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According to a recent report, the global 3D NAND Flash Memory market size is projected to grow at 21% CAGR to $47.8 billion by 2026 from $15.54 billion in 2020. Mountain View-based Pure Storage (NYSE: PSTG) recently reported its third-quarter results that surpassed market expectations. The company is transitioning to a subscription-based model for storage to drive growth.

Pure Storage’s Financials

Pure Storage’s third-quarter revenues fell 4% over the year to $410.6 million, ahead of the market’s estimates of $49.52 million. Adjusted EPS of $0.01 also beat analyst estimates of a break-even quarter.

Subscription services revenue grew 29% over the year to $136.1 million. During the same period, product revenues fell from $136.1 million to $105.1 million as the company continued to focus on transitioning to its subscription-based offering.

Given the current economic conditions, Pure Storage did not disclose any outlook for the rest of the year.

Pure Storage’s Subscription Services

Pure Storage is focusing on growing its subscription-based model. Subscription Services, including Evergreen and unified Pure as-a-Service offerings, grew 29% over the year with companies like ME Bank in Australia and The University of Texas Health Science Center adopting the service. Pure Strorage offers a unified subscription service through Pure-as-a-Service offering that includes Cloud Block Store and enables customers to subscribe to storage in their data center and the cloud, paying for only what they consume. The service makes migration to the public cloud possible at any time without organizations having to worry about stranded assets.

Earlier last quarter, it expanded the offering by releasing the Pure Service Catalog as part of the Pure as-a-Service suite. The catalog includes several new service tiers that will be able to deliver increased transparency and flexibility for customers and letting them choose the right storage service level for each workload. To attract a wider range of customers, Pure Storage is making Pure as-a-Service available at lower cost service tiers as well.

Portworx’s Acquisition

During the quarter, Pure Storage announced the acquisition of California-based Portworx for $370 million. Portworx is a Kubernetes Data Services Platform providing fully integrated solutions for persistent storage, data protection, disaster recovery, data security, cross-cloud, data migrations, and automated capacity management for applications running on Kubernetes. Prior to the acquisition, it had raised $55.5 million in three rounds of funding from investors including Mayfield Fund, GE Ventures, Mubadala Capital, Ventures US, NetApp, Cisco, and Sapphire Ventures.

The acquisition will allow Pure Storage to expand its data service capabilities to traditional and cloud-native applications in containers. Portworx will continue both its software-defined storage container and Kubernetes control roadmap and layer in Pure Storage’s capabilities. Together, they will use Pure’s capabilities along with VMs and bare-metal workloads, all managed through Pure’s Saas-based Pure1 management system.

I recently interviewed the CEO of Portworx Murli Thirumale on what’s happening in the storage industry as a player like Pure Storage tries to move up the stack and acquire a startup like Portworx.

I think the merger of Pure Storage and Portworx will work very favorably for both players. The products of the two companies complement each other. All of Portworx’s customers are deploying containerized apps using data services, and now Portworx will enable Pure Storage to give their customers the ability to manage data. Pure Storage will now be able to offer data management and data services that have much more to do with software than having the underlying hardware.

At the time of the acquisition, Portworx had about 175 customers, most of them from the global 2000 list. Pure Storage has about 8,000 customers, of which a majority are classic enterprise customers compared to the mid-market. There is a high amount of leverage based on their customer base and their customer base is consuming what Portworx has. Clearly, this is a well-made match.

Pure Storage’s stock is trading at $21.62 with a market capitalization of $5.8 billion. It had touched a high of $22.35 earlier this month. The stock fell to a 52-week low of $7.93 in March due to the global crisis. Pure Storage had listed on the NYSE in 2015 by raising $425 million at a valuation of $3.1 billion and a stock price of $17.