PSTG: Upcoming Cloud Expansion Will Drive Demand Amid Hyperscale Uncertainty

Pure Storage's fair value estimate has been raised to $92.21 from $89.39. Analysts cite broad-based price target increases driven by stronger-than-expected revenue growth, expanding enterprise demand, and positive momentum from AI and technology partnerships.

Analyst Commentary

Recent analyst updates reflect a wave of optimism regarding Pure Storage’s revenue momentum, product innovation, and positioning in the data storage landscape. However, some analysts remain cautious about premium valuations and the pace at which the company expands beyond its core enterprise base.

Bullish Takeaways

• Bullish analysts see near-term revenue and earnings upside as enterprise demand expands and AI-driven workloads grow. Firms are raising fair value and price targets following earnings previews.
• Several research notes highlight Pure Storage’s consistent share gains and execution. These notes point to broad-based product outperformance, stronger guidance, and major expansions of its Enterprise Data Cloud and cybersecurity offerings.
• Commentators point to the company’s differentiated technology, robust partnerships with leading ecosystem players, and favorable positioning to address both enterprise and hyperscale market needs.
• Upward revisions to sales multiples and price targets are attributed to increased demand tied to AI-fueled storage, product innovation, and expectations of sustained top-line growth.

Bearish Takeaways

• Bearish analysts note that Pure Storage trades at a premium valuation. They express caution about recommending the shares until there is broader adoption beyond existing enterprise customers.
• Some maintain neutral or sell ratings, citing margin risk from increased investment and competitive pressures, as well as the need for further acceleration in product growth and hyperscaler deal contributions.
• There is also concern about sustainability of AI-led valuation premiums, with calls for tangible, continued upside in both revenue and earnings to justify recent stock gains.
• Despite recent optimism, certain analysts are waiting to see a deeper, longer-term penetration in hyperscale and broader markets before reassessing their cautious stance.

What's in the News

• Kerrisdale Capital publicly announced a short position on Pure Storage, expressing skepticism about the company's hyperscaler strategy and stating that cost advantages still favor HDDs over flash for bulk storage applications (Periodical).
• Pure Storage and Cisco launched a new FlashStack Cisco Validated Design, enabling enterprise AI deployments with integrated compute, storage, networking, and software to accelerate the transition from pilot to production (Key Development).
• The company introduced enhancements to its Pure Storage Platform, including the expansion of its Enterprise Data Cloud into the public cloud with Pure Storage Cloud Azure Native, and released AI-driven features such as Pure1 AI Copilot for streamlined hybrid and multi-cloud management (Key Development).
• Pure Storage announced new cyber resilience capabilities, integrating advanced native threat detection and recovery functions into its platform through a connected partner ecosystem (Key Development).
• Pure Storage raised its revenue guidance for fiscal year 2026, now anticipating $3.60 billion to $3.63 billion in revenue with growth projections of 13.5% to 14.5% (Key Development).

Valuation Changes

• Fair Value Estimate has risen slightly from $89.39 to $92.21, reflecting increased analyst optimism.
• Discount Rate has declined marginally from 8.22% to 8.21%, suggesting a minor decrease in perceived investment risk.
• Revenue Growth projection has increased moderately from 15.46% to 15.54%, indicating a slightly more bullish sales outlook.
• Net Profit Margin estimate has edged down from 11.08% to 11.06%, implying a small expected contraction in profitability.
• Future P/E ratio has increased from 66.42x to 68.50x, which points to higher valuation expectations for future earnings.