Everpure

Good day and welcome to Everpeer's fourth quarter fiscal 2026 financial results conference call. Today's conference is being recorded. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. At this time, I'd like to turn the call over to Paul Dyett, Vice President of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to EverPure's fourth quarter fiscal year 2026 earnings conference call. On the call, we have Charlie Giancarlo, Chief Executive Officer, Tarek Robiadi, Chief Financial Officer, and Rob Lee, Chief Technology and Growth Officer. Following Charlie's and Tarek's prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website where this call is being simultaneously webcast. The slides that accompany this webcast can be downloaded at investor.purestorage.com. On this call today, we will make forward-looking statements which are subject to various risks and uncertainties. These include statements regarding our financial outlook and operations, our strategy, technology, and its advantages, our current and new product offerings, supply chain, hyperscaler opportunity, and competitive industry and economic trends. Any forward-looking statements that we make are based on facts and assumptions as of today, and we undertake no obligation to update them. Our actual results may differ materially from the results forecasted and the reported results should not be considered as an indication of future performance. The discussion of some of the risks and uncertainties relating to our business is contained in our filings with the SEC, and we refer you to these public filings. During this call, all financial metrics and associated growth rates are non-GAAP measures other than revenue, remaining performance obligations, or RPO, and cash and investments. Reconciliations to the most directly comparable GAAP measures are provided in our earnings press release and slides. This call is being broadcast live on the Everpure Investor Relations website and is being recorded for playback purposes. An archive of the webcast will be available on the IR website and is the property of Everpure. Our first quarter fiscal year 2027 quiet period begins at the close of business Friday, April 17, 2026. With that, I'll turn it over to Charlie.

Thank you, Paul. Good afternoon, everyone, and welcome to EverPure's Q4 and fiscal 2026 earnings call. Q4 was an outstanding quarter. Our first billion-dollar revenue quarter capped off a strong performance for FY26 with full-year revenue of $3.7 billion. And we enter FY27 with strong momentum. Revenue in Q4 was driven by broad-based strength across our business, particularly in enterprise. We are executing a clear strategy to modernize and simplify data infrastructure for our enterprise and hyperscale customers amid rising AI demand, power constraints, and increasing operational complexity. Our enterprise data cloud architecture continues to strongly resonate with customers, with over 600 customers adopting Fusion since its introduction a year ago. Consistent with our core strategy of investing in data storage as high technology rather than a commodity, EverPure can now support practically all enterprise storage needs and use cases with our unified Purity operating environment and our Evergreen hardware platform. Purity, enhanced with Fusion, now adds a unified control plane to its unified data plane and enables customers to manage their global data as their own enterprise data cloud with consistent enterprise policies implemented in software. The focused investment in our enterprise business is translating into accelerating demand and growth. Our purity software, direct flash architecture, and evergreen promise have proven their flexibility and universality by extending smoothly into our FlashBlade EXA offering. As a reminder, FlashBlade EXA supports AI scale workloads at industry leading performance and efficiency. FlashBlade EXA has achieved industry leading ML perf benchmark performance and recently published the highest results in the spec storage AI image benchmark. This past quarter, in a strong competitive contest, we secured our first EXA customer and are in advanced stage discussions with dozens more. Our hyperscale business grew beyond our expectations in FY26. We have broadened and expanded our solution, and we've standardized on our financial structure, which Tarek will detail later. Entering FY27, we expect continued growth in our hyperscale solutions concentrated in the second half of our year, which is also incorporated in our guidance. This broad and increasing momentum is reflected in our strong FY27 revenue guidance of almost 19% year-over-year growth at the midpoint, which Tarek will also discuss in more detail. As I stated earlier, Everpure has now reached a point where we can support the full spectrum of our customers' data storage needs, from high performance to low cost, from tens of terabytes to tens of exabytes, from AI to backup, and all protocols, including block, file, and objects. We support all customer use cases, including all databases, all virtualization, containers, file systems, object systems, and Kubernetes. We deliver all of this through a single software operating environment combined with our direct flash technology and our unique evergreen architecture and business model. Today, they ensure our customers always have access to the latest technology. This set of capabilities has been developed because EverPure alone has invested in data storage and management as high technology rather than as a commodity. We now invest more R&D in data storage and management than any other competitor. Our continuing investment in innovation is increasingly focused on enabling our customers to better control and make use of their data for AI and analytics. We released our latest audited net promoter score, which is the gold standard for customer loyalty and satisfaction. We achieved an industry high NPS of 84 for calendar 2025. While much of the industry remains with scores in the 30s, we have maintained a score above 80 for more than a decade while increasing our customer base to over 14,500. This is yet one more reason why we continue to outperform all other competitors in the market. We have developed a strong brand that is well known for quality, consistent innovation, and strong customer care. Our position has strengthened to where we are now gaining franchise customers who put their trust in us to standardize their IT architecture on our platform for a majority of their storage infrastructure. We are now in position to not only help our customers automate their data storage, but increasingly to enable them to better manage their global enterprise data. With Fusion and our enterprise data cloud architecture, customers can apply policy-driven governance across workloads, moving beyond traditional storage to standardize, protect, and intelligently manage their data sets. This represents a meaningful evolution from infrastructure management to comprehensive data governance. Earlier this week, we announced a definitive agreement to acquire One Touch, which will accelerate our ability to help customers unlock the strategic value of their data and make it ready for AI. One Touch's technology delivers discovery, classification, governance, cyber resilience, data sovereignty and context to prepare data for AI and serve as a critical foundation for the enterprise data cloud and enterprise-scale AI deployment. Our rebranding and name change reflect our growth from operational storage to intelligent data management, empowering customers to extract greater value from their data in an increasingly AI-driven world. Our new name, EverPure, reflects both what we have created and where we are going. We are expanding our brand to align with our expanded horizon and to attract a much broader set of strategic personas. We are entering FY27 with strong momentum, and we expect continued growth across all four products and sectors. These include commercial, enterprise, government, and hyperscaler. our U.S. and international theaters, and our systems, software products, and services, such as evergreen subscriptions. Turning to the broader environment, we expect macroeconomic uncertainty to persist through the coming year. Strong component demand driven by tech titan AI buildouts has outstripped supply across the industry, dramatically increasing NAND, memory, and CPU prices. We expect that the industry, including Everpure, will see unpredictable component shortages, which could lead to extended lead times and potential shipment delays. As we have identified in previous calls, we have a highly distributed and resilient supply chain and have weathered past supply chain disruptions well. Supply chain constraints are operating as both a tailwind and a headwind in our hyperscale discussion. A bit of a tailwind as hyperscalers are more eager to accelerate their testing and certification of new sources of supply. And as a headwind to every vendor's ability to source the necessary components. Everpure raised prices on our product line on February 9th, reflecting the dramatic and rapid rise in component prices. I believe we were the last in our industry to raise prices. And I also believe that our increase was the lowest in the industry to protect our customers. Based on the extraordinary rapid rise in component costs, we expect product gross margins in Q1 to be at the lower end of our typical range of 65% to 70%. But we also expect them to recover through the fiscal year. We have built a diversified supply chain with contingency plans to reduce disruption risk, even as the industry faces shortages. Our longstanding and direct component supplier relationships and in-house hardware design provides us additional flexibility in addressing supply chain disruption. Our Evergreen model provides transparent pricing that protects customer economics. In addition, with our continuous improvements in performance and capabilities entitled in Evergreen, existing customers will benefit from our new data reduction software. This recent release of Purity enhanced data reduction, offsets our higher pricing by providing a cost per effective terabyte that is lower than our previous prices on some workloads. We are at a very exciting time in the story of our company, EverPure. We can now compete for all of our customer storage infrastructure. We provide the world's most consistent, comprehensive, and reliable data storage environment. Our enterprise data cloud architecture will allow customers to more efficiently manage their global data, and we are now creating the technology that will allow our customers to more easily prepare their data for their AI future. Our focus on investing in data storage and management as high technology is driving the accelerated growth that we see today. With that, I'll invite Tarek to provide further details.

Thank you, Charlie. We closed the year on a high note with Q4 revenue surpassing $1 billion for the first time, representing 20% year-over-year growth and record operating profit of $226 million, implying a strong operating margin of 21.3%. Our performance in Q4 was broad-based with particular strength in the enterprise. We increased the number of customers transacting during the quarter and delivered solid performance in large scale transactions with deals over $5 million, growing 80% year over year. This performance was supplemented by accelerated growth in the government sector, along with several notable enterprise data cloud platform wins. We also secured the first sales of FlashBlade EXA, signaling positive initial market interest and demand for this new offering designed for large scale artificial intelligence and high performance computing workloads. Moreover, we expanded our footprint with our existing hyperscale customer, delivering strong growth in our hyperscale business for the year ahead of our initial expectations. We are confident in the sustained momentum of our hyperscale business, more on hyperscalers and our year-end performance later. But before we get into that, earlier this week, we made two key announcements for the company, including our intent to acquire OneTouch, a leader in AI-driven contextual data intelligence. OneTouch delivers top-down, automatically discovered and enriched contextual view of data across the data center, cloud, and edge. This critical software capability enables our customers to better understand the meaning of their data and unlock its strategic value through AI and other applications. In turn, the acquisition of OneTouch will further differentiate Everpure by allowing us to embed unique data management capabilities into our core Purity software offerings. Founded in late 2017, OneTouch has a financial profile of a fast-growing company that is investing heavily to gain traction in the market. Unsurprisingly, it is not yet profitable. We expect OneTouch to be 1.5% dilutive to operating profit in fiscal year 27 and to become accretive to operating profit within 24 months from the acquisition on a post synergy basis. As a company, we are expanding beyond being a storage provider to becoming a comprehensive data infrastructure and data intelligence platform. We are transitioning from simply delivering storage solutions to redefining data management at a global scale. Our new name, EverPure, reflects this transformation and captures our new identity as a full-scale data intelligence company. To conclude, we are uniquely positioned to address the full spectrum of our customers' needs, and to compete for large strategic enterprise franchise opportunities supported by our newly expanded AI enabling platform. Now let's deep dive into the details of our fiscal year 26 performance and subsequently discuss our outlook for fiscal year 27. Q4 product revenue of $618 million grew 25% year-over-year, while fiscal year 26 product revenue of $1.97 billion grew 16% year-over-year. As a reminder, our product revenue category now includes revenues that we receive from hyperscale shipments, as well as a portion of Portworx software revenue when sold as term licenses. Q4 subscription revenue of $440 million grew 14% year over year, while fiscal year 26 subscription revenue of $1.69 billion grew 15% year over year. Q4 total contract value sales for our storage as a service offerings grew 28% year over year to $179 million, driven by high velocity transactions of less than $5 million. For fiscal year 26, DCV sales grew 32%, totaling $520 million for the year. This significant year-over-year growth momentum reflects the increasing adoption by our customers of Evergreen One and other subscription-based offerings, which deliver a consistent, non-disruptive operating and management environment. In fiscal year 26, total revenue grew 16% to $3.7 billion. we also delivered our highest annual operating profit of $635 million and implied operating margin of 17.3%. Turning to gross margins, in Q4, total gross margin was 71.4%, supported by a robust subscription services margin of 77%, while product gross margin stood at 67.3%, an increase of over 400 basis points year over year, driven by a favorable product mix. It is important to note that sequentially, our product gross margin in Q4 was lower than in Q3 26, as we had lower hyperscale shipments and Portworx license shipments in Q4 relative to Q3. I would like to remind everyone that these sales are lumpy in nature. In addition, the sequential change in product gross margin reflects changes in customer and product mix during the quarter. The variance also includes a modest impact in the quarter from increasing component costs, which prompted pricing actions taken early February 26. For fiscal year 26, total gross margin was 72.1%, an increase from 71.8% in fiscal year 25. As industry-wide AI-driven infrastructure demand continues to outpace supply, driving higher input costs, we expect continued component price volatility across the storage industry, as well as extended lead times and potential shipment delays. As a result, and as Charlie mentioned, we implemented price increases across our product portfolio on February 9, 2026. It is important to remember that while we maintain long-standing supply agreements with our NAND suppliers, These agreements help mitigate but do not eliminate significant input cost swings and potential shortages. As we mentioned in the past, historically, component cost volatility has had a greater impact on our top line than on margins. When component costs such as NAND rise, the industry typically sees higher pricing as competitors face similar input cost pressures. This dynamic supports improved pricing discipline and can act as a tailwind to revenue over the medium term with some short-term pressure on gross margin as prices catch up to extraordinarily rapid cost increases. We remain committed to treating our customers fairly and will not engage in price gouging or take undue advantage of the current market dynamics. Moving on to our subscription business, Q4 subscription services revenue of $440 million increased 14% year-over-year accounting for 42% of total revenue. ARR grew 16% to $1.9 billion. I am particularly pleased with the results of our remaining performance obligations, or RPO, which accelerated to 40% growth in Q4, driven by the execution of large deals and strength of our Evergreen Forever and Evergreen One offerings. Notably, our RPO pertaining to our subscription services offerings grew 34% exiting Q4. Turning on to revenue by geography, in Q4, US revenue grew 9% to $674 million, while international revenue increased 48% year-over-year to $385 million. International revenue represented 36% of total revenue. The continued expansion of our international footprint remains a significant opportunity and a key strategic focus for the company. For fiscal year 26, US revenue grew 12% and international revenue increased 25%. In fiscal year 26, we expanded our customer base by more than 1,100 new customers, including 335 in Q4 alone, reflecting continued momentum throughout the year. Our penetration of the Fortune 500 now stands at 64%. With respect to our organization, in Q4, our headcount increased sequentially by 166 employees, bringing our total headcount to 6,400 employees at year end. Our balance sheet remains robust, with over $1.5 billion in cash and investments at the end of the year. Cash flow from operations in Q4 was $268 million, and $880 million for the year. Capital expenditures during the year were $264 million, representing approximately 7.2% of revenue for fiscal year 26. Our capital investments during the year supported data center expansion, the increased testing of new products and solutions, the scaling of our hyperscale business, as well as the funding of initiatives aimed at accelerating Evergreen One subscription growth. Free cash flow for Q4 was $201 million and $616 million for the year. Free cash flow margin for the year was 16.8%, tracking our operating profit margins of 17.3%. In Q4, we repurchased 1.7 million shares, returning approximately $127 million to shareholders. For fiscal year 26, share repurchases totaled $343 million, or 5.6 million shares. For fiscal year 26, 56% of free cash flow was utilized for stock repurchases. In addition, we paid $68 million in withholding taxes on employee awards in Q4, offsetting dilution by approximately 1 million shares and $271 million for fiscal year 26, offsetting about 4 million shares. We currently have about $329 million remaining under our existing $400 million repurchase authorization announced in Q4 26. Now turning to our guidance for fiscal year 27. As Charlie remarked earlier, unprecedented component demand driven by AI build outs has outstripped supply across the industry. At this stage, the duration of the demand supply imbalance and related risks to the industry are hard to predict. Needless to say, we're actively working with our suppliers to mitigate these risks and navigate this period of uncertainty. For Q1, we anticipate revenue to be in the range of $990 million to $1.01 billion, representing approximately a 28% increase year over year at the midpoint. We expect operating profit to be in the range of $125 million to $135 million representing approximately a 57% increase year over year at the midpoint. For fiscal year 27, we anticipate revenue to be in the range of $4.3 to $4.4 billion, representing an 18.8% year over year increase at the midpoint. We expect operating profit to be in the range of $780 million to $820 million, representing approximately a 26% year over year increase at the midpoint. In terms of seasonality, we're entering fiscal year 27 with very strong momentum and expect 47% of our revenues to be generated in H1 of fiscal year 27, which represents a 2% improvement year on year. Let me finish by adding more color about the factors that underpin our guidance for fiscal year 27. First and foremost, and specifically for our hyperscaler business, I would like to remind everyone that we started ramping our hyperscaler line of business in fiscal year 26 and feel very confident about the future of our business for years to come. We expect to significantly accelerate shipments and revenues in fiscal year 27 relative to fiscal year 26. This momentum is reflected in our strong fiscal year 27 guidance. As a reminder, hyperscaler revenues are governed by the schedule of hyperscalers data center build outs and are not linear during the course of the year. For fiscal year 27, we expect the majority of revenue from hyperscalers to be recognized in Q3 and Q4. Also, we have now standardized our business model to cater for the hyperscaler market. Moving forward, we will procure some of the components that are needed by hyperscalers to build their solution in their environment, but not the NAND. Hyperscalers will continue to procure the NAND through their supply chain. As a result, we expect gross margins of hyperscaler revenues to range between 75% to 85%, a level accretive to product revenue gross margins and overall company gross margins. For Q1, we expect product revenue gross margins excluding hyperscaler gross margins to be at the lower end of our typical range of 65% to 70%, reflecting the impact of unprecedented and sudden increases in NAND and other component pricing. As we move through the fiscal year, we anticipate gross product margins will recover. Second, and in line with prior commentary, we will continue to invest in R&D and sales and marketing to fuel growth in our core and establish our brand, and these investments are factored into our operating profit guidance. In terms of our fiscal year 27 operating profit guidance, and as mentioned earlier, we are absorbing a 1.5% dilution to our operating profit for the year from the acquisition of OneTouch. Yet, we continue to be laser focused on accelerating growth and building operating leverage as our guidance attests. With that, I'll now turn the call back to Paul for Q&A.

Thanks, Tarek. Before we begin the Q&A session, I'll ask you to please limit yourselves to one question consisting of one part so we can get to as many people as possible. If you have additional questions, we kindly ask that you please rejoin the queue and we'll be happy to take those additional questions as time allows. Operator, let's get started.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by one. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your questions. We'll pause here briefly as questions are registered. Our first question comes from Armit Daryanani from Evercore ISI. Please go ahead. Your line is open.

Thanks a lot. Good afternoon, everyone. You know, my question really is around the fact that, you know, you folks have had some really impressive results right now given all the fixation everyone has on memory. Charlie, perhaps you can just help put in context the acceleration in revenue growth we're seeing in Q1 and really fiscal 27. How much of that is really coming from your ability to pass on the memory price increases to your customers versus perhaps you're just seeing a step up in demand, especially the thing about customers at this point perhaps need to find a way to improve the utilization rate of Flash, which seems to be going up in price a lot. It seems like Pure is uniquely positioned to help provide a solution here. To start on what's driving the growth and just flesh out how much of it is pricing versus customer step-up in demand. Thank you.

Yeah, absolutely. Well, I can certainly assure everyone that Q4 in particular and Q1 is really all demand-based because, first of all, we took no pricing action in Q4. Furthermore, most of our proposals and bids that go out, go out with the 90-day pricing. In other words, we put out a proposal saying, customer has 90 days to accept or not. So those price, a lot of that of Q1 shipments will be based on Q4 wins, of course, and that'll be based on our old pricing. So most of this new pricing that we put out earlier this month won't really hit until our Q2. So therefore, you know, both our guidance, if you will, for Q1 as well as our print for Q4, really all demand-based. And that's one of the things that gets us very excited as we go forward, of course.

Thank you, Amit. Next question, please.

Our next question comes from Aaron Rakers from Wells Fargo. Please go ahead. Your line is open.

Yeah, thanks for the question. I guess I want to maybe double click on the breadth of what you're seeing in hyperscale opportunities. I know you talked about more of a weighted towards the second half as far as a ramp. But, you know, as we think about, you know, the changes you're making in procurement, the gross margin expectations, I'm curious if we could read into that at all of kind of the opportunities maybe expanding into additional hyperscalers through this year or any progression you've had with the engagements with other opportunities. Thank you.

Yeah, look, we are seeing increased activity. And as I sort of alluded to in my opening remarks, The level of activity is going up. Well, the amount of activity and the breadth of the activity both are going up. Now, you know, we have said before and we'll say again that until we have another one to announce, you know, we're still in the fight and not yet at the finish line. And, yeah, you might say, well, you know, it's a bit later than we expected, and I would say that's true. What I would say is that advancement continues and becomes broader as we go along. A lot of this is very dependent on the hyperscalers' own testing and development plans. But what we're seeing is wider interest, broader engagement, and wider engagement.

Thank you, Aaron. Next question, please.

Our next question comes from Howard Maugh from Guggenheim Securities. Please go ahead. Your line is open.

Great. Thanks for taking the question, and congratulations on the strong financial performance and also the rebranding efforts. So either for Charlie or for Tarek, when I listen to the qualitative commentary about higher pricing serving as a potential revenue tailwind, the momentum in exit sales, and maybe even initial shipments to a second hyperscaler, as Charlie, you just alluded to, it would suggest that you exit FY27 on a high note. But when I look at the full-year revenue guidance, I believe it implies that growth would decelerate to 13% to 14% in the back half. And I understand the back half comps are tougher, but you also are talking to higher hyperscaler shipments in the back half. So my question is, does the guidance factor in accelerated enterprise demand in Q1 that could come at the expense of future quarters, or are you intentionally haircutting your assumptions, pipeline close rates? more than normal to account for the uncertain environment.

Howard, thanks for the question. It's Tarek. I would say to you, we ended up fiscal year 26 and Q4 in particular with a very, very strong performance. Linearity in Q4 was very much back-ended in the quarter, which, as a result, leads us to have a very strong Q1 guidance. And if you really look at the difference in growth rates between the Q4 growth rates of 20% and what we're guiding at about 26 at the midpoint for Q1, that shows you that we have a very strong momentum carried from fiscal year 26 to fiscal year 27. And so the rest of the fiscal year 27 is in line with our internal expectations. And This is why in my script I highlighted that seasonality, H1 versus H2 revenue seasonality, is more weighted towards H1 this year as a result of the strong finish in fiscal year 26.

Thank you, Howard. Next question, please.

Our next question comes from Mike Sikos from Needham & Company. Please go ahead. Your line is open.

Great. Thanks for taking the question here, guys. I just wanted to cycle back. So first, congratulations on the EXA customer win that you had cited. I know that you also discussed how you're in advanced stages with dozens more at this point. Could you just walk us through what that EXA customer win actually looked like, how that sales cycle unfolded, what were some of the key points around that win? And then I know it's an earlier offering, but where are we in establishing, I don't know if you want to call it your customer testimonials or a playbook to make this a repeatable process on your side? Thank you so much.

Yeah, thanks for the question, Mike. This is Rob. I'll take that one. Yeah, so really happy to see the initial customer win and actually multiple sales of exit in the quarter. As you mentioned, it's a newer offering, which we went generally available with, I believe, at the end of Q2 or beginning of Q3. And we've seen really since launching the offering at last year's GTC conference in March, really strong initial demand. With this particular GPU Cloud customer, the nature of the win and how we got there, You know, frankly, this customer was looking to stand up storage to provide for their end customers training and inference workload environments. They had actually gone down the path of initially selecting an alternate vendor. You know, they engaged with us, did a performance test, were frankly blown away with the performance, and turned around and placed an order that, you know, within a couple of days. That subsequently led to follow-on orders as they were able to deploy that, get it into production quickly, and really light up their end customer footprint. As Charlie mentioned in his prepared remarks, we're in various stages and some advanced stage discussions with dozens of other customers. If I step back from it, I would say that Exa really is filling a market gap and a market need of covering both off on the high performance that's truly demanded of these environments, but also at the same time providing for the reliability, the usability, all of the manageability aspects and simplicity that Everpeer is known for.

Thank you, Mike. Next question, please.

Our next question comes from Samik Chatterjee from JP Morgan. Please go ahead. Your line is open.

Hi, thanks for taking my question. My question was on the product gross margin. Do you have maybe more on what's driving the confidence in guiding to the rough margins being in Q4 into Q1 and then steadily through the year? How much of the underlying commodity that you need for your full year guide do you have visibility into already in terms of locking in through either LTAs or contracts with your suppliers and Are you able to lock in pricing to the extent that's driving the confidence? We don't want to understand sort of the underlying sort of drivers there as much as possible. Thank you.

Yeah. You know, Tamek, thank you for the question. It's a-let me try to make the answer as straightforward as possible. Our gross margins tend to be relatively steady with respect to cost changes in the supply chain. that holds true when cost changes are relatively gradual. The cost changes that have taken place literally over the last four months have been anything but gradual. They were very rapid. And what that does is it breaks the synchronization between our pricing, which generally has, as I said, about three months or more time in the market, and our ability to fulfill that pricing with costs because the costs have, very dramatically increased in a shorter period of time. So we believe that we can get back to our standard gross margins as the pricing stabilizes. Stabilizes doesn't necessarily mean stays steady, but it means that it doesn't change by the significant factors that it's changed over the last several months. Visibility is a very different thing. I think visibility is just non-existent. The prices have been changing so rapidly, and the market is so dynamic. Whether it's visibility or contracts, frankly, at this point in time, there's very little. Thank you, Samick. Next question, please.

Our next question comes from James Fish from Piper Sandler. Please go ahead. Your line is open.

Hey, guys. Appreciate the time here. I'm sorry, jumping between calls. Just trying to understand how much of a pastor on the flash you have in sort of your bond here. Are you passing on in that price increase versus eating? And what was the price increase magnitude that you guys actually instilled on February 9th there across the business? Understanding flash as a percentage of the business can range pretty drastically across each of each of the products. Thanks, guys.

Yeah. Well, first of all, flash, it's not just flash. All the components memory is very well publicized, but even GPUs, those Those components are both in short supply and prices are very dynamic, I would say, right now. On average, they've more than doubled over the last six months. So think about that. That is a very big change. We think the pricing will address the increases that we've seen so far. That pricing increase was on average, about average 20%. Now, when I say average, it's very different on different product lines for the reasons that you mentioned, you know, different amounts of componentry costs associated with each, you know, different size NAND. But frankly, a lot of the controllers, of course, have a lot of memory in it as well. So it's a complicated formula. But on average, about 20 percent. And as I stated, I believe actually, first of all, we were, I think, the last to announce a price increase. And from all the price increases I've heard from our competitors, I believe ours was the lowest.

Thank you, Fish. Next question, please.

Our next question comes from Simon Leopold from Raymond James. Please go ahead. Your line is open.

Thanks for taking the question. Appreciate the breadcrumbs you've given us on the royalty business here and some of the shifts. It sounds like the messages are around lumpiness and a back half load to the current fiscal year. But what I didn't hear you update was the prior commentary about expecting double digit exabytes this fiscal year. And I appreciate double digit could be 10 to 99. So can you put a finer point? My sense is you feel better about the outlook, but I want to check in. Thank you.

Right. So a previous commentary, you know, quarters ago were that we expected low double digits, you know, in this year. And I can confirm that probably be the same, but more than what we expected, more than the amount that we had expected when we gave that commentary last year.

Thank you, Simon. Next question, please.

Our next question comes from Wamsi Mohan from Bank of America. Please go ahead. Your line is open.

Yeah, thank you. I appreciate all the color around pricing and memory. I guess, Charlie, would love to get your perspective on what you're seeing from a customer behavior standpoint. Given, you know, you just mentioned that the environment for supply is actually quite unpredictable. Do you think that you saw any pull forward of demand? I mean, you're also saying first half is going to be stronger. Your pricing doesn't really get impacted as much in the first quarter, clearly, maybe even not so much in second quarter. So to some degree, the pricing is yet to happen, but you're seeing significant uptick in demand. And second half, you're expecting hyperscaler revenues, including hyperscaler revenues, to still be less weighted than typical in second half. So just curious if the purchasing behavior that you're seeing in your customer conversations or indicating any pull forward or any level of maybe demand destruction for the industry, maybe not for you, but demand destruction for the industry given some of these unprecedented price changes? Thank you.

Well, I think we're seeing several things. One is we are seeing increased demand for our product. Win rates, size of the wins are increasing. So we believe we continue to pick up share. in a meaningful way. As I'd mentioned in my script, what might be called franchise deals, and I'll explain that in a second, those are going up. And what we mean by a franchise deal, the customer is not talking to us about or the conversations that are not just about this workload or this new opportunity, but pure let's have a enterprise scale discussion about you becoming our one of two or even our sole uh, storage strategic partner, uh, those are going up. All right. So the, the, the quality of the conversations are increasing, um, at, uh, and of course, when you do that, uh, you know, the pricing is not a transactional pricing. It really is about building a, um, a relationship, uh, and a structure that works well, uh, for both us, uh, and for the customer overall. So, we're seeing demand increase. I'm going to leave the quantification, if you will, of pull-ins, but what I would say is that your customers certainly are, they have a lot of projects that they need us for. Generally, when prices went, when costs went down and prices went down, they bought more, but not enough to offset the price decrease. We expect the inverse now. We expect there to be, in fact, some elasticity reduction, that is negative elasticity, but probably not enough to overcome the price increases that are occurring across the industry. So we do expect it to, you know, generally the market dynamics to be such that it increases somewhat the total market.

And then, yeah, let me elaborate on what Charlie has said, one of the hysteric. First of all, I want to reemphasize the fact that we have had a number of very large deals that we booked in Q4. Like I said in my remarks, deals of value that is in excess of $5 million increased 80% year-over-year, which is a very good result from my perspective. We finished Q4 extremely strong. Linearity was towards the end of the quarter. And the timing of it has to do a lot with the frenzy of price increases that the entire industry had to make to adjust for the sudden and rapid rise in underlying input costs. And so that in itself, yes, you're correct, there is an element of pull-ins. But the amount of pull-ins, I would say, is not a substantial amount that underpins our Q4 performance. It more underpins, per my answer in the prior question earlier, the growth rate in Q1. And if you want to quantify that, it's probably a mid single digit in the growth rate that we have guided for Q1 fiscal year 27. Finally, I would say that we're seeing very strong demand in our evergreen one offers. And if you really look at our performance measured in terms of RPO increase, our RPO has increased 40% in Q4. which really attest of the validity of the model and the fact that in uncertain times, customers tend to turn to solutions like Evergreen One for their needs.

Thank you, Wamsi. Next question, please.

Our next question comes from Eric Woodring from Morgan Stanley. Please go ahead. Your line is open.

Great. Thank you, guys, for taking my question. Tarek, I would just Given the comments you guys were making to Samik earlier just about, you know, kind of volatile pricing on certain supply, elongated lead times, and then I guess potentially the risk of any demand destruction depending on what your customers do or how the industry is forced to raise prices in the second half. Can you just help us better understand kind of the philosophy or the approach you took behind setting your full year guidance, just given all of these relative unknowns, especially as we look into the second half of the year? Thanks so much.

Sure. So as always, our guide is determined by the level of demand and deals that we see in the pipeline. So our guide reflects the strength of the pipeline that we have. and visibility of the demand that we have looking forward. We feel very good about the visibility of that demand for the next couple of quarters. Beyond that point, it's hard to ascertain. And we also have factored into our guidance, obviously, the price increases that we have made. Those price increases were timed well, I would say, because we affected them on February the 9th, which gives us pretty much the benefit for the full year. And we went very surgically around adjusting our prices, knowing that we have had a pretty strong benefit coming from enhanced data reduction so that we make sure that whatever price increases we put forward still provide value to our customers. And thirdly, of course, our guidance factors in the benefits from our hyperscaler business which is going to be counting for a lot of the growth in fiscal year 27. And like I said in my opening remarks, the hyperscaler business revenue is not linear during the fiscal year. It tends to be governed by the schedule of the data center build outs. And in this case, we expect the vast majority of the hyperscaler revenue to come in Q3 and Q4 of fiscal year 27. Thank you, Eric. Next question, please.

Our next question comes from Param Singh from Oppenheimer. Please go ahead. Your line is open.

Yeah. Hi, thank you. And I appreciate you taking my question. It's interesting to me to see how you're moving up the software stack, particularly with the acquisition of OneTouch. Maybe you can talk more about your thought process here and what else may be required from either an organic or inorganic investment to increase the value proposition for customers, particularly for AI workloads. Thank you.

You bet. So, and some of this is outlined a bit in our presentation that has come along with the earnings announcement. The way we look at it is the following. Customers today actually, generally, they manage their applications, and their applications manage the data that's associated with that application. The customers, many customers don't actually manage the data itself. And that, if they do, it's all with people, human middleware. What we've created with Fusion and the Enterprise Data Cloud is the opportunity for datasets, that is the same data that's used in different places at different times for different purposes, to be managed as data. That is to be managed on a global basis, to be managed by policies that customers set in software, and then the data is managed as such. So instead of managing storage, they're managing data. What we're doing with OneTouch now is we will be able to add the ability to provide context around the data. The shorthand that we speak about is when we talk about AI using data, it doesn't really use data. It uses data that's been highly transformed into information that is self-describing so that AI can use it. That process of going from data The self-describing information is done with a lot of work by companies. Companies have to use extensive ETL tools. They have to use a lot of human labor to restructure the data so that it can be used by AI. We believe that a lot of this work can be done in the operational environment, that is, with additional capability that we build, adding it not just to ourselves, customers' data, whether it's on our product, in the SaaS environment, on the cloud, or even on third-party product, and add that context to the data where it lives, and really just make it a lot easier for AI to be able to use data on a real-time basis. And Rob, do you want to add to that?

Yeah, just to add to what Charlie said, I think we, as Charlie mentioned, we've been expanding from our roots in data infrastructure through to data management, bringing the cloud operating model into the enterprise data center with fusion and so on and so forth. This next leg of our enterprise data cloud vision really is strongly supported by OneTouch, and the strategic fit is quite exceptional. OneTouch is bringing in critical capabilities to go and advance that vision and roadmap uh, capabilities in the areas of data discovery, data classification, um, really being able to understand the semantic meaning of data that, uh, you know, Charlie, as Charlie was just outlining, you know, in short, if I step back from it and I look at, um, you know, our portfolio evolution and, and where we have, uh, grown from our roots and data infrastructure diffusion to enterprise data cloud over the last couple of years and where we're headed. I would say that, you know, with Fusion, you know, we really started making data infrastructure AI-ready, really being able to connect all the different silos in the data center. And then this next leg with OneTouch and integrating that technology is really going to go serve to help customers make their data itself secure and AI-ready.

Thank you, Param. Next question, please.

Our next question comes from Krish Sankar from TD Cowen. Please go ahead. Your line is open.

Yeah, I have a question for Tarek. You know, very impressive growth in RPO sequentially, and I'm just wondering, are hyperscale revenues included in that, and how much of the $700 million in sequential growth is from hyperscalers?

Well, the answer, Krish, is none, because hyperscalers revenue is recognized in product revenue. It's not part of, it's not readable, and we do not include it in the remaining performance obligation.

Thank you, Krish. Next question, please.

Our next question comes from Azia Merchant from Citigroup. Please go ahead. Your line is open.

Great. Thanks for taking the question and good job on the name change as well. You talked a little bit about the hyperscaler opportunity, low double digit exabytes that was talked about earlier. If you can give us any update on, you know, now that you have a more structured model and how you're approaching these hyperscaler deals, if there's any updates on the progress beyond the first hyperscaler announcement. And related to that, the investments that you're making for exploring those opportunities, what specific, if you could drill a little bit deeper into what sort of investments are those? What are you looking to expand? Are those more related to product or what the nature of those investments are? That would be great. Thank you.

Thank you, Asiya. You know, of course, this is a difficult area for us to chat about for lots of different reasons. But what I would say is that we are in engineering test environments in multiples of the hyperscalers now. And they're proceeding well. But, you know, it still takes more time before we know whether or not we are certified or whether there is a specific date by which they plan to use us on build-outs. So until we can get to that level of certainty, we just have to leave it there, really.

And then on the nature of the investments, I wouldn't call out any change in what we've described before, primarily looking at continuing to help our hyperscaler customers grow and scale R&D to go support that, as well as scaling the supply chain to support that.

Thank you, Asya. Next question, please.

Our next question comes from Tim Long from Barclays. Please go ahead. Your line is open.

Thank you. Yeah, maybe for Tarek, just wanted to, you know, touch on something on the subscription services side of the business. You know, you guys saw a really nice rebound in the TCV business in fiscal 26, a nice acceleration. At the same time, we're kind of seeing a deceleration on just the overall subscription services revenue number compared to the prior year. Just curious, is this just timing? Is this related to maybe the impact of the non-TCV business where product sales were lighter in 24 and 25? Or is there something else going on where we're not seeing those two kind of metrics tracking a little bit more closely together and kind of how do we think about that going forward? Thank you.

Yeah, thanks. Thanks, Tim, for the question. I think, you know, you need to look at subscription services revenue growth in conjunction with the RPO growth. It's really important to look at them together. The RPO growth is really the best measure of latent revenue and momentum that we have in the business. You know, what is interesting is that this is the first time where we are lapping the introduction of evergreen and we are renewing a lot of those evergreen contracts, which is really good. Some of those renewals are longer term than what we originally anticipated. It's good for us to drive longer term renewals. It's a test of the validity of the model. And that elongation of the renewals is what goes into the RPO. And this is why the ARR, for example, is growing at 16% and the RPO is growing at 40%. And that explains why you're asking your question and you're looking at it as a deceleration from FY25 to FY26 in terms of growth rates. And you're right, it's 22% in 25 and 15% in 26. But again, the reason is we are shifting to longer-term contracts. That is the main reason. And the RPO attests to the performance of our subscription business.

Thank you, Tim. It looks like we have time for one more question. So the next question will be the last question.

Our last question comes from Max Michaelis from Lake Street Capital Markets. Please go ahead. Your line is open.

Hey guys, thanks for taking my question. As you guys shift away from primarily operational storage and more into this data management space, I mean, how does this rework your competition landscape? I mean, previous partnerships may now be bumping up against them in terms of competition. So I guess if you can just kind of give us an idea of how that changes the competition landscape for you guys.

Sure, thanks, Max. I want to be clear, we're not shifting away from storage. We're definitely not shifting away from storage. We are adding, yes, we are absolutely adding data management. So we actually believe in some ways this is a new area. Now, it's certainly true that this space was filled by ETL software and systems and a lot of human labor in our customer base. but the entire ETL segment is being disrupted by AI as it is. So that's an area, not only in disruption, but an area that's ripe, I think, in terms of opportunity of instead of completely separating out systems of operation, operational systems, which is what a lot of our data storage gets sold into, and then systems of information, which is other storage and other compute that is completely dedicated to actually analytics and or AI. And these are just two completely different environments. You might ask, well, why replicate all of your data away from the operational system into a system of information that has to go through a lot of ETL and a lot of transformation before it can be used? Why not have the data that's sitting in the repository of, you know, in the operational repository, why not have that be more ready to be used by AI, in which case it's much more real time, it's much more valuable, and it could be managed along with the foundational data itself on a global basis, you know, by policy rather than, as I mentioned in the past, by human middleware and fingers on keyboards. So we think this is a new opportunity. It's a new architecture, if you will. for how data is managed in the enterprise, and we think it really sets us up in a unique place.

And Max, this is Rob. Just to add one thing to what Charlie said, which I think was the other part of your question, looking to understand how does this fit into our partnership landscape. You know, as we mentioned before, OneTouch provides critical capabilities that, you know, we see longer-term applications for, as Charlie outlined, to really broaden and enhance the ways that customers are making their data AI-ready. That said, these capabilities are today offered as a DSPM platform. DSPM or Data Security Posture Management is an important tool. It helps customers make their data more secure. But at the same time, we rely on a strong ecosystem of partners to provide a much more holistic set of security capabilities and fully intend to keep working with those partners on our customers' behalf.

Before we conclude, I think Charlie has some final comments.

Yeah, thank you, Paul. And I want to thank all of you for joining our call today. We know there were many other calls out there, some very large. We're entering a new chapter in our company's journey, and I'm proud of the progress that we've made and the momentum that we're seeing right now. I want to thank our customers, our investors, our employees, our partners, our suppliers for their trust and partnership. And we look forward to building on this momentum this coming year. Thank you all.

That concludes the EveryPeer Fourth Quarter Fiscal 2026 Financial Results Conference Call. Thank you for your participation. You may now disconnect your line.