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Pure Storage’s (PSTG) 3Q26 report landed more with a thud than a pop, as merely in-line EPS and only modest revenue upside are colliding with very high expectations and tough storage-sector comps. Shares are plunging in the wake of the release, reflecting disappointment that results and guidance did not break meaningfully above the reaffirmed outlook issued on November 4.

• Non-GAAP gross margin of 74.1% marked a solid level in absolute terms but represented softer profitability versus what some investors hoped for, contributing to the in-line EPS outcome.
• The margin profile suggests PSTG is not converting incremental AI and subscription growth into the same level of operating upside that peers are demonstrating, which is likely weighing on sentiment.
• Another overhang is competitive optics. Seagate (STX) and Western Digital (WDC) both posted very strong October results and outlooks, including record gross margins and high-teens to 20%+ revenue growth, setting a high bar for storage and memory names.
• Management also signaled that some of the upside from AI hyperscaler deals will be reinvested into R&D and sales and marketing, particularly to deepen its AI data platform capabilities and expand go-to-market reach.
• While strategically sensible, that reinvestment message raises concerns that margin and EPS expansion may be more muted over the next few quarters than top-line growth alone would imply.
• On the positive side, remaining performance obligations (RPO) increased a robust 24% yr/yr to $2.9 bln, highlighting strong underlying demand and growing multi-year commitments.
• That RPO growth is being driven by a mix of AI hyperscaler wins, large enterprise subscriptions, and expanding services and recurring software components embedded in Evergreen and PSTG’s broader storage-as-a-service model.

Briefing.com Analyst Insight:

PSTG’s 3Q26 results underscore that demand for its flash and AI-centric data platform remains healthy, as evidenced by strong RPO growth and continued traction with hyperscalers and large enterprises. However, in a backdrop where storage peers like STX and WDC are producing eye-catching beats, record margins, and upbeat guides, PSTG’s in-line EPS, only slightly better-than-expected revenue, and plans to reinvest AI upside into opex leave investors wanting more. The strategic choice to lean into R&D and sales and marketing should support differentiation and long-term growth, but it also introduces near-term margin uncertainty at exactly the moment the market was looking for operating leverage from AI. Against that setup, the post-earnings stock plunge looks driven less by a breakdown in the fundamental story and more by elevated expectations, tougher peer comparisons, and fresh concerns that AI tailwinds will not translate into the same near-term earnings power that some investors had penciled in.