Despite unprecedented data growth, organizations appear to be buying less networked storage systems, and even flash purchases are slowing, judging by several large vendors' recent earnings reports.
NetApp and Pure Storage last week issued earnings reports that contained hints that all-flash storage may be losing some luster, and companies are taking longer to make buying decisions.
NetApp and Pure Storage barely hit the low end of their respective revenue projections last quarter, while issuing weaker-than-expected guidance for this quarter. Both vendors cited changing buying patterns and macroeconomics as factors.
NetApp reported net income of $396 million on revenue of $1.59 billion. The total revenue slipped 3% year over year, and product revenue of $1 billion slipped $2.5 billion from last year. The quarter that ended in April marked the second consecutive quarter that NetApp fell below financial analysts' revenue expectations.
Pure Storage lost $100 million last quarter, compared with a loss of $64 million a year ago. Sales at Pure Storage came in 28% higher at $327 million, but below analyst expectations of $333 million. Pure's revenue growth is slowing; it had consistently been in the mid-30% to mid-40% range until the past two quarters.
NetApp's execution, Pure's upmarket move
NetApp CEO George Kurian blamed his company's results on inconsistent execution related to renewals. Sales of NetApp all-flash storage arrays, including NetApp FAS, EF-Series and SolidFire systems, grew 11% to an annualized run rate of $2.7 billion, but Kurian said more was expected.
"I am disappointed by the performance of our all-flash array business. The [execution] issues we experienced in the quarter were most acutely felt here," Kurian said on NetApp's earnings call. But he said NetApp has been gaining its overall share of the all-flash storage market.
Kurian said, as data center buying patterns change, "customers are buying, but are taking longer and require greater effort to close," Kurian said. He added that private cloud storage grew, with NetApp SolidFire, NetApp HCI and NetApp StorageGrid contributing around $150 million run rate last quarter.
Pure Storage CEO Charles Giancarlo said Pure bulked up its sales force more than 40% since last year, although Pure executives declined to say how many salespeople it hired. He said the influx of new salespeople will take time to provide results.
"We had a record number of new sellers join our sales force, and, frankly, it took us a little longer to get them up to speed," Giancarlo told us in an exclusive interview.
Pure all-flash storage arrays include its flagship FlashArray block devices and NVMe-over-fabrics-designed FlashBlade system.
Pure's decision to pursue more hyperscale customers helped put a damper on earnings. Those transactions are more complex and can take longer to nail down. Giancarlo said Pure does have a "record pipeline" of prospects, with a deal size of at least $3 million, mostly among Fortune 500 and Global 2000 organizations.
Giancarlo said the Pure Evergreen Storage consumption model is gaining ground in data centers that want to avoid a forklift upgrade. Pure Storage earlier this year acquired Swedish file system company Compuverde to complement FlashArray. It also introduced cloud backup appliance Pure ObjectEngine.
Cautious flash forecast
Although neither vendor missed revenue targets by much, both NetApp and Pure Storage offered downside guidance for 2020. That suggests a slowdown on the horizon, as more and more data centers wean themselves from all-flash storage on premises.
Pure Storage's second-quarter forecast is between $389 million and $401 million. Annual revenue between $1.7 billion and $1.77 billion is revised downward from guidance issued in January.
NetApp provided a less optimistic forecast, projecting revenue between $1.315 billion and $1.465 billion. That would represent a 6% decline year over year.