Published: December 3, 2025
Pure Storage, Inc. (NYSE: PSTG) entered its latest earnings week riding a huge 2025 rally. Now the stock is back in the volatility spotlight as investors digest strong top-line growth, higher guidance – and a clear message that management plans to spend heavily to capture the artificial intelligence (AI) storage opportunity.
Pure Storage stock today: from big rally to post-earnings hangover
Pure Storage shares closed on December 2, 2025 at $94.72, up almost 7% on the day and close to their recent highs. [1]
That move capped a powerful run:
- The stock has traded in a 52‑week range of roughly $34.51 to $100.59. [2]
- Over the last three months, shares have climbed about 68–70%, driven by enthusiasm around AI-related storage demand and new partnerships. [3]
The mood changed after the company reported Q3 fiscal 2026 results (for the quarter ended November 2, 2025). While the regular-session close on December 2 was strong, pre‑market indications on December 3 showed PSTG trading near $80 – roughly 15% below that close, reflecting a sharp negative reaction to the earnings details and commentary. [4]
In short: fundamentals look solid, but expectations had become very high.
Q3 FY26 earnings: strong revenue, softer profit metrics
Pure Storage’s Q3 FY26 numbers were, on the surface, impressive:
- Total revenue:$964.5 million, up about 16% year over year from $831.1 million. [5]
- Product revenue:$534.8 million, up roughly 18% YoY. [6]
- Subscription services revenue:$429.7 million, up about 14% YoY, reinforcing the shift toward recurring revenue. [7]
- GAAP net income:$54.8 million, down from $63.6 million a year earlier, as operating expenses ramped. [8]
- GAAP diluted EPS:$0.16, versus $0.19 in the prior-year quarter. [9]
- Total gross margin: roughly 72%, reflecting the economics of an all-flash and software-rich portfolio. [10]
On a non‑GAAP basis, multiple outlets report adjusted EPS of about $0.58, slightly ahead of consensus estimates. [11]
Cash generation stayed healthy:
- Operating cash flow: about $116 million in the quarter.
- Free cash flow: approximately $53 million, after capex. [12]
The company also raised its full‑year FY26 outlook, guiding:
- Revenue to around $3.64 billion, up from prior guidance. [13]
- Adjusted operating income to roughly $634 million at the midpoint, another increase versus earlier expectations. [14]
So why the sell‑off? The answer lives less in the Q3 scorecard and more in what happens after FY26.
Why the stock is falling: AI bets, margins and the “expectations problem”
Analyst and media commentary converge on a few key reasons for the negative share-price reaction:
- Reinvestment of AI hyperscaler wins Management signaled that a meaningful chunk of incremental revenue from hyperscale AI customers will be plowed back into R&D and sales & marketing, especially as Pure ramps embedded solid‑state drives and large‑scale flash arrays for AI workloads. [15] That strategy supports long‑term growth but pressures operating margins, particularly looking ahead to fiscal 2027 – exactly the period many investors were hoping would show substantial profit leverage.
- Modest beat after a major run‑up Coming into the print, Pure Storage had become something of an AI‑infrastructure momentum stock, with the share price up roughly 60–70% in just a few months. [16] Against that backdrop, a mid‑teens revenue beat and a small EPS beat were not enough to sustain the rally. Several commentators highlight that Q3’s revenue surprise was smaller than in prior quarters, which made it easier for profit‑concerned investors to lock in gains. [17]
- Visibility concerns around hyperscaler demand Barron’s notes that Pure did not provide detailed projections for future hyperscaler sales, including a high-profile relationship with Meta, adding uncertainty around the timing and durability of this new growth vector. [18] Susquehanna, which downgraded the stock to Neutral, also pointed out that Pure’s embedded SSD footprint is only about 2 exabytes in a 460‑exabyte market opportunity – huge room for growth, but also a reminder that the company is still early in this specific game. [19]
- Rich valuation meets margin risk A Simply Wall St review pegs Pure Storage’s price‑to‑sales ratio around 8.7x, versus about 1.6x for the broader U.S. tech sector and roughly 2.1x for peers. [20] StockAnalysis reports a market cap near $31 billion and enterprise value just under $30 billion, on trailing‑twelve‑month revenue of about $3.17 billion – implying a premium multiple even before factoring in the post‑earnings drop. [21] With a trailing P/E well over 100x using recent earnings, Pure Storage is priced for sustained high growth and margin expansion; any hint of near‑term margin compression tends to have an outsized impact. [22]
Put simply, the market is wrestling with whether Pure Storage is spending at the right pace to maximize its AI opportunity, or over‑investing relative to what’s already discounted in the stock.
What Wall Street analysts are saying now
Despite the sell‑off, the analyst community remains broadly positive, though opinions are diverging at the margin.
Recent actions and commentary include:
- Needham
- Reiterated a “Buy” rating with a $100 price target, emphasizing the durability of demand for Pure’s flash storage and strong execution. [23]
- TD Cowen
- Raised its price objective from $85 to $100, also with a “Buy” rating, framing Q3 as supportive of the long‑term thesis despite near‑term volatility. [24]
- Citi & Guggenheim
- Maintained Buy‑equivalent ratings, while Citi trimmed its target to around $105 to reflect the planned step‑up in investment and resulting margin uncertainty. [25]
- Susquehanna
- Downgraded Pure Storage to Neutral, pointing to execution risks in scaling embedded SSD deployments and the possibility that the stock already prices in a very optimistic share gain in this nascent market. [26]
Across major aggregators:
- MarketBeat shows a consensus 12‑month price target in the low‑to‑mid‑$90s, with highs around $120 and lows in the mid‑$60s. [27]
- StockAnalysis and other forecast sites report an average target near $88–95, still implying a small downside or flat performance versus recent prices after the 2025 run. [28]
The consensus rating remains “Buy”, but the dispersion of price targets and rating changes shows that sentiment has become more nuanced.
Fundamentals and valuation: how expensive is Pure Storage?
Zooming out from the quarter, recent data paints this picture:
- Revenue (2024): around $3.17 billion, up nearly 12% year over year. [29]
- Net income (2024): roughly $107 million, up more than 70% versus the prior year. [30]
- Market cap: about $31 billion. [31]
- Enterprise value: roughly $29.8 billion. [32]
- Free cash flow remains positive, with Q3 FY26 FCF just above $50 million despite elevated capex and growth investments. [33]
On valuation:
- A price‑to‑sales multiple around 8–9x and a trailing P/E above 100x place Pure Storage firmly in the “high‑growth, high‑expectation” bucket, not in value territory. [34]
- Compared with larger, slower‑growing legacy storage vendors that often trade at low‑single‑digit P/S multiples, the premium implies confidence in Pure’s ability to compound revenue at mid‑teens or better for years.
This premium is exactly why any hint of slower margin expansion gets punished; the stock is priced as a structural winner in AI‑era data storage.
Strategic context: AI, flash and the “enterprise data cloud”
Pure Storage’s long‑term story remains anchored in a few structural trends:
- All‑flash storage replacing spinning disks The company continues to push its FlashArray and FlashBlade families as efficient, high‑performance replacements for disk‑based systems in data centers and cloud environments. [35]
- AI and data‑intensive workloads AI training and inference, high‑performance analytics and containerized workloads demand low‑latency, high‑throughput storage. Q2 FY26 commentary from The Futurum Group highlighted Pure’s positioning around its “Enterprise Data Cloud,” Fusion platform and next‑gen FlashBlade upgrades as key enablers for AI and cloud‑native architectures. [36] The Q3 FY26 call and subsequent analysis reinforce that AI‑driven demand – including from major hyperscalers – is already contributing meaningfully to growth, and management expects more to come. [37]
- Subscription and as‑a‑service models Subscription revenue of about $430 million in Q3 underscores the shift to “storage as a service”, improving revenue visibility and stickiness over time, even as it can delay near‑term recognition versus outright hardware sales. [38]
- Go‑to‑market execution In November, Pure named Patrick Finn as Chief Revenue Officer, sharpening its focus on enterprise and global account execution in what is becoming a more competitive AI‑infrastructure market. [39]
The strategy is coherent: spend now to capture outsized share of an AI‑accelerated storage market, especially at hyperscalers and large enterprises, while continuing to grow high‑margin subscription services.
Pure Storage stock forecast: what the models and analysts imply
Different forecasting approaches – from Wall Street research to algorithmic models – paint a broadly similar picture: solid growth expectations, but not universally cheap shares.
- Sell‑side consensus
- Average 12‑month targets cluster in the high‑80s to mid‑90s, with bulls as high as $120 and bears near $55–65. [40]
- That range implies anything from material downside to ~25–30% upside, depending on which analyst you believe and where the stock trades after the earnings reaction.
- Quant / model‑driven forecasts
- PandaForecast, for example, projects a short‑term target around $89.39 for early December 2025, with relatively modest expected volatility. [41]
- Longer‑term narrative models
- A recent Yahoo Finance‑covered narrative featured estimates of $5.1 billion in revenue and $571.5 million in earnings by 2028, implying roughly 15% annualized revenue growth from current levels. [42]
None of these forecasts are guarantees; they’re best thought of as scenarios anchored on assumptions about AI adoption, hyperscaler demand, competitive dynamics and Pure’s ability to execute.
Key risks to watch
Investors following Pure Storage should keep an eye on several risk vectors that feature prominently in the latest commentary:
- Margin trajectory – Management is explicitly choosing to invest more in FY27, which could pressure operating margins even if revenue grows at a healthy clip. [43]
- Hyperscaler concentration – Large AI customers can drive big wins but also create dependency on a handful of accounts, with limited visibility and significant bargaining power. [44]
- Competition – Traditional storage giants and cloud providers are not standing still; Pure must continue out‑innovating them in efficiency, simplicity and AI‑readiness. [45]
- Valuation risk – With premium P/S and P/E multiples, Pure Storage is more vulnerable to sentiment shifts, macro IT spending slowdowns, or any disappointment in growth or profitability. [46]
Bottom line: is the post‑earnings drop an opportunity or a warning?
As of December 3, 2025, the Pure Storage story has not broken – it has become more finely balanced:
- The Q3 FY26 report confirmed robust demand, especially in AI and subscription services, and management felt confident enough to raise full‑year guidance. [47]
- At the same time, the company is candidly prioritizing growth over near‑term margin expansion, and the stock was already priced for near‑flawless execution.
For growth‑oriented investors who believe AI‑driven data storage will expand rapidly and that Pure can be a sustained share gainer, a sharp pullback after a good (but not perfect) quarter may look like an entry point.
For more valuation‑sensitive or risk‑averse investors, the combination of margin uncertainty, hyperscaler concentration and a still‑premium multiple may argue for patience until either the price resets further or the medium‑term profitability path becomes clearer.
Either way, PSTG is likely to remain a high‑beta proxy for AI infrastructure spending – with the potential for both outsized gains and painful drawdowns as the market recalibrates its expectations.
References
1. stockanalysis.com, 2. www.investing.com, 3. finance.yahoo.com, 4. stockanalysis.com, 5. investor.purestorage.com, 6. investor.purestorage.com, 7. investor.purestorage.com, 8. investor.purestorage.com, 9. investor.purestorage.com, 10. investor.purestorage.com, 11. www.barrons.com, 12. investor.purestorage.com, 13. seekingalpha.com, 14. www.barrons.com, 15. seekingalpha.com, 16. finance.yahoo.com, 17. seekingalpha.com, 18. www.barrons.com, 19. www.barrons.com, 20. simplywall.st, 21. stockanalysis.com, 22. stockanalysis.com, 23. www.gurufocus.com, 24. www.marketbeat.com, 25. www.barrons.com, 26. www.barrons.com, 27. www.marketbeat.com, 28. stockanalysis.com, 29. stockanalysis.com, 30. stockanalysis.com, 31. stockanalysis.com, 32. stockanalysis.com, 33. investor.purestorage.com, 34. simplywall.st, 35. futurumgroup.com, 36. futurumgroup.com, 37. seekingalpha.com, 38. investor.purestorage.com, 39. investor.purestorage.com, 40. stockanalysis.com, 41. pandaforecast.com, 42. finance.yahoo.com, 43. seekingalpha.com, 44. www.barrons.com, 45. futurumgroup.com, 46. simplywall.st, 47. investor.purestorage.com
