Pure Storage shares tumbled on Friday after the data center storage equipment maker offered lower-than-expected guidance, citing falling prices and “a little bit of global economic headwinds.”
Pure said it expects sales of $484 million to $496 million in the fourth quarter, below the $511.3 million consensus estimate among analysts polled by Refinitiv.
CEO Charlie Giancarlo told analysts that pricing declines were continuing and “we are also seeing signs of a more challenging global business environment as commented on by other large infrastructure suppliers.”
He identified “Brexit slowdowns” and the trade tensions in Asia as “the things where we saw more slowdown than other areas and that just indicates a little bit of global economic headwinds.”
For the third quarter, the company reported revenue of $428.4 million, up 15% on the previous year, and all-time-high gross margins of 71.7%, well above Pure’s guided range of 66% to 69%. Revenue grew “significantly faster than our major competitors and the market as a whole,” Giancarlo said.
But Pure’s stock fell nearly 16.5% to $16.56 in trading Friday.
According to CNBC, Pure’s Q4 outlook is another “ominous sign” for tech infrastructure suppliers after both Arista and Cisco also recently gave revenue guidance that trailed Wall Street’s expectations. Cisco said it expects second-quarter revenue to decline by 3% to 5%, versus analysts’ estimates of 2.6% growth.
Cisco CEO Chuck Robbins said the weak customer demand the company experienced in the last quarter of 2019 had continued amid “some early signs of some macro impact.”
Pure’s operating margin for the third quarter was 6.8%, at the high end of its guided range though 2.3 basis points below the previous year’s margin. “These results speak to the resiliency of our model in the current environment,” Giancarlo said.
For the fourth quarter, the company is forecasting gross margin in the range of 67.5% to 70.5% and operating margin between 10.0% and 14.0%.