This under-the-radar storage stock is cashing in on Meta's AI spending

By Christine Ji

Pure Storage's stock cruises to a record after a flash-storage partnership with Meta helped the company crush earnings expectations

Pure Storage could see 90% margins from its flash-storage deal with Meta.

Investors looking for a differentiated way to invest in the picks and shovels of the artificial-intelligence trade just got a new opportunity: Pure Storage Inc.

While Pure Storage (PSTG) might not be a household name, its customers certainly are. The enterprise data-storage company blew past Wall Street's revenue and earnings expectations with its second-quarter fiscal 2026 earnings yesterday, driven in large by a partnership with Meta Platforms Inc. (META).

In March, Pure Storage announced a deal with Meta to supply the social-media giant with proprietary flash-storage solutions. Five months later, the company's earnings results proved that the partnership is shaping up to be a major growth driver for the company.

Pure Storage recognized its first revenues from the Meta partnership during the second quarter, earlier than analysts expected. The company is on track to ship 1 to 2 exabytes to Meta by the end of the fiscal year, and revenue from the Meta deal is expected to achieve gross margins of over 90%, according to management.

The company reported second-quarter revenues of $861 million, above the FactSet analyst consensus of $846 million. Earnings per share came out to 43 cents, beating consensus estimates of 39 cents. Pure Storage guided for full-year revenues of $3.6 billion to $3.63 billion, up from its previous guidance of $3.515 billion.

Pure Storage shares closed at a new all-time high of $80.54 on Thursday, after surging 32.3%, its largest one-day percentage increase on record, according to Dow Jones Market Data.

The Meta partnership signals a significant shift in the storage industry. Hyperscalers, as large cloud providers are known, have traditionally built their own customized hard-disk and solid-state drive infrastructure - but the vast amounts of data required to train large language models have made in-house solutions increasingly difficult. Flash-storage solutions are emerging as a more powerful and scalable solution. They're also much more energy efficient - a critical consideration for hyperscalers operating power-hungry data centers.

Pure Storage is increasingly tapping into the AI market to take advantage of this shift. In March, the company launched a new flash-storage solution specifically tailored toward AI workloads.

The Meta deal opens the door to more large hyperscaler deals down the road, Needham analyst Mike Cikos pointed out. Pure Storage Chief Executive Charles Giancarlo mentioned on Wednesday's earnings call that the company was in talks with other top hyperscalers and will leverage what it's learned from the Meta deal to enhance its offerings.

There's likely plenty of room for upside, as Wall Street believes the full impact of the Meta partnership isn't priced in yet. Meta is currently in the midst of conducting a small-scale testing phase on Pure Storage's products. Following the completion of this phase in fiscal-year 2026, Meta is expected to ramp up to full-scale deployment, with the potential for double-digit exabyte shipments slated for fiscal-year 2027 to power its next-generation data centers.

"Disclosures remain inadequate to incorporate Meta into our forecasts," Raymond James analyst Simon Leopold wrote in a note on Thursday - but he believes "it remains a source of upside" that could drive "a teens sales growth rate" going forward.

Needham raised its price target on Pure Storage to $85 from $75 and maintained a buy rating. Raymond James raised its price target to $88 from $76 and reaffirmed its buy-equivalent rating.

Also read: Tech frenemies: Meta strikes a $10+ billion AI cloud deal with rival Google

-Christine Ji

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08-28-25 2038ET