Pure Storage Inc.

09/10/2025 | Press release | Distributed by Public on 09/10/2025 04:01

Quarterly Report for Quarter Ending August 3, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with the (1) unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2025. This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue," and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled "Risk Factors", set forth in Part II, Item 1A of this Form 10-Q and in our other SEC filings. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Our fiscal year end is the first Sunday after January 30.
Overview
Data is foundational to our customers' business transformation, and we are focused on delivering an innovative and disruptive data storage platform that enables customers to maximize the value of their data.
We are a global leader in data management and storage with a mission to redefine the data experience by simplifying how people manage, consume and interact with data. Our vision of an all-flash data center integrates our foundation of simplicity and reliability with four major market trends that are impacting all organizations large and small: (1) the shift to modernizing today's data infrastructure with all-flash; (2) the increase of modern cloud-native applications; (3) increasing demand to consume data storage as a service; and (4) increasing demand for data storage to support the acceleration in artificial intelligence (AI) adoption while managing rising energy costs.
Our data storage platform (Pure Platform) supporting structured and unstructured data, at scale and across any data workloads, on premises, in the cloud, and hosted environments, makes it possible for customers to construct their Enterprise Data Clouds (EDC). EDC allows customers to serve a variety of data workloads including mission-critical production, test and development, analytics, disaster recovery, backup and restore, AI, and machine learning with a single consistent, highly automated and agile cloud operating model.
Recent Key Developments
•In June 2025, we introduced the Enterprise Data Cloud (EDC), an industry-changing architecture that transforms how organizations store and manage their data. Enabled by Pure Fusion, EDC sets a new standard for simplicity in intelligent and autonomous data and storage management, enabling organizations to prioritize business outcomes by abstracting away infrastructure.
•In June 2025, we unveiled next-generation storage products, including FlashArray//XL, FlashArray//ST, and FlashBlade//S, built to support high-performance and scalable workloads across diverse enterprise use cases and offering unified block, file, and object storage capabilities.
Components of Results of Operations
Revenue
We derive revenue primarily from the sale of our products and services that comprise our Pure Platform. Our Pure Platform primarily includes our FlashArray andFlashBladesolutions,and our portfolio of Evergreensubscription services offerings. Subscription services also include our professional services offerings such as installation and implementation consulting services.
Provided that all other revenue recognition criteria have been met, we typically recognize product revenue upon transfer of control to our customers and the satisfaction of our performance obligations. For Evergreen//Flex, product revenue is recognized upon the commencement of the underlying subscription services. Products are typically shipped directly by us to customers, and our channel partners generally do not stock our inventory. We expect our product revenue may vary from period to period based on, among other things, the timing and size of orders and delivery of products and the impact of significant transactions.
We generally recognize revenue from the fair value of subscription services provided ratably over the contractual service period or on a consumption basis based on the minimum usage commitment as well as usage above the commitment amount and professional services as delivered. We expect our subscription services revenue to increase and continue to grow faster than our product revenue as more customers choose to consume our storage solutions as a service and our existing Evergreen subscription customers renew and expand their offerings.
Cost of Revenue
Cost of product revenue primarily consists of costs paid to our third-party contract manufacturers, which includes the costs of our raw material components, and personnel costs associated with our supply chain operations. Personnel costs consist of salaries, bonuses and stock-based compensation expense. Our cost of product revenue also includes allocated overhead costs, adjustments to inventory and purchase commitments based on forecasted demand, product warranty costs, amortization of intangible assets pertaining to developed technology, and freight. Allocated overhead costs consist of certain employee benefits and facilities-related costs. We expect our cost of product revenue to increase in absolute dollars as our product revenue increases.
Cost of subscription services revenue primarily consists of personnel costs associated with delivering our subscription and professional services, part replacements, allocated overhead costs, depreciation of infrastructure used to deliver our subscription services, and amortization of capitalized internal-use software. We expect our cost of subscription services revenue to increase in absolute dollars, as our subscription services revenue increases.
Operating Expenses
Operating expenses consist of research and development, sales and marketing and general and administrative expenses. Salaries and personnel-related costs, including stock-based compensation expense, are the most significant component of each category of operating expenses. Operating expenses also include allocated overhead costs for employee benefits, facilities, and certain information technology costs.
Research and Development.Research and development expenses consist primarily of employee compensation and related expenses, prototype expenses, depreciation associated with assets acquired for research and development, data center and cloud services costs, third-party engineering and contractor support costs, as well as allocated overhead. We expect our research and development expenses to increase in absolute dollars. Key incremental investments will focus on accelerating density of our direct flash modules, and increasing operational scale of our supply chain partners to support expected production deployment ramp in connection with our hyperscale design win for large production deployments starting in fiscal 2027.
Sales and Marketing.Sales and marketing expenses consist primarily of employee compensation and related expenses, sales commissions, marketing programs, travel and entertainment expenses as well as allocated overhead. Marketing programs consist of advertising, events, corporate communications and brand-building activities. We expect our sales and marketing expenses to increase in absolute dollars.
General and Administrative.General and administrative expenses consist primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, facilities, IT and fees for third-party professional services as well as amortization of intangible assets pertaining to defensive technology patents and allocated overhead. We expect our general and administrative expenses to increase in absolute dollars.
Restructuring and Impairment. Restructuring and impairment expenses consist primarily of employee severance and termination benefits, and certain lease impairment and abandonment charges.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income related to cash, cash equivalents and marketable securities, interest expense related to our debt, unrealized gains (losses) from mark-to-market adjustments on an equity security, and gains (losses) from foreign currency transactions.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and current federal and state income taxes in the United States. Our foreign subsidiaries earn a profit margin based upon transfer pricing principles which require an arm's length return. Our foreign subsidiaries' sales and marketing expenses are expected to increase over time as we grow, resulting in higher pre-tax foreign earnings and higher foreign income taxes.
We have provided a full valuation allowance for U.S. deferred tax assets, which includes net operating loss carryforwards, capitalized research costs, and tax credits related primarily to research and development. When considering our historical earnings trend, sufficient positive evidence may become available where we will release all or a portion of the valuation allowance within 12 months. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.
Results of Operations
The following tables set forth our results of operations for the periods presented in dollars and as a percentage of total revenue:
Revenue
Second Quarter of Fiscal
Change
First Two Quarters of Fiscal
Change
2025 2026 $ % 2025 2026 $ %
(dollars in thousands, unaudited)
Product revenue $ 402,595 $ 446,303 $ 43,708 11 % $ 749,979 $ 818,447 $ 68,468 9 %
Subscription services revenue 361,176 414,699 53,523 15 % 707,271 821,040 113,769 16 %
Total revenue $ 763,771 $ 861,002 $ 97,231 13 % $ 1,457,250 $ 1,639,487 $ 182,237 13 %
The increase in product revenue during the second quarter and the first two quarters of fiscal 2026 when compared to the second quarter and the first two quarters of fiscal 2025 was primarily driven by sales to large enterprise customers of our FlashArrayand FlashBladesolutions, including FlashBlade//E.
The increase in subscription services revenue during the second quarter and the first two quarters of fiscal 2026 when compared to the second quarter and the first two quarters of fiscal 2025 was largely driven by increases in sales of our Evergreen//One consumption and subscription-based offerings and renewals of our Evergreensubscription services across our installed base.
During the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025, total revenue in the United States grew 7% from $537.7 million to $577.0 million while total rest of the world revenue grew 26% from $226.0 million to $284.0 million. During the first two quarters of fiscal 2026 compared to the first two quarters of fiscal 2025, total revenue in the United States grew 8% from $1.0 billion to $1.1 billion while total rest of the world revenue grew 24% from $430.5 million to $531.8 million.
Subscription Annualized Recurring Revenue (ARR)
We use Subscription ARR as a key business metric to evaluate the underlying performance of subscription services as of a point in time. Subscription ARR is not indicative of future revenue as events or circumstances that impact future revenue such as (i) future non-renewals or cancellations of existing contracts or renewals of expired contracts, (ii) expansion, contraction and churn of existing customers or the acquisition of new customers, and (iii) changes in customers' on-demand consumption of our subscription services are not reflected in Subscription ARR. Subscription ARR should be viewed independently of revenue, deferred revenue and remaining performance obligations and is not intended as a substitute for any of these items.
Subscription ARR is calculated as the annualized recurring contract value of all active, non-cancelable customer subscription agreements with subscription terms of any length at the end of a fiscal quarter, plus on-demand billings for the quarter multiplied by four. The contract values are the contracted amounts in effect at the end of a fiscal quarter and do not contemplate any adjustments made in accordance with ASC 606 such as the proportionate allocation of the contracted subscription amounts to other performance obligations based on standalone selling prices for contracts that have multiple performance obligations or vice versa that are reflected in subscription services revenue under U.S. generally accepted accounting principles. On-demand billings represent billings for consumption by our customers' most recent usage of our subscription services above the minimum usage commitment.
The following table sets forth our Subscription ARR for the periods presented:
At the End of Year-over-Year Growth
Second Quarter of Fiscal 2025
Second Quarter of Fiscal 2026
%
(dollars in thousands, unaudited)
Subscription annualized recurring revenue
$ 1,510,724 $ 1,785,059 18 %
The year-over-year growth in our Subscription ARR at the end of the second quarter of fiscal 2025 was 24%. The decline in year-over-year growth to 18% at the end of the second quarter of fiscal 2026 was impacted by lower Total Contract Value (TCV) sales of Evergreen//Oneand lower Evergreen subscriptions bundled with traditional product sales.
Remaining Performance Obligations
Total remaining performance obligations (RPO) which is total contracted but not recognized revenue was $2.8 billion at the end of the second quarter of fiscal 2026, and primarily includes non-cancelable TCV sales for our storage-as-a-service offerings, including Evergreen//One, Evergreen//Flex, and Cloud Block Storeconsumption and subscription-based offerings, as well as $68.2 million of non-cancelable product orders. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders that are cancelable are excluded from RPO. Cancelable orders will fluctuate depending on numerous factors.
TCV sales for our storage-as-a-service offerings is a key business metric we use to evaluate the performance of our consumption and subscription based offerings. TCV sales for these offerings include recurring subscription fees, any non-recurring charges such as initial setup fees, and any other billable services directly tied to the execution of the underlying service contract. Year-over-year growth in RPO to 22% at the end of the second quarter of fiscal 2026 when compared to 14% at the end of fiscal 2025 was driven by both growth of TCV sales for our storage-as-a-service offerings, and strong renewals of our Evergreensubscriptions.
We expect to recognize approximately 46% of total RPO over the next 12 months, and the remainder thereafter. RPO is expected to increase as our subscription services business grows over time.
Cost of Revenue and Gross Margin
Second Quarter of Fiscal
Change
First Two Quarters of Fiscal
Change
2025 2026 $ % 2025 2026 $ %
(dollars in thousands, unaudited)
Product cost of revenue $ 126,278 $ 146,147 $ 19,869 16 % $ 224,249 $ 283,931 $ 59,682 27 %
Stock-based compensation 3,445 4,149 704 20 % 6,227 7,415 1,188 19 %
Total product cost of revenue $ 129,723 $ 150,296 $ 20,573 16 % $ 230,476 $ 291,346 $ 60,870 26 %
% of Product revenue 32 % 34 % 31 % 36 %
Subscription services cost of revenue $ 86,007 $ 97,811 $ 11,804 14 % $ 174,156 $ 191,931 $ 17,775 10 %
Stock-based compensation 7,961 8,559 598 8 % 16,832 15,721 (1,111) (7) %
Total subscription services cost of revenue $ 93,968 $ 106,370 $ 12,402 13 % $ 190,988 $ 207,652 $ 16,664 9 %
% of Subscription services revenue 26 % 26 % 27 % 25 %
Total cost of revenue $ 223,691 $ 256,666 $ 32,975 15 % $ 421,464 $ 498,998 $ 77,534 18 %
% of Total revenue 29 % 30 % 29 % 30 %
Product gross margin 68 % 66 % 69 % 64 %
Subscription services gross margin 74 % 74 % 73 % 75 %
Total gross margin 71 % 70 % 71 % 70 %
The decrease in product gross margin during the second quarter and first two quarters of fiscal 2026 when compared to the second quarter and first two quarters of fiscal 2025 was primarily due to higher QLC component costs as well as increasing sales of our FlashBlade//Eand FlashArray//E solutions as customers' transition their cost-sensitive workloads from traditional disk solutions to flash. We expect product gross margin to improve as we progress through the year, driven by moderation of QLC flash pricing and continued deployment for our hyperscale customer.
The increase in subscription services gross margin during the first two quarters of fiscal 2026 when compared to the first two quarters of fiscal 2025 was primarily driven by (i) lower depreciation expense from increasing the estimated useful lives of assets supporting our Evergreen//Oneoffering during the third quarter of fiscal 2025 and (ii) continued optimization and increased efficiencies in our technical services operations, combined with cost benefits from automating our service logistics workflows that support delivery of our Evergreensubscription services to our installed base.
Operating Expenses
Stock-based compensation expense in the second quarter and first two quarters of fiscal 2025 included $3.2 million and $31.9 million related to a modification of our fiscal 2024 performance restricted stock units (PRSUs), resulting in higher stock-based compensation expense when compared to the second quarter and first two quarters of fiscal 2026. Refer to Note 11 of Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
In addition, operating expenses in the first two quarters of fiscal 2025 were positively impacted as a result of the workforce alignment that we initiated in the fourth quarter of fiscal 2024.
Research and Development
Second Quarter of Fiscal
Change
First Two Quarters of Fiscal
Change
2025 2026 $ % 2025 2026 $ %
(dollars in thousands, unaudited)
Research and development $ 144,621 $ 181,672 $ 37,051 26 % $ 288,147 $ 354,170 $ 66,023 23 %
Stock-based compensation 50,869 60,354 9,485 19 % 101,163 109,596 8,433 8 %
Total expenses $ 195,490 $ 242,026 $ 46,536 24 % $ 389,310 $ 463,766 $ 74,456 19 %
% of Total revenue 26 % 28 % 27 % 28 %
The increase in research and development expense during the secondquarter and first two quarters of fiscal 2026 when compared to the second quarter and first two quarters of fiscal 2025 was primarily driven by an increase in employee compensation and related costs from growth in headcount, and, to a lesser extent, an increase in data center and cloud services costs.
Sales and Marketing
Second Quarter of Fiscal
Change
First Two Quarters of Fiscal
Change
2025 2026 $ % 2025 2026 $ %
(dollars in thousands, unaudited)
Sales and marketing $ 225,849 $ 259,363 $ 33,514 15 % $ 453,302 $ 515,791 $ 62,489 14 %
Stock-based compensation 24,418 26,527 2,109 9 % 47,937 48,611 674 1 %
Total expenses $ 250,267 $ 285,890 $ 35,623 14 % $ 501,239 $ 564,402 $ 63,163 13 %
% of Total revenue 33 % 33 % 34 % 34 %
The increase in sales and marketing expense during the second quarter of fiscal 2026 when compared to the second quarter of fiscal 2025 was primarily driven by an increase in employee compensation and related costs.
The increase in sales and marketing expense during the first two quarters of fiscal 2026 when compared to the first two quarters of fiscal 2025 was primarily driven by an increase in employee compensation and related costs, and to a lesser extent, higher costs for sales and marketing events.
General and Administrative
Second Quarter of Fiscal
Change
First Two Quarters of Fiscal
Change
2025 2026 $ % 2025 2026 $ %
(dollars in thousands, unaudited)
General and administrative $ 51,248 $ 53,745 $ 2,497 5 % $ 100,507 $ 106,296 $ 5,789 6 %
Stock-based compensation 18,197 17,804 (393) (2) % 45,725 32,325 (13,400) (29) %
Total expenses $ 69,445 $ 71,549 $ 2,104 3 % $ 146,232 $ 138,621 $ (7,611) (5) %
% of Total revenue 9 % 8 % 10 % 8 %
The increase in general and administrative expense during the second quarter of fiscal 2026 when compared to the second quarter of fiscal 2025 was primarily driven by an increase in employee compensation and related costs.
The decrease in general and administrative expense during the first two quarters of fiscal 2026 when compared to the first two quarters of fiscal 2025 was primarily driven by higher stock-based compensation as a result of the modification of our fiscal 2024 PRSUs during the first two quarters of fiscal 2025.
Restructuring and Impairment
During the first two quarters of fiscal 2025, we recognized $15.9 million of restructuring and impairment costs. We recognized $9.5 million in incremental restructuring costs primarily associated with one-time severance and other termination benefits related to a workforce alignment plan that was initiated in the fourth quarter of fiscal 2024. We also recognized $6.4 million in abandonment and impairment charges related to certain leases associated with our former corporate headquarters that we ceased use in the second quarter of fiscal 2024. The incremental impairment charge was due to a revision to the underlying sublease assumptions during the first quarter of fiscal 2025.
Other Income (Expense), Net
Second Quarter of Fiscal
Change
First Two Quarters of Fiscal
Change
2025 2026 $ 2025 2026 $
(dollars in thousands, unaudited)
Other income (expense), net $ 19,437 $ 45,700 $ 26,263 $ 33,528 $ 77,355 $ 43,827
The increase in other income (expense), net during the second quarter and first two quarters of fiscal 2026 when compared to the second quarter and first two quarters of fiscal 2025 was primarily due to unrealized gains from mark-to-market adjustments on an equity security, and to a lesser extent, higher net foreign exchange gains as the U.S. dollar weakened relative to certain foreign currencies. In August 2025, we sold the equity security for $52.5 million realizing a gain of $27.5 million.
Provision for Income Taxes
Second Quarter of Fiscal
Change
First Two Quarters of Fiscal
Change
2025 2026 $ % 2025 2026 $ %
(dollars in thousands, unaudited)
Provision for income taxes $ 8,641 $ 3,453 $ (5,188) (60) % $ 15,967 $ 17,932 $ 1,965 12%
The decrease in provision for income taxes during the second quarter of fiscal 2026 when compared to the second quarter of fiscal 2025 was primarily driven by a decrease in U.S. taxable income due to the enactment of the One Big Beautiful Bill Act (OBBBA), which removed the requirement for domestic research and development capitalization under Section 174.
The increase in provision for income taxes during the first two quarters of fiscal 2026 when compared to the first two quarters of fiscal 2025 was primarily driven by an increase in foreign income taxes.
Liquidity and Capital Resources
At the end of the second quarter of fiscal 2026, we had cash, cash equivalents and marketable securities of $1.5 billion. Our cash and cash equivalents primarily consist of bank deposits and money market accounts. Our marketable securities generally consist of highly rated debt instruments of the U.S. government and its agencies, debt instruments of highly rated corporations, debt instruments issued by foreign governments, asset-backed securities, and municipal bonds.
We believe our existing cash, cash equivalents, marketable securities and revolving credit facility will be sufficient to fund our operating and capital needs for at least the next 12 months. Our future capital requirements will depend on many factors including our sales growth, the timing and extent of capital spending to support development efforts including investments to scale operations in support of our hyperscale customer, growth of our Evergreen//Oneoffering, the addition or closure of office space, the timing of new product introductions, our share repurchases, the timing of renewal and/or repayment of borrowings under the revolving credit facility, and cash payments for tax withholding obligations for equity awards held by employees. We may continue to enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property and other licensing rights. We may enter into equipment financing arrangements and seek additional equity or debt financing in the future.
Revolving Credit Facility
In June 2025, we entered into a Credit Agreement with a consortium of financial institutions and lenders that provides for a five-year, senior unsecured revolving credit facility of $500.0 million (Credit Facility) that expires on June 10, 2030, unless otherwise extended. Proceeds from borrowings under the Credit Facility may be used for general corporate purposes and working capital. The Credit Facility replaced our prior $300.0 million revolving credit facility in which the outstanding borrowings of $100.0 million was repaid in full and terminated effective June 10, 2025.
U.S. Dollar denominated borrowings under the Credit Facility will bear interest, at our option, at a base rate, subject to a floor of 0%, plus a margin ranging from 0% to 0.50%, or the term Secured Overnight Financing Rate (SOFR) rate (based on one, three or six-month interest periods), subject to a floor of 0%, plus a margin ranging from 0.875% to 1.50%. Interest is payable quarterly in arrears with respect to base rate borrowings and at the end of the interest period with respect to term SOFR borrowing. We are also obligated to pay an ongoing commitment fee on undrawn amounts at a rate ranging from 0.075% to 0.20% per annum, payable quarterly in arrears. The respective margins will fluctuate based on the then-applicable Consolidated Net Leverage Ratio (as defined in the Credit Agreement) and, if available, our debt rating.
We are subject to certain affirmative and negative covenants, including a Consolidated Net Leverage Ratio not to exceed 3.5:1 (which may be increased to 4:1 for the first six consecutive fiscal quarters after a qualified acquisition, as defined in the Credit Agreement) measured as of the last day of each fiscal quarter. As of the end of the second quarter of fiscal 2026, there were no outstanding borrowings and we were in compliance with all covenants under the Credit Facility.
Letters of Credit
At the end of fiscal 2025 and the second quarter of fiscal 2026, we had outstanding letters of credit in the aggregate amount of $7.2 million and $14.3 million in connection with our facility leases and a certain employee-related benefit. The letters of credit associated with our facility leases are collateralized by either restricted cash or the 2025 Credit Facility and mature on various dates through December 2031. The letter of credit associated with a certain employee-related benefit is collateralized by restricted cash.
Share Repurchase Program and Shares Withheld to Cover Taxes
In February 2025, our Board of Directors authorized an additional $250.0 million increase to repurchase shares of our common stock under our share repurchase program, increasing the total remaining authorization amount to $271.5 million. The authorization allows us to repurchase shares of our common stock opportunistically and will be funded from available working capital. Repurchases may be made at management's discretion from time to time on the open market through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing. The share repurchase program does not obligate us to acquire any of our common stock, has no end date, and may be suspended or discontinued by us at any time without prior notice. During the second quarter of fiscal 2026, we repurchased and retired approximately 0.8 million shares of common stock at an average purchase price of $54.70 per share for an aggregate repurchase price of $42.2 million. During the first two quarters of fiscal 2026, we repurchased and retired approximately 3.3 million shares of our common stock at an average purchase price of $49.66 per share for an aggregate repurchase price of $162.1 million. Approximately $109.4 million remained available for future share repurchases at the end of the second quarter of fiscal 2026.
During the second quarter and first two quarters of fiscal 2026, we withheld approximately 1.1 million and 2.3 million shares to cover $57.8 million and $117.9 million in tax withholding obligations.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands, unaudited):
First Two Quarters of Fiscal
2025 2026
Net cash provided by operating activities $ 448,097 $ 496,093
Net cash provided by (used in) investing activities $ (132,896) $ 17,993
Net cash used in financing activities $ (47,525) $ (342,146)
Operating Activities
Net cash provided by operating activities consists of net income, adjusted for non-cash items and changes in operating assets and liabilities. Non-cash items primarily included stock-based compensation and depreciation and amortization. The year-over-year increase in net cash provided by operating activities was primarily driven by higher net income of $32.5 million and an increase of $49.3 million from changes in operating assets and liabilities, partially offset by $30.4 million in unrealized gains from mark-to-market adjustments on an equity security. The increase from changes in operating assets and liabilities were primarily impacted by higher deferred revenue driven by renewal of our Evergreensubscription services across our installed base, and lower payments for employee compensation. Partial offsets to operating cash inflows were decreased cash collections and higher deferred commissions.
Our primary source of cash from operating activities during the first two quarters of fiscal 2025 and 2026 were from cash collections from billings for sales of our product and subscription services.
Our primary uses of cash from operating activities during the first two quarters of fiscal 2025 and 2026 were payments to our contract manufacturers, payments for employee compensation, and general corporate operating expenditures.
Investing Activities
Net cash provided by investing activities during the first two quarters of fiscal 2026 was driven by net purchases of marketable securities of $152.4 million, partially offset by $134.4 million in capital expenditures. Key capital expenditures included investments for: (a) equipment supporting deployments of our Evergreen//Oneoffering; (b) data center expansion to support testing of new products and services, including for our hyperscale solution design win; and (c) developing our Pure Fusion v2solution.
Net cash used in investing activities during the first two quarters of fiscal 2025 was driven by $108.9 million in capital expenditures relating to test equipment for new product innovation, and equipment supporting our Evergreen//One offering, as well as the construction of our headquarters facility, and net purchases of $24.0 million in marketable securities.
Financing Activities
Net cash used in financing activities during the first two quarters of fiscal 2026 was primarily driven by cash outflows related to share repurchases of $162.2 million and tax withholding remittances on vested equity awards of $117.5 million, and repayment of the $100.0 million outstanding on our former credit facility that terminated in June 2025, partially offset by proceeds from the issuance of common stock under our employee stock purchase plan (ESPP) of $27.2 million, and exercise of stock options of $13.5 million. The year-over-year increase in tax withholding remittances on vested equity awards was due to extending the net-share settlement of equity awards to satisfy tax withholding obligations to the majority of our employees in June 2024 whereas previously, shares were sold to cover such tax withholding obligations.
Net cash used in financing activities during the first two quarters of fiscal 2025 was primarily driven by tax withholding remittances on vested equity awards of $86.7 million, partially offset by proceeds from the issuance of common stock under our ESPP of $25.3 million, and exercise of stock options of $17.8 million.
Contractual Obligations and Commitments
Except as set forth in Notes 6 to 8 of Part I, Item 1 of this Quarterly Report on Form 10-Q, there have been no material changes to our non-cancelable contractual obligations and commitments disclosed in our Annual Report on 10-K for fiscal 2025.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures.
We evaluate our estimates and assumptions on an ongoing basis. Our estimates and judgments are based on historical experience, forecasted events and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We deem an accounting policy to be critical if the nature of the estimate or assumption it incorporates is subject to material level of judgment related to matters that are highly uncertain and changes in those estimates and assumptions are reasonably likely to materially impact our condensed consolidated financial statements. Refer to Note 2 of Part I, Item I of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, see "Critical Accounting Policy and Estimates" in our latest Form 10-K for our fiscal year ended February 2, 2025. There have been no material changes to our critical accounting policies and estimates since this Form 10-K filed on March 27, 2025.
Available Information
Our website is located at www.purestorage.com, and our investor relations website is located at investor.purestorage.com. The following filings will be available through our investor relations website free of charge after we file them with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders. We also provide a link to the section of the SEC's website at www.sec.govthat has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements, and other ownership related filings.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, social media accounts (Twitter, Facebook and LinkedIn), and blogs as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts and RSS feeds. Further corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading "Corporate Governance." The content of our websites are not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
Pure Storage Inc. published this content on September 10, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on September 10, 2025 at 10:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]