How Pure Storage’s Margin Squeeze Amid Solid Growth At Pure Storage (PSTG) Has Changed Its Investment Story

• In early December 2025, Pure Storage reported third-quarter revenue of US$964.45 million, up from US$831.07 million a year earlier, while quarterly net income slipped to US$54.81 million from US$63.64 million, and it modestly raised full-year 2026 revenue guidance to US$3.63–3.64 billion alongside confirming strong fourth-quarter revenue expectations.
• Despite this growth and an ongoing share repurchase program totaling US$443.5 million since early 2024, investors focused on declining operating margins and slightly lower quarterly earnings per share, underscoring concerns about the profitability of Pure Storage’s expanding product and subscription portfolio.
• We’ll now explore how solid top-line growth paired with pressure on operating margins could alter Pure Storage’s existing investment narrative.

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Pure Storage Investment Narrative Recap

To own Pure Storage, you need to believe that demand for its all-flash and subscription storage platform will stay strong enough to offset current pressure on profitability. The latest quarter supports the growth side of that belief, but the market’s sharp reaction shows that the main near term catalyst is clearer progress on stabilizing operating margins, while the biggest risk is that rising costs tied to hyperscaler and AI workloads keep outpacing revenue growth. Overall, this earnings report does not materially change that risk balance in the short term.

Among the recent announcements, the modest raise in full year 2026 revenue guidance to US$3.63 billion to US$3.64 billion stands out, because it reinforces the top line growth story that underpins many bullish views, even as margins come under scrutiny. For investors, that guidance keeps the focus squarely on whether Pure can translate strong product and Evergreen One subscription adoption into more resilient earnings power without further margin compression.

Yet while revenue guidance moved up, the pressure on operating margins is something investors should be aware of, because it suggests...

Read the full narrative on Pure Storage (it's free!)

Pure Storage's narrative projects $5.1 billion revenue and $571.5 million earnings by 2028. This requires 15.2% yearly revenue growth and about a $432.3 million earnings increase from $139.2 million today.

Uncover how Pure Storage's forecasts yield a $95.16 fair value, a 29% upside to its current price.

Exploring Other Perspectives

Five Simply Wall St Community fair value estimates cluster between US$76.09 and US$95.16, reflecting a wide spread in individual views. You should weigh that diversity against the risk that heavier R&D and infrastructure spending could keep net margins under pressure and influence how sustainably Pure Storage converts its revenue growth into long term earnings power.

Explore 5 other fair value estimates on Pure Storage - why the stock might be worth as much as 29% more than the current price!

Build Your Own Pure Storage Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Pure Storage research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Pure Storage research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Pure Storage's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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