Everpure, Inc. Class A common stock

of strength that we've seen throughout the year. If you recall, we similarly outperformed in Q2 and raised the outlook and guidance for the full year. Underlying that really, I would say, is broad-based strength that we're seeing across the enterprise business, across some of the newer product areas, such as Portworx, we talked a bit about on the call. And then certainly we had a discussion about starting to or really surpassing our previously anticipated full year shipments to the hyperscalers. So a really strong quarter and really from what we see and flowing through to the outlook for the rest of the year, I continue to see that momentum building. I'd say that in the quarter and really the discussion that we had in the earnings, Really two elements, I would say that, well, maybe three elements that pervaded those discussions. One is commentary that we put out in terms of, hey, how to think about the incremental financial benefits accruing to us in terms of the hyperscaler business. Second was, hey, as we expand our discussions with our existing hyperscaler customer, other potential hyperscaler environments, really looking at, hey, what's the range and optionality in terms of additional business models that we can introduce? And then third, as you'd imagine, I'm sure you have questions on, a lot of discussion about commodities and kind of the supply chain tightness. And what I'd say is, and maybe what a lot of the discussions we've had kind of post the call, what I'd say is on the incremental kind of spending commentary, You know, really what we're trying to say is, look, as the hyperscaler revenues come through, we see a ton of opportunity across the business, whether it's in the enterprise, whether it's, you know, going after newer markets, really, you know, going after the neoclouds, the AI market with FlashBlade EXA, with Vigor, certainly the hyperscalers. We see opportunities across the board to continue to invest for growth, and we intend to do that to a degree. Um, but you know, we also are laser focused on continuing to grow operating profit, uh, as well as, uh, to a degree our operating margin expansion. And I think that that, you know, that that's been a piece of the discussion, uh, that we've had post, uh, the earnings. Um, you know, and the, I would say the other thing that, uh, you know, would seek to clarify on, uh, the additional business models, right. Is, um, as you recall, our existing, uh, you know, the existing business model with, uh, our, our first customer, really has been framed around primarily a software license or royalty revenue associated with the shipments and deployment of the technology. We're not providing the customer any of the hardware components. Really, it's just a software royalty. As we discuss other environments of different price performance tiers with a customer, as we discuss engagements with other potential hyperscalers that we're in discussions with, what's become clear is, hey, there's a range of options. Just like we tailor our technology solution to fit into their technology environment, we have the optionality to tailor the business model and the mechanism for procurement into however it fits the hyperscaler best. But to be clear, we don't want to be in a position, it's not our intention to be in a position to be sourcing the full, all the NAND for the hyperscalers, but we do see a range of options premature to get into specifics. We see a range of options that really might over time take the gross margin profile associated with a hyperscaler revenue stream a bit closer to blended company averages, but we're not going to take the whole kind of NAND on the bomb.

Got it. Now, that's a great overview and a lot to unpack there. So as you can imagine, in the last day and a half or so, we've been getting a lot of questions on that relationship that you just mentioned. So maybe we could start about what happened, obviously you outperformed on Exabyte deployments. Can you help us understand how the customer in this case is thinking about that roadmap with you? I would imagine that deal that you currently announced previously is unchanged from a royalty perspective and a roadmap from an Exabyte perspective. Is that a fair characterization of that current relationship or is there an opportunity to expand it to different models or different tiers of storage or use cases as you just described? Or is that more targeted towards other potential relationships with other hyperscaler environments?

Yeah, so really two pieces in there, right? Hey, how's the relationship going? What is the current environment that we're serving? How does that grow? And then second, how does the new business model commentary layer into that? So let me hit those in two parts. So the relationship is going great. As we previously discussed, we're going to be a bit more circumspect about quantitative disclosure about shipments because of the wishes of the customer. But we had previously indicated coming into the year that we had expected and really contemplated in our guidance one to two exabytes of shipment for the year. We've surpassed that within Q3. And so we felt it important to update our financial community on that milestone check. We've also said, hey, shipments continue. And our expectations that we've previously put out, we're not updating those. We're not changing those one way or the other. But the relationship goes great and look, as we have discussed before, the way that hyperscalers in general design and deploy and ramp these types of environments, they go through a long design process to inclusive of storage, compute, networking, HVAC systems, the whole nine yards. They build a template and once that template is defined for some period of time for a generation, if you will, as they have additional data center needs, as they have needs to decommission old data centers and refresh them, they'll go and deploy that template. And so that's going well, and that's really the driver for scale. Now, on the second part of the question, business models, as we are discussing, as that first deployment is ramping well, and we've given the update on that, We are working with them to look at qualifying the technology into other price performance tiers. And as part of those discussions in the different environments, which, as you might imagine, involve different economics, and discussions with other hyperscalers, that's really the catalyst for saying, hey, maybe there are other business models that might be more appropriate in those environments.