Q2 2025 Summary
Published Feb 7, 2025, 7:58 PM UTC| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +6% | The 6% growth, from a lower level in the prior period, was driven by improved product demand—particularly in flash arrays—and steady services revenue. In earlier quarters, supply chain constraints and backlog normalization led to lower revenues; however, an easing demand environment and new sales initiatives helped boost revenue this period. |
Hybrid Cloud | +6% | The year-over-year growth reflects renewed traction in all-flash storage sales, partly offset by normalizing backlog from the previous fiscal year. In prior periods, softened demand for on-prem storage impacted Hybrid Cloud revenue, but recent portfolio updates and improved go-to-market execution spurred a rebound. |
Public Cloud | +9% | The 9% increase stems from a shift toward consumption-based offerings and partnerships with hyperscalers, which drove usage rates. Previously, subscription service weakness and budget constraints dampened results, but expanded first-party services and customers’ growing preference for integrated cloud storage lifted this segment. |
Americas | +9% | The Americas region benefited from enhanced sales coverage and enterprise flash adoption, resulting in a 9% year-over-year rise. Compared to prior quarters, go-to-market adjustments and pipeline expansion (including the success of new product launches) have led to broader customer engagement and improved regional performance. |
Net Income | +28% | Net income rose 28%, reflecting higher revenue, improved gross margins, and lower restructuring costs relative to last year. The previous period’s lower product sales and macroeconomic headwinds curbed profitability; however, operational efficiencies and cost management boosted this year’s earnings growth. |
EPS (Diluted) | +29% | Driven by net income expansion and share repurchases, diluted EPS climbed 29% compared to the prior year. In previous quarters, heightened operating expenses offset repurchase benefits; now, margin improvements and a reduced share count magnify earnings per share, indicating potential for continued shareholder returns. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q3 2025 | no prior guidance | $1.61B–$1.76B | no prior guidance |
Consolidated Gross Margin | Q3 2025 | no prior guidance | 71%–72% | no prior guidance |
Operating margin | Q3 2025 | no prior guidance | 29% | no prior guidance |
Net Interest Income | Q3 2025 | no prior guidance | $10M | no prior guidance |
Tax Rate | Q3 2025 | no prior guidance | 20%–21% | no prior guidance |
EPS | Q3 2025 | no prior guidance | $1.85–$1.95 | no prior guidance |
Revenue | FY 2025 | $6.48B–$6.68B (5% YoY at midpoint) | $6.54B–$6.74B (6% YoY at midpoint) | raised |
Consolidated Gross Margin | FY 2025 | 71%–72% | 71%–72% | no change |
Operating margin | FY 2025 | 27%–28% | 28%–28.5% | raised |
Net Interest Income | FY 2025 | $50M | $55M | raised |
Tax Rate | FY 2025 | 20%–21% | 20%–21% | no change |
EPS | FY 2025 | $7.00–$7.20 | $7.20–$7.40 | raised |
Free Cash Flow | FY 2025 | no prior guidance | slightly lower YoY | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q2 2025 | $1.55B to $1.715B | $1.658B | Met |
Gross Margin | Q2 2025 | 72% | ~71% (COGS = $481MOn Revenue of $1.658B) | Missed |
Operating Margin | Q2 2025 | ~28% | ~21% ($345M/ $1.658B) | Missed |
EPS - Diluted | Q2 2025 | $1.73 to $1.83 | $1.42 | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
All-flash storage expansions and growth forecasts | Q1 2025: 21% growth, $3.4B run rate, key product launches. Q4 2024 and Q3 2024: mid-to-high teens growth, expanded product lines. | 19% year-over-year growth, strong performance, four consecutive quarters of high teens to low 20% annual growth, run rate at $3.8B, continued market share gains. | Recurring topic with consistently strong growth. |
Public Cloud revenue and marketplace momentum | Q1 2025: $159M (+3% YoY), strong marketplace services. Q4 2024, Q3 2024: modest single-digit growth, focus on hyperscaler partnerships. | Revenue $168M (+9% YoY), marketplace/first-party up 43%, expecting double-digit growth in 2H FY ‘25. | Recurring topic with improving momentum. |
AI business acceleration and generative AI opportunities | Q1 2025: 50+ AI wins, strong early adoption, multiple verticals. Q4 2024, Q3 2024: described as early-stage but strategic growth area. | Over 100 AI/data lake wins, expecting larger-scale AI deployments in 2H of next year, partnerships with Domino, NVIDIA, Lenovo. | Strengthening sentiment and viewed as a key long-term driver. |
Macroeconomic and geopolitical uncertainties impacting IT spending | Q1 2025: Market still “choppy,” some public sector softness. Q4 2024, Q3 2024: Similar caution, with stable but uncertain environment. | Macro conditions unchanged, growth not tied to macro improvements; well-aligned with customer priorities. Geopolitical exposure seen as manageable. | Recurring, but sentiment remains cautious. |
Margin pressures from NAND/SSD costs and inventory management | Q1 2025: Prebuys lock in lower cost but temporarily reduce free cash flow; product GM in upper 50%–60%. Q4 2024, Q3 2024: Similar strategies, QLC usage mentioned. | Strategic SSD prebuys increased inventory, product GM ~60%, expecting slightly lower gross margins in 2H FY ‘25. | Recurring, focus on mitigating NAND cost volatility. |
Shift to consumption-based (OpEx) storage models | Q1 2025: Brief mention of Keystone traction ; Q4 2024: Keystone cited as a growth area ; Q3 2024: Emphasis on OpEx models and triple-digit growth. | Not specifically mentioned in Q2 2025, though Keystone revenue growth (55% YoY) was noted. | Mentioned less, overshadowed by other priorities. |
Free cash flow dynamics and strategic SSD purchases | Q1 2025: 28% YoY decline in FCF due to incentive payouts and SSD prebuys. Q4 2024, Q3 2024: Similar mention of prebuys and inventory effects. | FCF impacted by upfront SSD commitments, expected to improve in 2H FY ‘25; described as a timing issue, not structural. | Recurring, short-term cash flow impact from SSD strategies. |
Potential deceleration risks in all-flash array growth (FY ‘26) | Q1 2025: Analyst concern about possible FY ‘26 deceleration; company expressed confidence but didn’t rule it out. No Q4/Q3 mentions. | No mention in Q2 2025. | Limited coverage, uncertain future risk. |
U.S. public sector spending slowdown | Q1 2025: Slower federal segment due to budget constraints. Q4 2024: No specific mention. Q3 2024: Dip attributed to normal seasonality. | Strong US Public Sector results despite continuing resolution; no notable slowdown cited. | Recurring, but impact varied quarter to quarter. |
Future impact of AI and flash storage market leadership | Q1 2025: AI data growth (RAG) cited as a big driver; top-tier flash offerings fueling share gains. Q4 2024, Q3 2024: Emphasis on unstructured data for AI, strong flash portfolio expansions. | AI seen as multi-year growth driver, large-scale deployments in 2H FY ‘25; flash leadership strengthened by consistent mid-teen to low 20% growth. | Recurring with high future impact. |
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AI Opportunities
Q: When will AI significantly impact your business?
A: We are seeing the early stages of preparing data infrastructure for AI, with over 100 wins across multiple verticals serving as leading indicators of future large-scale deployments. These are primarily on-premises wins in AI centers of excellence and have not yet reached large scale. We expect AI inferencing to become a bigger factor in the second half of next year, so the growth opportunity is still ahead of us. -
All-Flash Array Growth
Q: How sustainable is your all-flash array growth?
A: We've had four consecutive quarters of high teens or over 20% revenue growth in all-flash arrays, clearly outpacing the market and competitors. This success is due to our alignment with customer spending areas and a unique value proposition, including a single operating system and advanced hybrid multi-cloud capabilities. We're focused on executing in the go-to-market while competitors are distracted, giving us confidence in the durability of our leadership position and the growth opportunity ahead. -
Cloud Revenue Growth
Q: How is your public cloud revenue performing?
A: Our first-party and marketplace cloud storage services grew by 43% year-over-year, significantly boosting public cloud revenue. We expect to return to double-digit growth in the second half of this fiscal year , driven by strong partnerships with hyperscalers and shifting customers from subscription to consumption models, which is improving margins. -
Prebuying Memory Inventory
Q: What's the impact of prebuying memory on inventory?
A: The increase in inventories is largely due to prebuys of memory negotiated at the end of '24 and '25, covering the majority of our expected demand in fiscal '25. We're not planning further prebuys and are starting to see some softening in the NAND market. We'll monitor the market but don't expect additional prebuys this fiscal year. -
Public Sector Outlook
Q: What's the outlook for your public sector business?
A: Our U.S. public sector business performed well despite the continuing resolution, supported by long-term projects with program spending approved across annual budget cycles. We also saw strong performance globally in the public sector segment. With the new administration, we anticipate that alignment across legislature and executive may lead to policies being implemented quickly. -
Impact of VMware Acquisition
Q: Any impact from Broadcom's VMware acquisition?
A: We haven't seen any material impact yet. Customers are exploring three paths: optimizing existing VMware estates, moving to new architectures with alternative hypervisors where we benefit due to our integrations, and moving to public cloud where our strong solutions with VMware and hyperscalers are advantageous. -
RPO Decline Explanation
Q: Why did RPO decline sequentially this quarter?
A: RPO decreased quarter-over-quarter as expected because deferred revenue always declines from Q1 to Q2. However, total deferred revenue, including short term, grew year-over-year, which is a great sign following strong billings growth. We expect unbilled RPO to continue growing, largely driven by Keystone. -
Keystone Business Growth
Q: How is Keystone contributing to growth?
A: Keystone is reported in professional services revenue, which grew sequentially due to Keystone. Customer feedback has been stellar with zero churn, and we expect Keystone to grow faster than our product business, aiding us in winning new customers and workloads. -
Macro Impact on Growth
Q: How does macro affect your growth outlook?
A: The macro environment remains unchanged, and we are well aligned to priority spending areas like data center modernization and cloud. Our growth outlook for the year is regardless of the macro; we assume it stays where it is.