Key financial results

  • Revenue increased 38% year-over-year, continuing a trend of 30-plus percent growth since the fourth quarter.Revenue growth of 38% year-over-year continued our 30-plus percent growth performance since Q4.
  • Operating profit surged 77% year-over-year to $230 million, resulting in an operating margin of 19.4%.Operating profit surged 77% to $230 million year-over-year.
  • The company achieved its third consecutive quarter of performance above the Rule of 40.

Business segment results

  • Product: Product revenue grew 54% year-over-year to $687 million, driven by pricing actions and mix shifts despite lower unit volumes.Product revenue increased 54% year-over-year to $687 million.
  • Subscription: Subscription services revenue increased 20% year-over-year to $499 million, accounting for 42% of total company revenue.Subscription services revenue in Q2 increased 20% year-over-year to $499 million and represented 42% of total company revenue.
  • Evergreen//One: Evergreen//One Total Contract Value (TCV) run rate accelerated to over $1 billion for fiscal year 2027.Evergreen//One Total Contract Value, or TCV, has accelerated to an annualized run rate of above $1 billion for fiscal year '27.
  • ARR: Annual recurring revenue (ARR) grew 20% year-over-year to more than $2 billion.
  • RPO: Remaining performance obligations (RPO) increased 44% year-over-year to more than $4 billion.Remaining performance obligations, or RPO, increased 44% year-over-year to more than $4 billion.

Capital allocation

  • The company repurchased 932,000 shares for approximately $69 million during the quarter.In Q2, we repurchased 932,000 shares, returning approximately $69 million to shareholders.
  • Management paid $74 million in withholding taxes on employee awards, offsetting dilution of approximately 1 million shares.We also paid $74 million in withholding taxes on employee awards, offsetting dilution of approximately 1 million shares.
  • There is approximately $176 million remaining under the existing $400 million repurchase authorization.We currently have about $176 million remaining under our existing $400 million repurchase authorization announced in Q4 '26.
  • Cash and investments at the end of the quarter exceeded $1 billion.Our liquidity remains robust with over $1 billion in cash and investments at the end of the quarter.
  • The industry is experiencing rapid increases in semiconductor demand and costs, which are driving up prices for customers.The rapid increase in semiconductor demand and cost continues to affect our industry in multiple and complex ways.
  • Customers are purchasing fewer system units but are paying higher prices and shifting toward higher performance configurations.Customers are buying fewer solutions at higher prices.
  • There is a notable increase in large deal sizes, with deals above $5 million growing 59% and deals above $20 million growing 385% year-on-year.In terms of deal sizes, deals above $5 million grew 59%, and deals above $20 million grew a whopping 385% year-on-year.

Competitive landscape

  • Gartner positioned the company highest in execution and furthest in vision in their 2026 Magic Quadrant for Enterprise Storage Platforms.Last week, Gartner validated that momentum, once again positioning Everpure highest in execution and furthest in vision in their 2026 Magic Quadrant for Enterprise Storage Platforms.
  • Management believes the company is achieving market share gains that exceed the growth of legacy competitors.Only some of our growth acceleration can be attributed to price increases, as our growth is far beyond that of our legacy competitors.

Macroeconomic environment

  • The company continues to operate in a tight supply market and has made strategic component purchases to mitigate cost inflation.
  • Operating cash flow was negative $136 million due to strategic inventory purchases, but management expects this to normalize over the next two quarters.While these purchases created a temporary headwind to operating cash flow in the quarter, we expect operating cash flow to normalize over the next 2 quarters.

Growth opportunities and strategies

  • AI: The company is focusing on 'data primacy' to help enterprises structure data for AI readiness, supported by the 1touch acquisition.Interest in Everpure Data Intelligence, which includes capabilities from our 1touch acquisition, is off the charts.
  • Virtualization: Virtualization solutions as alternatives to VMware, such as Portworx with Red Hat OpenShift and Nutanix, have reached a run rate of over $100 million per year.our VMware alternative solutions have grown to well over a $100 million per year run rate.
  • Enterprise Data Cloud: The company is expanding its enterprise data cloud strategy, with over 2,000 of its 15,000 customers currently enabled.Our enterprise data cloud strategy continues to advance with over 2,000 of our 15,000 customers now enabled with the capability.

Financial guidance and outlook

  • For Q3, revenue is expected to be between $1.325 billion and $1.335 billion, with operating profit between $265 million and $275 million.
  • For fiscal year 2027, the company raised revenue guidance to a range of $5.030 billion to $5.070 billion.
  • Fiscal year 2027 operating profit guidance was raised to a range of $940 million to $960 million.

Hyperscale strategy

  • The company signed a supply agreement with a second top 5 hyperscaler, which is expected to generate significant revenue starting in fiscal year 2028.
  • Hyperscale product deployments are expected to yield margins between 75% and 85%.
  • Management expects hyperscale order commitments for DirectFlash solutions to extend into calendar 2028.

Q2 FY2027 results

MetricResultChange
Product Revenue$687 million+54% YoY
Subscription Services Revenue$499 million+20% YoY
Operating Profit$230 million+77% YoY
RPO>$4 billion+44% YoY
ARR>$2 billion+20% YoY

How management sounded

Positive (+45 on our -100 to +100 scale). Management described the quarter as outstanding and remarkable, citing broad-based growth and a new hyperscaler win, though they maintained a disciplined approach to pricing and supply chain management. Management sounded more upbeat than on 62% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.

Read the analyst Q&A summary and guidance and outlook for this call.

What to watch before the next call

  • Sustainability of demand amid high price increases.
  • Ramp of the second hyperscaler design win in fiscal year 2028.
  • Component cost stabilization and its impact on gross margins.

Earlier calls

  • Q1 FY2027 (May 27, 2026), tone Balanced: Everpure reported 35% revenue growth and raised its full-year guidance, driven by strong demand and market share gains despite significant supply chain constraints and component cost inflation.