 From the CUBE studios in Palo Alto in Boston, connecting with thought leaders all around the world, this is a CUBE Conversation. Hi everybody, this is Dave Vellante and welcome to our ongoing CXO series, Charlie Giancarlo's here as the chief executive officer of Pure Storage. Charlie, always a pleasure. Thanks so much for taking the time. Thanks, Dave. And like you said, always a pleasure. Thank you. Well, I got to start asking you, last time we talked, you were recovering from COVID. How are you doing? Yeah, I'm doing great actually. I seem to have fully recovered. I've been on 17 mile heights at 10,000 feet. I've been doing a lot of biking. So it looks like, other than my wife telling me that maybe I'm not all there, but she did that before COVID. So, I'm used to it. Well, that's awesome to hear. Well, Coach, just yesterday, you guys announced your quarter. I want to start there. You beat expectations, although revenue growth was a little less robust than we're used to from Pure, but you clearly had some activity regarding COVID in the US, international, very strong. But again, we'll talk about this. The US customer was kind of reevaluating was your early key point. I got a lot of takeaways from the call they want to ask you about. But the big thing was, you had set a very confident tone on the earnings call. So I kind of want to start there. Give us your summary. Yeah, no, thank you for that. So first of all, we feel like we're operating really with all of our cylinders going. We have operational discipline. We've been adding to our R&D out capabilities. We've hired people this year and we showed a profit this quarter. So we're operating, I think, very well. We've introduced a boatload of new products continuously over the last couple of quarters, including Flasher AC, the first and only all flash product that competes at low, at second tier disc levels. We introduced our file services on Flasher AC which really allows us to go into the general purpose of file market. And we picked up a huge amount of share as you well know in Q1. We believe we're gonna pick up significant share in Q2 as well, well above our competitors. So we feel like, given everything we can control, we're doing very well. As you said, in Q2, what we saw was Europe which came out of the crisis for the most part recovered very, very nicely. The US that's still in the crisis, of course, we're seeing some slowness and especially among what we call the mid-tier or the commercial market. They've been hurt very badly by the lockdown in the economy and they have our sympathies but we definitely saw some slow down there. Yeah, so I wanna talk about the market share and maybe unpack some of that data. I mean, you guys gave a cautious outlook. You kind of gave no formal guidance but you did informally guide flat. So you kind of gave some visibility there. So actually, I appreciated it. I think some of the analysts were a little bit concerned there but I think that's prudent. And really the expectations are a function of your expectations around the COVID recovery. I think you mentioned in the call it's almost state by state and very clearly the international where you've seen comebacks have been very, very strong. Right, so I think our customer's data continues to grow if anything growing faster under a lockdown environment and the move to more digital engagement with everyone, their customers, their employees, et cetera. So digital continues to grow which generally creates more demand. However, of course, as you know, in storage, customers generally have always have a buffer and what we saw in Q2 was customers starting to reconsider how they're going to spend their IT budget and whenever you have a reconsideration you have a slow down and that's what we experienced and especially in the US where the effects of the pandemic, of the economy have been much more severe than in other parts of the world. Yeah, so I wanna talk about some data. I often, as you know, like to share some data from our partner ETR every quarter we do the survey. So guys, bring up that chart and what shows here, I'll set it up for the audience and Charlie for you as well. This is essentially net score which is a measure of spending velocity for the major primary guys. So we show pure at the top and orange. That's just a coincidence guys. And then HPE, NetApp, Dell and IBM. And you can see the net score and then I've superimposed that net table in the upper left and you can see pure storage is really the only one of these majors in the green. Everybody else is in the red which is either the lower high teens. And you can see a little bit of the COVID impact last quarter but holding strong at about a 40% net score where everybody else as I say in the mid teens. And so that's a real positive. I point out, this is a forward looking survey. So we're asking people, what are you planning and spending in the second half relative to what you spent in the first half? And again, we see pure with consistent momentum. I'll add, just if you looked at the past quarter you guys announced plus 2% growth. IBM was plus 3% growth that we know why they have the mainframe tailwind. HPE played a little hide the growth ball. I don't know Charlie how close you looked at it but they said 4% growth sequentially. Now the last quarter they were down 16%. The same quarter last year they were flat. So it looks to me like they were down this quarter. So that was, we appreciate when you have clear guidance. Well their storage by the way was down 10% year-to-year. Yeah, okay, great. Thank you. I didn't pick up on that. And so yeah, that seemed like that to me. And then NetApp is tonight and we get Dell tomorrow. But so you were saying that you gained share. What gives you that confidence? Well several, you mean for Q2. We know we gained Q1, right? We were 15 points above the industry average and 20 points ahead of our competitors. We saw similar momentum from our partner. Remember we're 100% partner fulfilled, right? And so in conversations with our partners we have a general sense of how we're doing vis-a-vis competitive environments. We also know that our wind rates have held very nicely and in quarters, almost every quarter we're used to about a 20% per annum higher growth rate than our competitors. So when all of our metrics, that is our relative metrics, things like wind rates and so forth continue on abated we generally expect to have the same outcome. Great and so let me go through some of the takeaways that I have from the quarter. I'll just run through them and we can go wherever you like but the COVID snapback obviously is a key indicator. We saw that in international versus the US. New opportunities for growth. I want to talk about that at some length, the flasher AC object, the Cohesity piece is another TAM expansion. The pipeline is very encouraging but there's some uncertainty leading to your tepid guidance. Very strong gross margins as usual. The subscription model is growing nicely. I want to hit on that and the RPO, the remaining performance obligations grew to almost a billion dollars. That's a big number. New logos solid at 20%. No real change in the competitive but you see more power max than power store. That was really interesting. You're still hiring pretty aggressively last quarter and your technology investments continue and I'll throw in the seven nines which I think is another industry first but what do you want to go there? Yeah, well seven nines is a reliability figure for those of your audience that doesn't know. It relates to how much uptime or availability a product has or in our case a fleet of products. We have tens of thousands of arrays in the field and last quarter we achieved what's called seven nines which is the equivalent across the fleet of only three seconds of downtime per array per year. Which is most other vendors have struggled to stay to five nines and that's typically without even counting what they call scheduled downtime for upgrades. We don't even count that. We count all downtime of any type. So we're clearly, I think with no doubt we're the most reliable product on the market these days. So I want to come back to the TAM discussion because I infer many opportunities for you guys to continue to grow. I mean, it's flash, it's still about flash. Flash is gaining share relative to spinning disk and relative to hybrid. You guys made that point a lot. Flash or AC, you sound pretty happy with that. Again, going after hybrid. And then this notion of bringing file services and object that unified play. Kind of a net app made great strides years ago with that capability. And then the data protection piece, the recovery with Cohesity, the fast recovery. That's another TAM expansion. So really I identified four points of potential growth area for you over the next several years. I wonder if you could talk about that. Absolutely. We do feel very positive about all these areas. These areas open up a huge amount of the TAM that we didn't play in before. So flash or AC for example, as you say, flash was always a primary workload environment for flash because it was very expensive compared to disk. Higher performance, better ecological footprint, denser, faster, cheaper, are more expensive though. So it only went after primary workload. But the vast majority of data storage is secondary workload. Things that don't require the high performance and therefore customers want it less expensive. And of course there are even more bits there. But flash or AC now competes very well with low cost disk, which is amazing. And of course it's 10 times lower footprint and 10 times more reliable. So this is the first and literally today only product that is all flash in that secondary workload market. So it just opens up a huge amount for us. And then yes, I love talking about data protection for the following reason. Customers actually don't want to do a backup, right? If you think about it, what they really want is recovery. Backup is what you have to do in order to get recovery. And these backup systems have been very good at backup but usually can take 24, 48 or even more hours to be able to recover from a failure. And now with ransomware, you don't want your website to be down for days before it comes back up. You don't want your traders not trading for days. It costs a lot of money. And with what we call rapid recovery and now flash recover, we can have companies come back within an hour or two at most with a rapid recovery solution. And so the integrated solution that we've put together with Cohesity allows customers to very quickly get up and running with an anti ransomware solution that allows them to get backup up and operating in no time at all. Well, it's interesting to see you choosing the partner route. I mean, you could have, I mean, you remember EMC in the day, they bought in data protection and it actually worked out pretty well for them. You look at a company like NetApp, they've chosen not to vertically integrate with backup. You're choosing the same path. What's the thinking there? Stick to your knitting and partner up and add value where you can. Yeah, we have strong partnerships actually with all of the data backup players, Veritas, Veeam with Rubrik and others. And we, in many cases, customers have already made their decision who their backup player is. Also, backup is actually a relatively fragmented market. There's backup for different types of applications and different vendors have strengths and weaknesses in each one of those. And so our partnership across the backup board is very important to us. We did see however, customers wanting an integrated solution, which we have, let's say, initiated with Cohesity. But we believe it's the first of what will be multiple pure validated designs. Not all of which will be OEM'd, but all of which will be available as integrated systems in the market through our channel partners. And so you can expect to see more of these as we go forward. So kind of the PVDs. Okay, I wanna ask you about your subscription model. I mean, it's growing very nicely. Are there nuances there just in terms of understanding the income statement, i.e. product revenue was down, subscription's growing? Are you going through that transition and having to sort of educate people on the impact of the income statement? You didn't make a big deal out of that on the earnings call. And I thought, well, maybe I'm overstating that, but I wonder if you could talk about that dynamic. No, no, you're absolutely correct. And there is some of that going on the earnings statement. The bigger part, though, of let's say the lower growth this quarter was due and the forecast was due to the pandemic, no doubt. And especially in the US, especially hard hit in the US. But simultaneously, we are going through the transition that many companies have had to go through in the past where a larger proportion over time of our sales are going to be what we call pure as a service and our unified subscription. So moving to subscription from CapEx. And whenever you do that, it takes a while even though your sales as in bookings can stay in the growth path, the revenue takes a while to catch up as your subscription bookings grow. So there is some of that going on on our P&L as well. Yeah, well, it's the Nirvana to the extent you can get that model. And of course, your RPO is a good indication of you got a nice backlog that's certainty in revenue. That's correct. And the RPO is very nice and it reflects the fact that we have multi-year contracts going in with customers who are choosing pure as a service in Evergreen. And of course, the billing only reflects what we've actually built them for. I was struck by your comments regarding your main competitor, which is Dell, Dell EMC. Now, of course, in the early days of pure, I've always said you guys drove a truck through the old VNX and Symmetrix base. And, but you said you're seeing power max more than you're seeing power store. And that was interesting and sort of come somewhat surprising to me. Yeah, well, so a standard play of Dell is to offer VMAX because it's less expensive versus our flash array. And then when the customer clearly says, well, it's just not performance enough or it just can't do the work that we need, then they'll offer power max at supposedly a deep discount to be able to compete with a flash array. So that's been a favorite tactic of theirs for quite some time. We maintain our wind rates against that. Power store, on the other hand, remember it's a forklift upgrade with a new product on four different Dell existing products, right? And two things, one is customers are just reluctant right now to try new things, right? And they don't have the time to be able to test them properly. But I also think it's, I think there's some reluctance even on Dell's part to put those properties up for grabs right now when customers are more risk adverse. So, we continue, as I said, we are not seeing it as much as we had thought we might going into this. Yeah, well, we'll definitely find out more tomorrow. And I would expect that you're, to the extent that you're having more and more success in file, you're going to obviously run into net app more. Yeah, and that's what we're expecting. You know, the file services on Flasher AC really allow us to start to penetrate the general purpose file market. Clearly not on the very small, you know, we're not going after the very small market. You know, we're going after the data center, you know, file share market on this and the tier two workloads. Well, what's the early returns there? I mean, you saw the net app, the solid fire acquisition to shore up. I mean, net app kind of missed flash and then bought solid fire, but that is obviously a good play. Do you feel like it's a tougher road than perhaps the old EMC install base or what are you seeing early on? Well, you know, there's a lot of maturity, obviously in files. And it'll take us a while to be able to get up to full levels of maturity in files. But what customers love about us is our simplicity. You know, and our file services on Flasher A is just as simple as our block, you know, as our block services on Flasher A. And I think what customers are going to find is a very performant product that requires very little maintenance, very little tuning to meet their needs. And I think they're just going to appreciate the fact that it's a true, you know, fully capable block product with a fully capable set of file services and that they'll be able to consolidate more and more of their use cases onto smaller and smaller footprint. So I think that's what they're going to appreciate about what we do. Listen, that's ironic. Outsimplifying, you know, net app, which of course made its name, taken on guys like AUSPEX for those of you who remember that or even the early days. So that's good. And I'd be remiss if I didn't ask you about cloud, you know, thinking on cloud, I know it's early days and I know most of your subscriptions of course are still with on-prem, but you made an interesting announcement last year at Accelerate with cloud block store running on AWS. How's the uptake been there? What can you tell us about that? Yeah, we're seeing a good uptake there. I'd say more of it is in the DevOps environment than in the actual NDR, disaster recovery, more than it is in transition of primary workloads into the cloud. We're just seeing a bit less of that than one would expect given all the press around it. I don't think it's us. I think customers are just taking a while. They're focusing their new activities in the cloud and much less about transitioning existing environments. But we are seeing work done there. What we are seeing is a huge uptake in what we call our unified subscription, which is pure as a service on-prem where we deliver to our customers basically cloud, the equivalent from their point of view of cloud storage on-prem where we manage the entire environment, plus the unified subscription is that plus cloud block store. So regardless of where our customers want to place their data, either on-prem or in the cloud, it's the same price and the same contract, same interface, same management to them. So we've seen a huge, I mean, literally an incredible spike in uptake in that. Great, thank you for that. And then I gotta end with, I asked you last time about networking. You have a very wide observation space and a lot of expertise in a lot of different areas. So I wanna ask you about, we've seen the spate of IPOs this week. Snowflake came out, Palantir, Unify, a JFrog number of others. Very interesting to see that in the valley or in the valley, of course you shut in the valley like everybody else these days, but what do you make of that? Is it kind of everybody trying to get in before the election or is it just a really good time? What's your take on that? I think a lot of it is getting in before the election, but a lot of the stock market movements, as you well know, has to do with cash flows more than it has to do with the prospects of individual companies. And just given the amount of stimulus that's taking place, not just in the US, but worldwide, there's a lot of money floating around which is buoying stock market prices. And so it's a great, an old colleague of mine had a saying, when Monday's on sale, take it. And that seems to be the case right now, at least as far as the stock market is concerned. And I thought therefore a good time for IPOs. Well, the Palantir IPO took a swipe at Silicon Valley broadly really targeting, I think, Facebook and Google. They don't have anything to do with your business, but I mean, I think as an executive in Silicon Valley, you see the innovation and the software development that's going into so many good things. I was struck by that though. I thought it was a little bit of a cheap shot at Silicon Valley. It really was aimed at Google and Facebook because there's so many companies, from you guys, Cisco, Palo Alto Networks, on and on and on, that are just doing some great software work. And we're seeing that with COVID. Where would we be without big tech? Well, thank you, Dave. I mean, I think the press tends to focus on the consumer companies that, and we all have maybe our own individual opinions about the way they operate, but you're correct. I mean, I think the good foundational work that many companies in Silicon Valley are doing to make our lives easier every day, just continues to really impress. Well, Charlie Jean-Carlo, it's always a pleasure. Thanks so much for your generous of your time and really appreciate you coming on theCUBE. Thank you, Dave. Again, as you said, always a pleasure to speak with you and look forward to doing it next quarter. All right, us as well. And thank you for watching everybody. This is Dave Vellante for theCUBE. We'll see you next time. We're out.