Pure Storage at Bank of America Conference: Navigating AI and Market Dynamics

On Tuesday, 03 June 2025, Pure Storage Inc. (NYSE:PSTG) participated in the Bank of America Global Technology Conference 2025. CEO Charlie Giancarlo outlined the company’s strategic navigation through an uncertain macro environment, highlighting both opportunities in AI and challenges in the hyperscale market. The company’s focus on real-time data accessibility and the potential to replace hard disk drives with Direct Flash Modules were key themes.

Key Takeaways

• Pure Storage is expanding into the hyperscale market, with a significant design win with Meta.
• The company is focusing on AI-related storage opportunities, despite macroeconomic uncertainties.
• Pure Storage has paused its operating margin increase to invest in hyperscale opportunities but plans to resume next year.
• The company has secured NAND supply for the next two years through partnerships with major suppliers.
• The E Series product line is priced lower to increase market penetration in lower storage tiers.

Financial Results

Pure Storage operates in a $50 billion enterprise storage market, with current revenues exceeding $3 billion. The company has paused its 1-2% annual increase in operating margin for the current year due to investments in the hyperscale market. The as-a-service model contributes to the high 40% range of revenues, ensuring steady cash flows.

Operational Updates

In the AI sector, storage linked to AI was valued at $2 billion last year and is expected to grow. Pure Storage launched the FlashBlade Exa, capable of operating at the scale of tens of thousands of GPUs. The company is also making enterprise storage environments more accessible for AI.

The hyperscale market is a key growth area, with the top five hyperscalers accounting for 65-70% of the hard disk market. Pure Storage has secured a design win with Meta and plans to ship 1-2 exabytes for pilot systems in the second half of the year. The company will supply software and support for Meta’s hardware.

Future Outlook

Pure Storage sees significant growth opportunities in the hyperscale market and is engaged in proof-of-concept projects with other top hyperscalers. The company aims to replace hard disk drives with Direct Flash Modules due to their higher density and performance. PureFusion is expected to create a network effect in enterprise storage, allowing customers to operate all storage as a cloud.

Q&A Highlights

During the Q&A session, Giancarlo emphasized the Total Cost of Ownership (TCO) advantages of flash over hard disk drives, citing improvements in density and power efficiency. He reassured investors about the NAND supply, highlighting the company’s strong partnerships with suppliers. Giancarlo also addressed concerns about tariffs, noting Pure Storage’s flexible supply chain.

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - Bank of America Global Technology Conference 2025:

Wamsi Mohan, Analyst, BFA: Everyone, thank you for joining us here at BFA’s Global Tech Conference on day one. I’m Wamsi Mohan. I cover IT hardware and tech supply chain here. Delighted that you could all join us here. Also delighted to welcome Pure, Charlie Giancarlo, CEO with a long history in tech and obviously a experienced veteran both at Pure and and Cisco before that and can talk deep into tech and deep about the market.

So we’re looking forward to that conversation. We also have the CFO, Kevin Chrysler, back there and from IRB of San Andres. So if you have any follow-up questions, you can definitely reach out to them as well. Before we get started, I just need to read the safe harbor statement. Statements made in these discussions, which are not statements of historical fact are forward looking statements based on current expectations.

Actual results could differ materially from those projected due to a number of factors, including those referenced in Pure Storage’s most recent SEC filings on Form 10 Q, 10 ks and eight ks. And so with that behind us, I guess we can kick it off. So Charlie, maybe to kick it off, right, like, what would you say in this sort of really, you know, kind of uncertain macro backdrop? What are you seeing out there? What are your customer conversations being like?

Charlie Giancarlo, CEO, Pure Storage: Yeah. You know, the the conversation that that I’ll start with is the same is the same conversation generally that we have with when I meet with executives at other companies, whether they’re suppliers or potential customers of ours, which is that, you know, the the whether it’s the global macro or the or the geopolitical environment changes so rapidly week by week. And without without at this point in time, you know, a clear endpoint that there’s just a lot of there’s just increased uncertainty for this second half of the year. You know, we are able to get supplier that is is able to get a signal for the next quarter, but your signals for longer in the year generally depend a lot on there being a stable macro and geopolitical environment. And and, of course, we’re living in anything but that right now.

And that’s when we say uncertainty is up, what we really mean by that is it’s very difficult to project when the with the larger macro is so uncertain. You know, we we in other words, our signals that we get directly may be roughly the same as they might be in any other year, but they can change so rapidly given a change in the macro. So that that’s why there’s, like, increased uncertainty.

Wamsi Mohan, Analyst, BFA: Okay. Great. I I think one one topic that I think is squarely in center for for investor minds is understanding the linkage of storage with AI. Mhmm. And so maybe you could talk a little bit about what your view on that is.

Is the overall growth rates within the storage industry going to shift because of AI, and how’s Pure positioned to handle some of that?

Charlie Giancarlo, CEO, Pure Storage: Yeah. It it it sounds like a simple question. It’s actually it’s actually more complex because AI is gonna affect really every every part of the IT ecosystem. And so you have AI, of course, affecting very large scale environments for which their specialized storage is required, storage that can both read and write at at very high rates. We recently had a product announcement of a product we call FlashBlade Exa, which is a modification of our FlashBlade product that allows it to operate at tens of thousand at the scale of tens of thousands of GPUs.

And a lot of the attention of the media is on these very large scale environments. And yet we believe that the the bigger change and the bigger opportunity for us or for anyone actually will be in the enterprise environment, which might only be tens may not be any GPUs at all, or it may be, you know, tens to hundreds GPUs. And and, actually, the the real opportunity there from our perspective is that it’s gonna change the nature and the value of of storage in the enterprise environment. So to give you perhaps, you know, another change that it’s creating is up until now, of course, software has really dominated the way that companies compete when they compete with IT. Right?

A new software program moving to mobile, giving customers the ability to to transact or to interact on their mobile devices. It’s all based on software. But one of the things that AI has changed is the relationship between software and data. And increasingly, data is becoming more important than software. Let me give you an example.

We’re in San Francisco. It has only happened in the last year that the number of robotaxis, the amount of trips taken by robotaxis has surpassed the number of trips trips taken by ride ride hailing or ride or ride sharing environments like Uber and Lyft. What does that mean? Well, robotaxis, they’re the way they operate has been because of all of the AI associated with with self driving. Right?

The data was more important in that sense than the software, whereas the software is what created the ride, you know, the ride sharing apps. Okay. So you have one example. It may be one of the first of of data becoming more important than than software. So this is true in the enterprise environment.

The data the the importance of data is going to rise. While the importance of being gate able to get access to real time data for AI analysis is important, Well, that real time data is gonna sit on traditional environments, not on necessarily an AI environment. And what we’re doing with what we called our fusion v two product that we or capability that we recently launched, it’s just as part of our normal software updates, allows all of an enterprise storage environment that it sits on Pure to operate as a cloud of storage rather than individual storage arrays. And that means it’s all accessible by AI. Real time data, production data accessible by AI.

We think that’s a very important part of the AI picture. So as I said, I think it’s an it’s a it’s a question that sounds easy, but actually is complex, has many different parts. We’re very confident about both our current position as well as our strategy in this in this environment, but it spans everything from just organizing data better all the way to to being able to provide the kind of systems necessary to operate the highest level of scale.

Wamsi Mohan, Analyst, BFA: Okay. That’s that’s super helpful. So as you think about, you know, Pure’s growth in the future, how much of that would you say is maybe what you could attribute towards AI versus what you could attribute towards market share gains when you think about And and where within the market would you most anticipate taking share? Right.

Charlie Giancarlo, CEO, Pure Storage: So if we just look at the numbers, it’s pretty clear. We operate in roughly a $50,000,000,000 market in enterprise storage. We’re currently just over $3,000,000,000. So that’s $47,000,000,000 roughly or or $57,000,000,000 of of raw opportunity. We estimate last year that storage that was directly tied to AI was probably in the on the order of $2,000,000,000.

And I think that’ll grow, but I don’t think it’s AI doesn’t require a lot of specialty storage. So I I think that’ll grow double, possibly triple, but it’s still gonna be, you know, very small single digit percentage of the overall enterprise storage market. And, of course, we’re gonna be competing as well for storage in the hyperscale market, which is another opportunity and for which, you know, a lot of growth is possible. So I I think the AI opportunity changes the nature of storage. I think we’re well well set up for that with our our fusion launch.

But in terms and I look. I love being in an f one car race, which is the way I look at the about storage in the AI market, but you don’t find a lot of f one cars on the road. Sure. So I think it’s an exciting area to be, but I still think it’s gonna be a small portion of the of the other two markets.

Wamsi Mohan, Analyst, BFA: That’s great. So maybe if we just think about you mentioned hyperscale as an incremental TAM. How how large do you think that TAM is, that market is, and and what’s your opportunity there?

Charlie Giancarlo, CEO, Pure Storage: So the overall opportunity right now, the the top five hyperscalers are roughly 65, 70 percent of the total hard disk market. I just want that to sink in. 67 60 to 70% of of all hard disks are sold into the top five hyperscalers. It’s on the order of six, seven hundred exabytes a year. It’s a very big opportunity.

We’ve now as, you know, we’ve talked about, we’ve gotten a a design win. We are busy working on the on on the finishing the next generation data center design with Meta that they’ll start stamping out across their system. They’re one of those large they’re they’re a strong portion of that six or 700 exabytes that are sold a year. Obviously, it’ll take ramp time for us to be able to get into into those sorts of numbers. We plan on or it’s our understanding that we’ll ship one to two exabytes in the second half of the year, which is just going into a pilot system, you know, with build outs of their data centers starting the year after that.

So we’re very bullish on that. We’re in some POCs and other of the top 10 hyperscalers that hopefully will go positively. You know, those will roll out obviously, or if if we’re successful there, that’ll be in later later time frames. But it’s a very big opportunity for us. Now and to be very clear, our with those top five hyperscalers, we have or at least with Meta, we’ve structured it where they will buy their own hardware.

We’ll be providing them and supporting that with our software to make those that direct flash capability work. But it’s a nonetheless, it’s a very big opportunity. Yeah. Maybe if

Wamsi Mohan, Analyst, BFA: we can dive a little more into that and just think through so you mentioned sort of the one to two exabytes in the near term. We would look at like, I think you noted a double digit exabyte number slightly further out. The scale of what you’re talking about relative to what you just said of like six, seven hundred exabytes at hyperscalers just being HDDs. What of that six, seven hundred would you say is the area that you’re first replacing? And what would you call like maybe the low hanging fruit in terms of the exabyte the incremental exabytes that you can grow into?

Right.

Charlie Giancarlo, CEO, Pure Storage: Well, so in each of the again, I’ll go back to the top five hyperscalers. They have horizontal storage tiers, meaning that they don’t build their storage dedicated to any specific application or any specific customer. They generally have three or four tiers of storage that are based on price performance. Right? So a low price tier generally has lower performance.

High very high price tier that has high performance, couple in between. We are effectively competing for all of those tiers. Now more likely than not, the hyperscalers will start off with the highest price performance tier largely because, you know, there there’s a higher price umbrella and also more performance is necessary, which Flash is able to provide. But but we’ve also proven that we can be, on a TCO basis, performant at even the lowest tier. But I do expect them to start, you know, from the highest tier to go to the lowest tier.

Wamsi Mohan, Analyst, BFA: Can you dissect that TCO math a little bit, Charlie? Because, you know, it’s it’s interesting. Right? Like, I mean, I I cover, like, obviously, you guys also cover hard drive companies, and the TCO map across both of those seem very different. And and the TCO map generally, like, from what you see at, like, from a HDD perspective is obviously focused on the media cost delta to begin with.

But but beyond that, the extraneous parts of the system other than the media, the size and the trajectory of where those costs are and operating cost assumptions over time seem to be very different. So, I mean, I’m not asking you to opine on what their TCO, but can you walk us through the assumptions maybe in your TCO?

Charlie Giancarlo, CEO, Pure Storage: Well, we we had to prove out our TCO to to Meta in order to get this design win. So, yeah, everybody or often when you hear the hard disk manufacturers talk about it or analysts, they’ll focus on the media costs. And the thing about this is that the media by itself doesn’t do anything. They have to be connected into systems. The systems require computers.

They require networks to tie them together. They require power supplies to make to make them work. Now there are two things that become important, density and performance. The from a density standpoint, actually, I was just handed this morning a one of our engineering test units of our of the next generation direct flash module of 300 terabytes that should be available by the end of the year. This is to compare it with the latest hammer of 50 terabytes.

Alright? So already six times faster. And by the way, currently, we’re shipping a one fifty terabyte DFM. That’s been shipping since last year. Next year, by the end of the year, we should have a 600 terabyte, whereas, you know, the hard disk manufacturers are talking about 60 to 80 by the end of the decade.

So first of all, the, flash continues to operate at Moore’s Law, which is about 344% price price performance improvement every single year. It’s a track record that’s been established over thirty years. A hard disk, which has a track record of over forty years, improves at roughly 12% a year. So it’s, you know, these sort of curves, these long term curves of price performance don’t change overnight. You know, they are very steady, very stable, and so it’s just a matter of time.

But secondly, and probably more importantly, the hard disks are getting denser, but they’re not getting faster. And and that’s a really important element. The way you know, they they only have one head per per disk. And even if they were to double it, they’d only be able to double that at two heads per disc. That’d probably be be pretty much it.

And let me give you a sense of that. You know, they’re spinning at a certain rate. So the bits coming out of it are at the rate that it the head is spin or the disc is spinning under the head. And the way I would describe it is if you took a one gallon bucket of water and you put a one inch hose on it, you can fill it up or empty it pretty quickly. If you take a city water tower and put a one inch hose on it, it’s gonna take forever to drain it or to fill it.

And that’s the problem with our discs, is they’re getting so big, but they’re not getting any faster. That problem does not exist with flash. We can put flash is parallel almost parallel by definition. As the density gets gets higher, we can put more lanes of of IO into it. And so it doesn’t suffer from the performance issue that disk suffers from.

So this is what is going to continue to to make flash just a superior technology over time. So whether you believe it’s now, next year, or five years from now, I mean, the the really, the trends are all in the favor of of flash.

Wamsi Mohan, Analyst, BFA: May maybe just to push back a little bit on that, Charlie. Right? Like, you think about the workloads that do require that performance improvement, granted it would take longer even with the dual actuator, you can’t match the speeds of Flash. So you’re on the HDD side, it is definitely going to be slower. If the growth in unstructured data is largely coming because of Sora and AI generated videos and things like that that maybe don’t require potentially that fast response time.

Right. As you think about the evolution of unstructured data growth, like, where do you think that that opportunity size fits within the incremental growth in overall storage?

Charlie Giancarlo, CEO, Pure Storage: Right. So now we get into the density portion of this. Right? So at 300 terabytes versus 50, alright, we’re already at one sixth or six times the density, which means, on average, we need, you know, six times fewer of everything else, six times fewer power supplies. Actually, it’s more than that.

We need roughly 10 times fewer power supplies, 10 times fewer network connections, six times fewer processors to make this all operate. And, you know, we we’ve proven to be meta less than one tenth of the space power and cooling of their equivalent hard disk environment. Alright? Now on average, the average hyperscaler data center turns out turns out Meta is even higher than this, but the average hyperscale data center is about 25% of their power going to storage, to hard disk storage. At one tenth, not only are we the same total cost of ownership over time, but we give them 20% of their power back.

If you think about data centers being limited more in power than they are in anything else, getting 20% of your power back for things such as AI is a really important consideration. Right? And you’re not having to build the next data center saves a lot of money. So even compared to if we look at hard disk from a density and total cost of ownership standpoint, we’re also hard disk about one and a half percent failure rate a year. We’re one eighth of 1%.

If you talk about replacement cycle, about ten years for hard disk, not sorry, about five years for hard disk, ten years for one of our direct flash modules. It just it one thing adds on on another, and it just gets to the point where if it’s the same total cost of ownership, even if we’re slow requiring slow performance, but you know, same cost of ownership and five times the performance, why would you do that?

Wamsi Mohan, Analyst, BFA: So maybe let’s let’s switch a little bit to think about where all that NAND supply is going to come from in terms of all the bits that are needed. Because this is a frequent argument that that that I think we hear is if you look at relative to the, call it, thousand exabytes roughly of of hard drive shipments, total output of NAND might be, I don’t know, 900 or so for the market, but enterprise SSDs are where what is being diverted at the moment to satisfy enterprise demand, maybe only 15% of that. Mhmm. And there’s a hunk of it that’s going towards smartphones to PCs and other things. And so conceptually, how should investors think about your access to those bits without having the price go up or the returns be as favorable to

Charlie Giancarlo, CEO, Pure Storage: the NAND industry? Right. Well, of course, we would like nothing more than to get, you know, the six or 700 exabytes, you know, ready to go for NAND tomorrow, but that that’s not going to happen. It’s gonna be a ramp over over a period of time. You know?

Even you know, we’ve talked about the meta ramp one to two this year, some double digits next year. Even if we were to get another design win, that’s at least two years out. So these things will be ramping over time. Again, semiconductor ability to ramp capacity is legend. Right?

And we’ve been working very closely now with three major suppliers, Micron, Kioxia, and Hynix. Hynix. Thank you. A little little brain freeze there. And Hynix, you know, we’ve already been able to make sure that we had enough supply necessary for the next two years.

So we feel confident there. And, of course, as we see success, these companies will continue to expand their their production rate. Maybe switching away from tech for a bit, like, just

Wamsi Mohan, Analyst, BFA: to think about the financial profile of the company since we don’t have that much more time left. When you think about Pure’s growth in the past, has you’ve kind of gone through these cycles, and correct me if I’m maybe not articulating this correctly, but I think that you have high investment years and then you have a big uptick in, you know, feet on the street. You really start to penetrate like new accounts in years where you’re harvesting margin. You kinda see the inverse of it. It’s not perfect, but it’s kind of, like, over time, it’s an observation at least for me.

And that I think that that generally holds true. So part of, I think, Pure’s challenge is that there is this incumbency that’s been out there. It’s sticky. Storage is a lot stickier than, say, servers. So it’s a hard market to kind of penetrate.

You’re investing now for it’s an investment year in some ways. Right? Like, your your growth rate’s in the low double digits. You’ve got investment year that is compressing maybe what you would normally have had, like margin expansion into into not. And so how should we put all these pieces together and think about how you wanna manage the company over the next few years?

Charlie Giancarlo, CEO, Pure Storage: Absolutely. Well, I might just recharacterize a little bit of of our past. Sure. It it was less about us making changes in our investment profile for different years. We’ve tried to keep a very steady and consistent investment profile.

What did happen in past years was that, you know, despite the fact that NAND, you know, on a long term basis declines in price, what we’ve seen twice now in the in the eight years that I’ve been here has been some wild swings in NAND, either going to half or doubling, you know, pricing within a within a four quarter time frame. And that actually has largely affected the top line more than it has the margin more than the margin line while we’ve kept investment steady. Now a couple of things have changed. One is that was during a period of time when when Pure was much more specialized in terms of the type of storage that we could provide, and so it gave us limited flexibility when NAND prices change. The second thing was that, of course, we were very dependent on effectively a CapEx sales sales model.

And now we are in the, you know, high 40% range in terms of having an as a service model that has much steadier, obviously, revenues and and cash flows. So I think we’re much steadier now. Five years ago, we together a stated strategy where it was our intent, and we’ve been, you know, we’ve had a high fidelity to this of putting another point or two of of operating margin on our bottom line every year. Now given the opportunity for the hyperscale, which was going to come with some heavy r and d investment without revenues associated with it for for a period of time, we identified last year that for this year, we were seeking to put that one to two points of of addition to our operating profit line on hold for one year, which, you know, continues to be the plan. But then we plan on picking that up again next year.

So it’s part I I think we’ve been very transparent and and thoughtful in terms of the way that we are operating the company. We hope to not create surprises for our for our investor base.

Wamsi Mohan, Analyst, BFA: Yeah. No. No. That’s helpful context, and I appreciate that. Maybe, you know, we can’t kind of not talk about tariffs, I guess, to some degree.

So what what can you say about, like, the known state of affairs and and how you’re thinking about managing the various elements, including managing to, you know, a more uncertain demand environment.

Charlie Giancarlo, CEO, Pure Storage: Right. Well, the known state of affairs is that, you know, if you just look at last week, tariffs were off again and then on again, you know, all all within one week. But the exact nature of those tariffs, that’s one of the things that’s a little bit you know, creates the additional uncertainty is that it’s even worse when you look at the fine print. That is the details behind the large statements around tariffs is really quite missing. And so I think for anyone, any manufacturer, there’s a lot of uncertainty associated with tariffs.

You know, there’ll be announcement, for example, of a certain tariff on a certain country, but what does it actually include? Does it include the value out of that country or the entire bill of materials that comes out of the country? A lot of times that that that type of detail is just not forthcoming. So what we can say about tariffs is that there’s still a lot of uncertainty as to exactly what that will look like, you know, when they are finally put into effect with the detail behind that. We now the other thing we can say about tariffs is is we’ve done a lot of planning around it.

I think we’re prepared for a lot of different scenarios. We do have a a very flexible, very distributed supply chain. We are in quite a few countries around the world. We have and by the way, when we talk about tariffs, you also have to talk about your demand chain. It’s not just about where we source product, it’s where we ship product.

We have a lot of flexibility in our demand chain as well. So I think we’re well prepared, but it’s until until the final rulings come out with the detail behind it, it’s very hard to predict. And I think that’s what’s creating a lot of uncertainty in the market, not just with us, but with our fellow travelers in in this environment.

Wamsi Mohan, Analyst, BFA: You you brought up NAND pricing, Charlie. Was just kinda curious. What’s your outlook on that in sort of the next six months to a year? I know it’s it’s always pretty volatile, but how are you thinking about that? Are you doing anything around inventory and managing managing that?

Charlie Giancarlo, CEO, Pure Storage: Well, I mean, we’re as you know, we’ve announced just in the past six months two different relationships that we’ve extended. So I think we’re we’re well prepared for any fundamental changes in what would be spot NAND pricing. I I think we’re pretty confident about our our costs as we go into the second half of the year. Of course, what we we can’t be necessarily confident about is tariffs that could make a change in the cost or in the macro, which could change the top you know, the demand side.

Wamsi Mohan, Analyst, BFA: Maybe just one more thing on margins around product gross margins. And in particular, like, E Series has been significantly lower product gross margin. So can you just help us think through, like, strategically, is that, like, where they need to be to drive penetration? What kind of penetration does it need to drive? Why is it priced the way it is priced?

Right.

Charlie Giancarlo, CEO, Pure Storage: Well, there are two reasons why it’s priced the way it’s priced, which we signaled many actually several years ago. And that is we believe that we had a that we were the prime mover, the first mover in driving flash into lower tiers of storage, and we wanted to be aggressive there. And we are being very aggressive there. The second is this is a new product area. Customers are just not used to buying storage that’s typically hard drive based storage in their lower priced tiers.

And to get them focused on doing this, like any new product, you generally have to come in at what are are typically lower margins for an organization. Now let me just provide some context for this. I’ve been part of organizations that have introduced a lot of new products into a lot of new markets before. I have never seen a case of a successful product being introduced that represents the same gross margins or higher of an existing of an existing organization. Typically, in a new market, you have to really incent your early adopters, your early users with a a very strong pricing model.

And that’s a second reason why we’re doing this here. But I’ve always lived by the statement that with market share comes margin. As we gain market share in this segment, the margins will come up, and and they will. I have high confidence that we’re already starting to see some of that as we saw in the last earnings call. So my expectation is we gain more market share as customers say, yeah, I can actually replace or or start to think about using flash in place of disc and start to realize some of the benefits of doing that, which go way beyond just the cost.

I think we’ll see margins come up.

Wamsi Mohan, Analyst, BFA: Okay. Great. I think we’re just about out of time. But, Charlie, maybe any parting thoughts for the investor group here just in terms of why you’re so confident about Pure as an investment case?

Charlie Giancarlo, CEO, Pure Storage: You bet. I you know, for those that have been following us for some time and even for those that have not, you know, we started out selling a specific storage product in a specific storage area within the enterprise. Today, we can really satisfy any storage need of our of our customers, which is a huge which is a huge change. And we’ve done it with a lot of discipline, meaning we have one operating system that supports any need they may have. Block file and object, very high performance, very, very low price.

We’ve now introduced something we haven’t talked about, but our PureFusion that really allows us to to enable the company that is the customer to operate all of their storage as a cloud of storage rather than as individual arrays. This, for the first time, is gonna create a network effect in storage in the enterprise, which has never really enjoyed a network effect before. And we believe that this will really allow us to start to really penetrate even deeper into the enterprise environment.

Wamsi Mohan, Analyst, BFA: Amazing. Thank you so much, Charlie. Really appreciate the time. Thank you so much.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.