We came across a bullish thesis on Pure Storage, Inc. on High Growth Investing’s Substack by Stefan Waldhauser. In this article, we will summarize the bull’s thesis on PSTG. Pure Storage, Inc.’s share was trading at $51.58 as of June 20th. PSTG’s trailing and forward P/E ratios were 135.74 and 28.90, respectively, according to Yahoo Finance.
A futuristic datacenter with servers and high-tech equipment, signifying the company’s cutting-edge digital technology.
Pure Storage (PSTG) has delivered remarkable returns over the past five years, rising over 400% and recently tripling within 12 months to an all-time high. This sharp appreciation followed strong Q1 FY25 results, with 18% revenue growth, a rebound from a weak prior-year quarter. The company’s shift toward subscription-based revenues continues, with recurring revenue reaching $1.4 billion and comprising half of total sales.
Profitability has improved significantly, with a 14.5% non-GAAP operating margin and 25% free cash flow margin in Q1. Pure Storage is transitioning from a hardware vendor to a software-like business, demonstrated by its 20% R&D spend, rivaling software peers. While FY25 guidance calls for 10% revenue growth and improved GAAP profitability, the stock’s recent surge is also driven by broader tailwinds.
The declining relevance of traditional disk storage and the growing cost-efficiency and energy savings of flash storage, bolstered by products like FlashArray E, are accelerating industry-wide adoption. Although Pure has seen limited hyperscaler adoption, discussions with major players like Google and AWS are advancing, and the company hopes to secure a design win this year. However, CEO optimism on this front raises execution risk.
Concerns also persist over high stock-based compensation, which has led to nearly 40% shareholder dilution over six years, muting per-share gains. At an EV/FCF of 33 and EV/Sales above 6, the stock appears richly valued. While the author has trimmed exposure after significant gains, Pure remains a long-term holding given its leadership in flash storage and potential to become a dominant player in the global data storage market.
Previously, we covered a bullish thesis on Pure Storage, Inc. by Magnus Ofstad in March 2025, which highlighted the company’s expanding subscription revenue base, strong margins, and market overreaction to conservative FY26 guidance. The company’s stock price has appreciated by approximately 5% since our coverage. This is because the core thesis held, but macro fears capped upside. The thesis still stands as Pure Storage’s fundamentals remain intact, and long-term growth drivers are unchanged. Stefan Waldhauser shares a similar view but emphasizes Pure’s historical performance, improved profitability, and the strategic shift toward energy-efficient flash storage amidst rising AI demand.
Pure Storage, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held PSTG at the end of the first quarter, which was 30 in the previous quarter. While we acknowledge the risk and potential of PSTG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
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