Last Update 06 Dec 25

Fair value Increased 3.20%

PSTG: AI Storage Demand And Hyperscale Wins Will Drive Future Upside

The analyst price target for Pure Storage has increased to approximately $95 from about $92, as analysts point to accelerating AI driven storage demand, ongoing enterprise share gains, and expanding opportunities with hyperscale customers as key drivers of faster revenue growth despite a richer valuation and slightly lower long term margin assumptions.

Analyst Commentary

Bullish analysts highlight that Pure Storage continues to gain share in the enterprise storage market while positioning itself as a key beneficiary of accelerating AI driven data workloads. Multiple recent target hikes reflect growing confidence that the company can deliver above consensus revenue and earnings as customers modernize infrastructure and shift performance intensive workloads to flash.

JPMorgan, in particular, points to the potential for near term upside as AI leveraged demand supports orders, even as broader hardware valuations have cooled. Other upbeat voices emphasize that product momentum, including new platforms such as FlashBlade//EXA and the expansion of Enterprise Data Cloud, is deepening Pure Storage's role with both enterprise customers and large scale cloud buyers.

At the same time, more cautious and neutral views underscore that the stock now trades at a premium multiple that embeds a meaningful amount of future success. These observers want to see clearer evidence of sustained adoption beyond the core enterprise base and more tangible progress in hyperscale data center wins before endorsing further multiple expansion.

Across the research, there is broad agreement that Pure Storage has executed well on its long term vision to disrupt disk based storage, with differentiated technology and growing ecosystem partnerships in cybersecurity and data protection. The debate now centers on how quickly this execution can translate into durable, large scale AI and hyperscale driven growth at a valuation that still offers attractive risk reward for new investors.

Bullish Takeaways

Bullish analysts see Pure Storage as a consistent share gainer in enterprise storage, with product innovation and flash leadership supporting above market growth and justifying higher price targets.
Expansion of Enterprise Data Cloud and enhanced cybersecurity capabilities, combined with ecosystem integrations, are viewed as expanding the total addressable market and strengthening long term growth visibility.
Several firms argue that AI driven workloads and early traction with hyperscale and large internet customers can drive upside to near term revenue and earnings, even as broader hardware peers face macro and demand concerns.
Positive feedback from recent product and technology events suggests strong customer interest in newer offerings like FlashBlade//EXA, reinforcing confidence in execution and multi year growth durability.

Bearish Takeaways

Bearish analysts and more neutral voices note that shares trade at a premium valuation, leaving less room for error if AI related demand or enterprise spending normalizes.
Some caution that the investment case still relies heavily on the core enterprise franchise, and want more evidence of broad based adoption across new customer segments before turning more positive.
Despite optimism on long term hyperscale opportunities, there is concern that meaningful revenue contributions from large cloud deployments could take time, creating execution risk relative to elevated expectations.
With estimates largely unchanged in some cases and target increases driven by higher multiples, skeptics question how much further upside remains if Pure Storage does not consistently beat and raise guidance.

What's in the News

Issued new fourth quarter fiscal 2026 guidance, projecting revenue between $1.02 billion and $1.04 billion, with implied year over year growth of 16.5% to 17.6% (Corporate guidance).
Raised full year fiscal 2026 revenue outlook to a range of $3.63 billion to $3.64 billion, up from prior guidance of $3.60 billion to $3.63 billion, with expected growth of 14.5% to 14.9% (Corporate guidance).
Completed a share repurchase tranche totaling 7.68 million shares, or 2.35% of shares outstanding, for $443.5 million under the buyback program announced in February 2024 (Buyback tranche update).
Expanded AI focused solutions with Cisco through a new FlashStack Cisco Validated Design that unifies compute, storage, networking, and software to help enterprises scale AI deployments from pilots to production (Client announcement).
Unveiled major enhancements to the Pure Storage platform, including Pure Storage Cloud expansion, Azure native integration, and broader Pure1 AI Copilot capabilities, intended to support AI workflows, cyber resilience, and hybrid cloud data management (Product related announcement).

Valuation Changes

The Fair Value Estimate has risen slightly, increasing from approximately $92.21 to about $95.16 per share.
The Discount Rate has edged up marginally, moving from roughly 8.21% to about 8.22%, implying a slightly higher required return.
The Revenue Growth assumption has increased modestly, from around 15.54% to approximately 16.26% annually.
The Net Profit Margin forecast has been reduced meaningfully, declining from about 11.06% to roughly 10.00%.
The future P/E multiple has risen notably, expanding from about 68.5x to roughly 74.7x forward earnings, contributing to the higher valuation.

Accelerating adoption of Pure's data cloud and subscription offerings positions the company for long-term growth, improved revenue predictability, and higher gross margins.
Strategic hyperscaler partnerships and success in high-performance hardware enhance premium pricing power, create new revenue streams, and drive share gains in demanding enterprise segments.
Heavy focus on traditional products and uncertain cloud transition, combined with rising competition and unpredictable demand, threaten recurring revenue growth and margin stability.

Catalysts

About Pure Storage

Engages in the provision of data storage and management technologies, products, and services in the United States and internationally.What are the underlying business or industry changes driving this perspective?

The adoption of Pure's Enterprise Data Cloud architecture and software-defined solutions is accelerating among large enterprises, driven by the need to manage rapidly growing and increasingly valuable data assets in the evolving AI economy; this positions Pure to capture rising long-term revenue from digital transformation and AI/ML-driven workloads.
Strategic wins and expanding co-engineering relationships with hyperscalers (e.g., Meta) are creating new high-margin royalty and software revenue streams, and ongoing early-stage engagements with additional hyperscalers signal potential for material upside to revenue and gross margin as cloud infrastructure investments scale.
Momentum in subscription-based offerings like Evergreen//One and Cloud Block Store-demonstrated by strong annual recurring revenue (ARR) growth, a rising share of total revenue, and robust RPO backlog-improves revenue predictability, reduces earnings volatility, and supports higher overall gross margin.
The success of new hardware launches targeting high-performance AI and data analytics workloads (e.g., FlashBlade//EXA, FlashArray//XL R5) is capturing share in the most demanding enterprise segments, enabling premium pricing and driving expansion in gross margin and product revenue.
Pure's all-flash solutions continue to attract organizations focused on lowering TCO and meeting sustainability/efficiency mandates, as evidenced by customer reports of major reductions in space, power, and cooling requirements (~70%), supporting both top-line growth from new wins and higher net margins via operational efficiency.

Pure Storage Earnings and Revenue Growth

Pure Storage Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Pure Storage's revenue will grow by 15.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.2% today to 11.2% in 3 years time.
Analysts expect earnings to reach $571.5 million (and earnings per share of $1.4) by about September 2028, up from $139.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $688.9 million in earnings, and the most bearish expecting $327.9 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 56.5x on those 2028 earnings, down from 186.0x today. This future PE is greater than the current PE for the US Tech industry at 24.3x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.03%, as per the Simply Wall St company report.

Pure Storage Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Pure Storage's heavy emphasis on physical and hybrid storage products, along with its noted challenges in accurately forecasting the mix between as-a-service (Evergreen//One) and product revenues, may hinder its ability to fully transition to scalable, cloud-native services at the pace required by the market-potentially capping recurring revenue growth and predictability.
While current financials show strong margins (72.1% total gross margin, 76.5% subscription margin), the company acknowledges the need for ongoing heavy R&D and infrastructure investment to support hyperscaler deployments and data center expansion, introducing a risk of margin compression and higher operating expenses if revenue growth does not outpace these investments.
Pure Storage's ongoing efforts to win business from hyperscalers (like Meta and others) are still in early-stage engagements, with management repeatedly stating that most of this revenue is not yet material; this introduces substantial uncertainty and potential volatility in future large-scale contract wins, impacting both future revenues and net earnings.
The company faces growing competition, including from large incumbents and niche players, in AI, HPC, neo-cloud, and cloud-native storage spaces; increased price-based competition or technological disruption (e.g., open-source, software-defined storage) could erode market share and average selling prices, negatively affecting top-line growth and profit margins.
Pure Storage's financial guidance now incorporates a range rather than a single target, attributed partly to increased market and macroeconomic uncertainty; this suggests potential unpredictability in demand, product mix, or macro conditions, which could result in missed revenue, operating profit, or margin targets in the future.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $78.5 for Pure Storage based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $93.0, and the most bearish reporting a price target of just $55.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.1 billion, earnings will come to $571.5 million, and it would be trading on a PE ratio of 56.5x, assuming you use a discount rate of 8.0%.
Given the current share price of $79.21, the analyst price target of $78.5 is 0.9% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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