’s as-a-service offering, is outperforming expectations - as seen in the vendor’s Q3 2024 earnings. This is having an impact on short-term revenue, but is promising for long-term growth.

Cloud computing technology at scale concept © Just_super -
(© Just_super -

Pure Storage is experiencing higher than expected demand for its storage-as-a-service offering, Evergreen//One, which is helping the vendor shift its revenue model from CapEx to subscription. Whilst this is positive for the company’s long-term growth prospects, the leadership team at Pure Storage did note during the company’s Q3 2024 earnings call that this would result in short-term revenue headwinds.

That shouldn’t worry investors too much, as the market favors cloud-based subscription models and suggests that cloud buyers have an appetite for ‘storage-as-a-service’. CEO Charlie Giancarlo said:

The Pure Storage platform provides customers the ability to deploy a consistent software and management environment across the full price performance range for block, file and object workloads, for both traditional and cloud-native applications. The Pure platform guarantees customers never experienced change management downtime.

The Pure Storage platform also promises a cloud operating model for our customers, enabling them to manage their data storage like the cloud providers to reduce their storage costs in the cloud to provide tailored storage services to their developers like the cloud and to consume storage like the cloud as a service.

This model is gaining traction with leading customers. 

The key numbers for the quarter include: 

  • Revenue $762.8 million, an increase of 13% year-over-year

  • Subscription services revenue $309.6 million, up 26% year-over-year

  • Subscription annual recurring revenue (ARR) $1.3 billion, up 26% year-over-year

  • Remaining performance obligations (RPO) $2.0 billion, up 30% year-over-year

  • GAAP operating income $74.2 million; non-GAAP operating income $169.1 million

  • Total cash, cash equivalents, and marketable securities $1.35 billion

Commenting on the success of the company’s subscription offering, Giancarlo said: 

Evergreen//One, our storage-as-a-service consumption offering saw continued extraordinary growth, more than doubling year-over-year. Evergreen//One and Evergreen/Flex are our preferred services for providing customers data storage on a consumption basis.

Although we continue to offer customers the choice of consuming storage as CapEx, we believe the continued high demand for Evergreen//One is being driven by our sales activities, new customer buying behavior, and the current macro environment. 

Customers are attracted to the ability to manage and consume Evergreen storage as a cloud service as they need it. But with the low cost advanced capabilities and data security of on-prem storage.

Giancarlo added that Pure also saw increased multi-year renewals from existing customers and new customers deploying the vendor’s Portworx suite of products for multi-cloud databases, messaging and logging systems. He highlighted how Portworx was chosen by a “leading global retailer” to provide a single integrated platform for its machine learning researchers, ensuring consistent models across multiple clouds. And it seems that machine learning and AI are also fuelling demand at the company. Giancarlo added: 

A large international government authority is supporting their artificial intelligence and machine learning environments with Portworx deployed in mission-critical cloud-based applications. Customer momentum in the field of artificial intelligence also continues for Pure with a double-digit number of AI wins in the quarter across our portfolio.

This included ERA technology, an AI-based decision intelligence and automation platform, that chose our Portworx solution for seamless cloud integration, outperforming competitive solutions by 200%. 

We remain our customers' preferred partner for AI deployments and have strengthened our innovation and leadership by earning NVIDIA-based pod certification.


Pure Storage is very aware it is going through a transition, as it ramps up its subscription services. The growth in that area of the business is strong, but Pure CFO Kevan Krysler was keen to highlight that this would have some near-term consequences that investors should be aware of. 

One of the key positives is that the challenging macro environment is helping to drive demand for Pure’s consumption and subscription offerings, but that the better-than-expected demand for Evergreen//One will impact full-year revenues. Krysler explained: 

We are very pleased with the momentum and growth of our Evergreen//One service offering, while appreciating that this momentum creates a short-term impact on revenue growth. 

Last quarter, we stated that sales of our Evergreen//One service offering was expected to create one to two points of headwind to the annual revenue guide we provided at the beginning of the year.

Based on our Evergreen//One sales in Q3 and the opportunities in our seasonally largest quarter Q4, we now expect that annual sales of our Evergreen//One and Evergreen//Flex offerings will more than double this year, reaching nearly $400 million and expect the impact will now create three points of headwind to the annual guide we provided at the beginning of the year.

When excluding the impacts of the increased shift to our Evergreen//One offering and a $41 million order with a telco customer, our annual revenue growth would have been 7% when compared against the annual revenue guide we provided at the beginning of the year. 

And it was hinted that Pure will provide further guidance in the near future, as it assesses the impact of this transition. Krysler added: 

We expect that our consumption and subscription business models will drive improved long-term growth for Pure as our subscription and consumption business continues to grow, we will provide additional business metrics that will help measure the health of our business. This includes translating growth rates of our subscription and consumption service offerings to a growth rate under our traditional model of a CapEx sale.

My take

Pure Storage may be warning slight caution as it shifts its revenue model from CapEx to subscription, but I’d argue that’s purely for the benefit of investors that are interested in quarterly guidance. Those with a long-term view will know that Pure moving its customer base towards a cloud-based consumption model is a highly positive metric for long-term growth. Recurring annual revenues are what the market ultimately wants to see and it looks like Pure Storage has made strong early progress. 

A grey colored placeholder image