Everpure, Inc. (P) Earnings

Management highlights

### Overall Performance and Market Positioning - Q1 FY27 delivered strong top- and bottom-line results that exceeded the high end of prior guidance, with 35% YoY total revenue growth and operating profit nearly doubling YoY - Market share gains are accelerating across enterprise and commercial segments, driven by higher competitive win rates and displacement of rival storage products, particularly in AI infrastructure - Approximately one-third of Q1 YoY revenue growth came from pricing increases and customer purchase pull-ins ahead of further expected price hikes, with the remaining two-thirds from organic volume growth ### Product and AI Infrastructure Progress - FlashBlade//EXA secured multiple new wins in Q1, including deployments for AI/ML workloads and GPU-accelerated algorithmic trading, and is increasingly displacing competing AI storage offerings in enterprise and neo-cloud markets - Purity Fusion (for customer-built enterprise data clouds) doubled adoption to over 1,200 customers, with wins across financial services, telecom, healthcare, and public sector, demonstrating demand for self-managed cloud-like infrastructure - Hyperscale storage solution development is progressing, with ongoing system qualification at multiple prospective hyperscale, cloud, and large technology customers; significant shipment expansion is on track for H2 FY27, with further growth expected in FY28 ### Supply Chain and Pricing Strategy - The company is facing an unprecedented, highly volatile global supply chain environment driven by insatiable AI demand, with extremely rapid increases in component costs and widespread shortages; unlike competitors, Everpure has intentionally delayed and implemented smaller price increases to avoid profiteering from the crisis - Management is operating product gross margins at the lower end of the long-term target range to absorb a portion of cost increases for customers; gross margin recovery is expected to be gradual in the second half of the year ### Strategic M&A and Storage-as-a-Service Growth - Evergreen//1 (storage-as-a-service) grew 73% YoY in Q1, as customers value its long-term cost blending, lower upfront costs, and extended asset lifecycles that deliver more stable pricing amid supply chain volatility; pricing increases for Evergreen//1 have been far smaller than for traditional CapEx product purchases - The acquisition of OneTouch closed in early May, adding cross-environment data cataloging, semantics, and knowledge graph capabilities that help enterprises rationalize data quality for AI and analytics; the acquisition is expected to be $12 million dilutive to FY27 operating profit and accretive within 24 months post-acquisition ### Geographic and Operational Execution - International expansion remains a key strategic priority, with 30% of total revenue coming from international markets in Q1 - The company added 275 new customers in Q1, with 64% Fortune 500 penetration; large deals over $5 million grew high double-digits YoY, and new customer logos increased 20% YoY

Guidance

- Full year FY27 guidance has been upwardly revised: revenue is now guided to a range of $4.41 billion to $4.51 billion, representing 22% YoY growth at the midpoint (a 300 bps increase from prior guidance of 19% YoY growth) - Full year FY27 operating profit is now guided to a range of $820 million to $860 million, representing 32% YoY growth at the midpoint (a more than 600 bps increase from prior operating profit guidance) - Q2 FY27 revenue is guided to a range of $1.0 billion to $1.1 billion, representing approximately 28% YoY growth at the midpoint; Q2 operating profit is guided to a range of $195 million to $205 million, representing approximately 54% YoY growth at the midpoint - Management expects the vast majority of hyperscale product revenue for full year FY27 will be recognized in Q3 and Q4, in line with prior customer order commitments - Product gross margins (excluding hyperscale contributions) are expected to recover gradually in H2 FY27 as pricing actions catch up to rising input costs, with overall gross margins expected to remain within the long-term 65% to 70% range - 48% of full year 2027 revenue is expected to be generated in H1, up from 45% in prior years, reflecting stronger than expected early year momentum; management did not build additional pull-forward demand from future periods into the H2 guidance, given current market uncertainty

Segment performance

Everpure reports two primary business segments: product revenue and subscription services revenue for Q1 FY27. Total company revenue was $1.053 billion, growing 35% year-over-year. Product revenue (including hyperscale shipments and term-licensed Portworx software) was $577 million, growing 55% year-over-year, and contributed 55% of total revenue. Hyperscale product revenue contribution was minimal in Q1, with management expecting the vast majority of 2027 full-year hyperscale revenue to come in H2 FY27. Hyperscale products are expected to carry gross margins of 75% to 85%. Subscription services revenue was $476 million, growing 17% year-over-year, and contributed 45% of total revenue. TCV sales for Evergreen//1 (storage-as-a-service) were $165 million, growing 73% year-over-year. Geographically, U.S. revenue was $739 million (39% YoY growth, 70% of total revenue) and international revenue was $314 million (27% YoY growth, 30% of total revenue). Total gross margin was 70.1%, product gross margin was 65.5% (in the lower end of the 65-70% long-term target range, down 180 bps sequentially due to rising component costs), and subscription services gross margin was 75.6% (down 140 bps sequentially due to temporary mix shifts). Operating profit was $159 million, growing over 90% YoY, with an operating margin of 15.1%. Annual recurring revenue (ARR) grew 19% to over $2 billion, accelerating 300 bps sequentially from Q4 FY26. Remaining performance obligations (RPO) grew 41% to $3.8 billion.

Risks & headwinds

- Extreme volatility in global component pricing and supply: NAND and memory spot prices have increased 5x to 10x YoY, with prices changing almost weekly; long-term supply contracts at previously agreed prices are no longer honored, and most new quotes are only valid for 30 days, down from 90 days historically - Widespread semiconductor fab capacity shortages: across all component types, capacity is sold out through 2027, with capacity shifted to higher-margin components creating broad pricing pressure across the entire supply chain; Everpure could sell more product if it could source sufficient NAND components - Uncertain demand outlook for H2 FY27: it is unclear if demand will remain strong at current unprecedented price levels, or if significant demand destruction will occur as customers adjust to higher costs - Qualification and ramp risk for hyperscale business: while urgency for new storage capacity is high among hyperscalers, the qualification process still must be completed, and component availability constraints could impact shipment timelines - Gradual gross margin recovery: ongoing rapid input cost increases mean product gross margin recovery (excluding hyperscale contributions) will be slower than originally expected, even as overall margins remain within the long-term target range

Analyst Q&A

• Q: The guidance implies slower H2 growth after a strong Q1. Is this an actual deceleration, or just conservatism given current component pricing and AI deployment timing? /

  A: Management notes the current environment is extremely dynamic, with supply chain and pricing changing weekly, so high visibility into H2 is unrealistic for any company. While current demand remains very strong, two key uncertainties prevent raising guidance further: it is unknown if demand will hold at current historically high prices, and the unstable supply environment makes it difficult to guarantee ability to ship committed orders. This guidance reflects prudence, not an expectation of actual deceleration.

• Q: Can you quantify contracted hyperscale revenue versus forecasted revenue in the full-year guide, and could supply shortages lead to higher ASP than expected? /

  A: Management does not disclose specific hyperscale revenue figures. All hyperscale revenue included in the full-year guide is based on customer order commitments agreed before the start of FY27, and the company remains on track to meet these commitments. Management reaffirmed that FY27 hyperscale revenue will be a multiple of FY26 hyperscale revenue.

• Q: How has customer demand for Evergreen//1 held up after price increases, relative to traditional CapEx purchases? /

  A: Evergreen//1 demand is actually stronger than CapEx purchases, with 73% YoY TCV growth in Q1. Its value proposition is even more attractive in the current high-price environment: long-term contracts allow Everpure to blend component costs across multiple years, customers only pay for capacity they need currently rather than buying upfront for future needs, and price increases for Evergreen//1 have been far smaller than for traditional CapEx products, supporting strong ongoing growth.

• Q: How much upside would there be to the $4.5 billion full-year revenue target if there were no NAND shortages? /

  A: Hyperscale shipment timing is ultimately determined by customer build-out schedules and the completion of qualification processes, not just component availability. That said, management confirmed the company could sell every terabyte of NAND it is able to source, meaning component constraints are currently limiting total revenue growth.