{ "docId": "019dd923-622c-750b-8b98-491cf8c853e8", "docSlug": "3b36a8e60d92", "documentTitle": "Pure Storage, Inc. (PSTG)", "authorId": "53_Kerrisdale_Capital", "authorName": "Kerrisdale Capital", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2025-09-01 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 29, "pageCount": 35, "prevPage": 28, "nextPage": 30, "slideType": "research-note", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 6, "notes": "The slide uses a quote from a CTO to frame a discussion on accounting transparency and profitability metrics.", "elementsJson": [ "paragraph", "quote_block" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-491cf8c853e8/29", "deckHref": "/decks/019dd923-622c-750b-8b98-491cf8c853e8", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-491cf8c853e8.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-491cf8c853e8#slide-29", "components": [ { "bbox": null, "kind": "callout", "text": "This is particularly important in light of Pure’s accounting shenanigans used to embellish profitability.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-fb91-749f-a6ab-b57a53b9ea49", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.76, "x": 0.118, "y": 0.565 }, "kind": "paragraph", "text": "Finally, Pure's true operating profitability is dramatically overstated. We view stock-based compensation as a real expense, and at Pure it accounted for 56% of cash flow from operations in FY2025. In addition, we highlight that Pure's $76 million of interest income earned on its $1.6 billion cash balance ($55 million tax-effected) contributed about 52% of Pure's GAAP net income in FY2025.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3d346672-b2d6-4ca6-9a2f-560675661cc2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.76, "x": 0.118, "y": 0.183 }, "kind": "paragraph", "text": "Similarly for Evergreen//One, we believe Pure should separately disclose the portion of capital expenditures and specific amortization assumptions behind the hardware deployed. This is particularly important in light of Pure's accounting shenanigans used to embellish profitability.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4f0589d6-ccdd-453e-bf37-0acbd8e2ae2f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.76, "x": 0.118, "y": 0.277 }, "kind": "paragraph", "text": "In accordance with our accounting practices, we review the estimated useful lives of our property and equipment on an ongoing basis. In the third quarter of fiscal 2025, management determined that the estimated useful lives of our test and infrastructure equipment and assets supporting our Evergreen//One offerings should be revised from 4 years to a range of 5 to 7 years. The change in estimated useful lives was recognized on a prospective basis effective at the beginning of the third quarter of fiscal 2025. The effect of this change in estimate resulted in an aggregate reduction to depreciation expense and corresponding increase in net income of $20.1 million, or $0.06 per basic and diluted share, during fiscal 2025.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8a6578d5-a97e-4c6d-8582-2fc6732b685e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.76, "x": 0.118, "y": 0.777 }, "kind": "paragraph", "text": "Excitement surrounding an impending hyperscaler win has propelled Pure's valuation to levels exceeding those seen when the company was growing revenue 30-60% YoY. Surprisingly, it has maintained this approximate 80% EV / NTM revenue premium to historical averages despite the Meta arrangement underwhelming expectations and remaining frustratingly opaque.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a363aea9-aba2-4da8-9b11-3df8d2abffb8", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.76, "x": 0.118, "y": 0.093 }, "kind": "quote", "text": "necessary, we'll bring in faster controllers, new CPUs, new hardware, new software, but that original product has now been modernized completely under that Evergreen//Forever subscription, just showing itself on the subscription revenue line.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6374087c-781a-49cd-b765-ee5a299301c7", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "In accordance with our accounting practices, we review the estimated useful lives of our property and equipment on an ongoing basis. In the third quarter of fiscal 2025, management determined that the estimated useful lives of our test and infrastructure equipment and assets supporting our Evergreen//One offerings should be revised from 4 years to a range of 5 to 7 years. The change in estimated useful lives was recognized on a prospective basis effective at the beginning of the third quarter of fiscal 2025. The effect of this change in estimate resulted in an aggregate reduction to depreciation expense and corresponding increase in net income of $20.1 million, or $0.06 per basic and diluted share, during fiscal 2025. — Pure Storage FY2025 10-K", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-fb91-749f-a6ab-bbec4b7b5c93", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.15, "x": 0.118, "y": 0.735 }, "kind": "title", "text": "VII. Valuation", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1f30521c-0f05-441a-b45d-603848c34ba9", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Valuation: Asset value", "slug": "asset-value", "agent": "architect", "layer": "slide", "matchId": "5dba3dd1-9896-4572-8b17-d2487d6b5504", "evidence": "Pure's true operating profitability is dramatically overstated.", "confidence": 0.7 }, { "name": "Valuation: DCF", "slug": "dcf", "agent": "architect", "layer": "slide", "matchId": "f3f6181a-de26-420c-be88-65d75216545b", "evidence": "In accordance with our accounting practices, we review the estimated useful lives of our property and equipment on an ongoing basis.", "confidence": 0.7 } ], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "3493b0ac-aa77-4ce7-81b6-4fd1b801b61d", "evidence": "Critique of accounting practices and profitability metrics", "confidence": 0.85 } ], "arcBeats": [ { "to": 31, "from": 26, "beatId": "b7b9d07d-8a29-40c7-aabc-41ddb9147aac", "arcName": "Problem-Agitate-Solution", "arcSlug": "problem-agitate-solution", "beatName": "Research Note", "beatSlug": null, "evidence": "The document presents research notes on Pure Storage's competitive positioning and financials", "position": 3, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [ { "to": 32, "from": 5, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "f175e9df-40bd-4f68-b964-eed15e12ff5a", "evidence": "The document highlights the risks of investing in Pure Storage", "position": 0, "objective": "To highlight the risks of investing in Pure Storage", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.7, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }