Almost a month has passed since Pure Storage (stock code: PSTG) released its last financial report, and the stock has increased by about 3.6%, outperforming the S&P 500. So, will this positive trend continue until the next earnings report is released? Or will Pure Storage possibly experience a pullback? Before we analyze the recent reactions from investors and analysts in detail, let's quickly review its latest earnings report to identify the key driving factors.

In its latest financial report, Pure Storage announced a non-GAAP earnings per share of 43 cents for the second quarter of fiscal year 2026, which is 10.3% higher than Zacks' expectations. Compared to the non-GAAP earnings per share of 44 cents in the same period last year, this is a slight decline; however, quarterly revenue grew by 13% year-over-year, reaching $861 million, surpassing Zacks' expectations by 1.8% and also exceeding the management's guidance of $845 million. The growth is mainly attributed to strong demand from large enterprises, particularly the ongoing growth momentum of FlashBlade, especially FlashBlade//E, as well as the accelerated adoption of its core software and service products like Evergreen//One, Cloud Block Store, and Portworx.

In addition, the company no longer uses a single target when providing financial guidance, but instead adopts a range of scope. This approach, consistent with industry peers, offers greater flexibility, allowing the company to explore new investment and transformational growth opportunities while advancing its strategy. For the fiscal year 2026, it expects revenue to be between $3.6 billion and $3.63 billion, which indicates a year-on-year growth of 14%, 300 basis points higher than the previously expected 11%.

Operating income under Generally Accepted Accounting Principles is now projected to be between $605 million and $625 million, which at the midpoint implies an annual growth rate of about 10%, exceeding the previous guidance of $595 million by more than 300 basis points.

From the perspective of product revenue, it accounted for 51.8% of the total revenue, amounting to $446.3 million, an increase of 10.6% year-on-year. Subscription service revenue accounted for 48.2%, reaching $414.7 million, growing by 14.8%. The annual recurring revenue (ARR) from subscriptions reached nearly $1.8 billion, up 18% year-on-year. Subscription ARR includes the annualized value of all active subscription contracts on the last day of the quarter, as well as annualized on-demand revenue.

The total revenue in the United States and internationally was $577 million and $284 million, representing a growth of 7% and 26%, respectively.

From the margins perspective, the non-GAAP gross margin is 72.1%, slightly down from 72.8% in the same period last year. The non-GAAP product gross margin is 68%, consistent with its long-term target range of 65% to 70%, but slightly lower than 69.5% in the same period last year. The non-GAAP subscription service gross margin is 76.5%, compared to 76.4% a year ago.

Pure Storage also reported a non-GAAP operating income of $130 million, exceeding the expected $125 million, down year-on-year but still within the expected range. The non-GAAP operating margin was 15.1%, lower than 18.1% in the same period last year, but still slightly above the projected 14.8%.

As of the end of the second quarter on August 3, Pure Storage held $1.5 billion in cash, cash equivalents, and marketable securities, down from $1.6 billion on May 4, 2025. The cash flow generated from operations for the quarter was $212.2 million, a decrease from $226.6 million in the same period last year, while free cash flow was $150.1 million, also slightly lower than $166.6 million in the same period last year. Currently, the company has returned $42 million to shareholders through the repurchase of 800,000 shares, and there is still $109 million remaining under the authorized plan.

As of the end of this quarter, the total performance obligations reached 2.8 billion USD, an increase of 22% year-on-year.

Looking ahead to the next quarter, Pure Storage expects revenue to be in the range of $950 million to $960 million, with the midpoint indicating a year-over-year growth of 15%. Operating income, calculated under non-GAAP, is expected to be between $185 million and $195 million, with the midpoint reflecting an annual growth rate of approximately 14%.

In the past month, investors have seen revisions in expectations increase. Due to these changes, the overall expectations have risen by 23.75%.

Although Pure Storage scored a decent B in growth and momentum, it received an F in the value index, placing it in the fifth quintile for value investors. Overall, the stock has a total VGM score of C, which is what you should pay attention to if you are not focused on a specific strategy.

In summary, the valuation trend is favorable for the stock, and the revision magnitude looks promising. It is worth noting that Pure Storage's Zacks rank is #3 (Hold), and the company is expected to have stable performance in the coming months.