Everpure, Inc. (P) Earnings Call Transcript & Summary

We are excited about today's discussion and the future of Pure Storage. Let me remind you that we will be making forward-looking statements today that are subject to assumptions, risks and uncertainties. Actual results could differ materially from those anticipated due to a number of factors, including those referenced in the detailed disclaimer at the beginning of our presentation slide deck and in our public filings with the SEC, which we encourage you to review. The presentation slides discussed today will be available on our Investor Relations website at investor.purestorage.com.

Hello, everyone, and welcome to our Product and Technology Analyst Meeting at Accelerate. We appreciate that you made time for us in your schedules today and we intend to use the 2 hours efficiently. The plan is to spend the first hour on short presos and conversations and the second hour on informal and interactive Q&A. Charlie, he'll start us off with Pure's perspective on flash, both historically and in the future as well as our competitive position and the outcomes that we drive for customers. And a spoiler alert, this won't surprise some of you, but our Purity operating system, it's key to everything. Partway through Charlie's talk, Coz will come up. He'll use his props and he'll cover the historical progression of our Purity-managed DirectFlash modules. Then most importantly, as Coz can do, he'll explain how our trajectory with our DirectFlash modules will leave hard disk drives and solid state drives in the dust. Under the headline of All-Flash Everywhere, Amy and Sean, they're going to cover a number of products that enable Pure to further expand across the data center. This includes our unified block and file and unified file and object platforms as well as our e-family. And as of this week, we have an e-family. Amy and Sean will also cover AI, use cases for Pure as well as our Fusion and our Cloud Block Store software. Then Rob will conclude the first half of our meeting with a more detailed understanding of what it is that enables each of Pure's 4 unique sustainable competitive advantages. And then when Rob finishes, Kevan and Ajay will join us all on stage for Q&A. So with that, I'll hand it over to Charlie to kick things off.

Thank you, Paul. Hello, everyone. It's great to be seeing you again, and thank you for coming all this way to come see us. Really appreciate it. I am going to present to you this morning, and I know that at least a few of you were here yesterday and so this may be a bit redundant, but as our former colleague used to say, repetition doesn't spoil the prayer. So I hope you forgive me for that. And I really look forward to having our entire team in front of you today. So without further ado, I'm going to start off with a true story. 1984, last semester of business school. I start doing an independent study with a friend. And believe it or not, the independent study was on this new recording media called optical. And was -- and there's a lot of euphoria about optical at the time and was it going to replace magnetic disk, which was still early in its infancy. In fact, it hadn't come out yet for the PC. It was just in mainframe environments. So we did a deep and detailed analysis and determined that magnetic storage had decades of improvement coming in the future and that it was unlikely to be replaced anytime soon and especially by optical that had a number of limitations. Well, a little later that year, I'd gotten married. My friend had gotten married and we got together for dinner with our 2 new wives. And it was BC or before color photos. And we -- my friend had continued that study, as it turned out, with a consulting group. And he came to dinner and said, "You know something. Within 5 years, vinyl LPs are going to be gone completely replaced by compact disks." And my wife who just loves music and loved her LPs and her albums said, "That is just impossible. That is never going to happen." What are people going to do? They love their albums. They love the album covers. It has beautiful pictures and all the words. And she's just incredulous. Well, I think we know what happened here. It only took about 6 or 7 years and vinyl was almost gone, right? And it all went to compact disk. Now oddly enough, of course, vinyl probably outsells compact disks today, but not -- but that's a more recent phenomenon. So in just 6 or 7 years, LPs were gone, vinyl was gone, CDs ruled. Well, another media which we're very familiar with, again, an information-carrying media, VHS and VHS tapes. In the year 2000, they were dominant. The way we were able to play our movies was through our own home video cassette recorders. DVDs came out, another optical recording technology, and within 5 or 6 years, completely dominant. What was different about this though was it wasn't just a media that changed. It changed an industry and we're all very familiar with this industry. We can look back at 2006 when DVDs became dominant. And at that point in time, Blockbuster was dominant. It sold VHS. Now it didn't switch to DVDs as well but there was this upstart, Netflix. And within 5 or 6 years, not only did Netflix become dominant but Blockbuster went bankrupt. And Netflix today is -- does over $30 billion a year, is over $30 billion in market cap. So it cannot just change media but it can change industries. So what does all that have to do with storage? Well, let's look at storage more recently because hard disk has been dominant for 5, 6 decades, a very long period of time. Sorry, that didn't go. There we are. So flash actually has been around for decades as well. Flash has been around for about 30 years, perhaps more depending on how you look at it. But really, it started entering the consumer space around 2007. I don't know if some of you remember that one of the original iPods actually had a hard disk in it. It was very heavy. And -- but since that time, since 2007, as you can see, flash has continued to grow, mainly because of the consumer revolution, right, especially handheld cell phones. But then it got to the price point and SSD manufacturing -- sorry, NAND flash manufacturers are very clever in packaging it -- flash as an. What is an SSD? An SSD is flash that has been packaged to mimic a hard disk. Because if you mimic a hard disk, it can go into an existing laptop or an existing desktop, and they don't have to change the software to be able to operate it because it operates just like a hard disk. But it's lighter, it's more rugged. And that's what has allowed it to take off. So it replaced 1 thing at a time, right? Cell phones, iPods, your DVD recorders -- your cable and/or satellite box at home and then eventually laptops, desktops. And as you can see, flash, and this is the all- flash market, continues to grow year after year. Hard disks are still around but you can see that's been coming down quite aggressively. And so this is why we believe we're on the verge of something very new here. We believe that in 5 years, there will be no new hard disks sold because they only sell in 2 places right now: enterprise mass storage and into hyperscalers. Those are the only 2 locations where they go and we are breaking that price barrier. So what does that mean relative to Pure Storage? Well, let me start from a different standpoint. For about the last 10 years, when Pure was first introduced, we've continued to grow. And not only have we continued to grow, we've been able to increase our market share. 8 points, and this is, I guess, the total storage market, not the all-flash market, where we obviously have higher market share but just against the entire storage market. Flash and specifically, Pure has been able to grow. And the right question to ask is why, why have we consistently grown year after year against much larger rivals, against companies that had products that had certainly more featured content than us despite the fact that we didn't have any low-end products that could compete in the mass storage market because that's still dominated by disk? Why have we been able to grow in this environment? And I would tell you that it's for a variety of reasons. In particular, though, the outcomes that we deliver to our customers. So I want to remind you here, I am talking about multiplication factors, not percentages. Our products are 2 to 5x more space- and power-sipping. That is more -- we are more power efficient. We use less power, less space than our all-flash rivals, all right? So apples-to-apples, the same capacity, same performance, flash product by a competitor versus Pure were 2 to 5x more space and power efficient. We are over 10x more reliable, over 10x more reliable, and not even counting the fact that when our competitors do an upgrade, they have to take the system down. They have to take their customers' application down. In fact, there's an [asterisk] after the reliability figure that says not counting scheduled downtime. At Pure, we have no scheduled downtime. We upgrade without disruption. We are 5 to 10x -- we require 5 to 10x less labor. This is customer recorded -- reported rather, than our competitors, 5 to 10x -- for the same amount of storage, we require 5 to 10x less labor to operate. You put all that together, including the original purchase price, we have 50% lower total cost of ownership and our customers get their nights and weekends back. Now in addition to that, we have the most consistent product line in the business. What do I mean by that? Most of our competitors have 5 or 6 different models of product that have different operating systems. They have different hardware environments and can't -- they have to have a different model of product, most of which have been assembled by acquisition to their customers. So if I buy -- if I'm a customer buying from one of our competitors, typically, I actually do have 5 or 6 different products entirely in their environment. And as you'll see in a moment, we have the most consistent product line. And then finally, with our Evergreen program, our products are never obsolete. And what do we mean by that? Well, we have a customer that started with us about 10 years ago. Over the years with our Evergreen program, that product has been continually updated so that in fact, just a few months ago, if you were to look at that product, it looked like the product that we sold this past year, brand new, every bit of hardware, every bit of software, brand-new, customer never had to take their application environment down, never paid an additional cent other than the subscription program that they're on. This is unique in all the industry. So the question now is, well, how do we do that? How is it possible for us to be 5 to 10x better than everybody else? And it really boils down to the following. It starts off with our Purity operating system. What is Purity? Purity is the operating system that we have working on all of our products consistently, which I'll go into in a moment, and is the only product -- is the only software that works on native flash. What do we mean by that? We don't use SSDs because SSDs make flash look like a hard disk. In my opinion, that's like making a personal computer which is a semiconductor device look like a typewriter. I think we all know that it's much more powerful than a typewriter. In order, and Coz will go into this in more detail, but SSDs suboptimize the performance of the flash. And so we take all of the requirements for managing flash. We put it in our core software, which we call Purity. And Purity and our DirectFlash modules work on our entire hardware product line, both scale out -- scale-up and scale out. Scale-up in order to be able to address smaller capacities but with very low latency, scale out for higher capacities with very high performance. And they all run Purity and they all use the same DirectFlash modules. In addition to that, we even have Purity operating on the cloud. AWS and Azure for Cloud Block Store, and of course, we'll continue to expand that capability. All of this is managed by 1 management system, Pure1. This is for traditional workloads, the traditional FlashArray, FlashBlade, array-based block file and object. But of course, there are new workloads for containers and Kubernetes. And we have our Portworx software to be able to enable that, works on our products, works on the cloud just as Purity does. And then finally, all of these things enabled by that Evergreen capability that I told you about, which is non-disruptive upgrades all along the way, able to be purchased as a service that is purely as an SLA as well. And then Pure -- sorry, Pure Fusion, which enables a cloud operating model. So instead of the customer having to operate their storage systems array by array as independent units, they can operate it as a pool of storage across the data center or across a multi-cloud environment. So this is the world's most consistent product line for sure. One operating system, only 2 hardware architectures, both supported by the same DirectFlash modules, 1 management system able to operate both traditional workloads, next-generation, cloud-native workloads, all enabled by Evergreen. So we go a little bit further than that. All of those were block file and object. But until recently, we could only compete at what's called the primary storage level. What is primary storage? High-performance storage, transaction processing systems, AI, analytics, electronic design automation, et cetera. Mass storage, truly mass storage [data] on hard disk because it was cheap. And storage is generally expensive. It's a large fraction of data center spend. And so if you're just going to store a file away for a long period of time, you really don't want to put it on something that costs a lot of money for storing that file. You want to put it on something less expensive. And flash, by its nature, started off much more expensively than disk. What we're able to do now with our E-Series is go after all of the disk [state]. That is -- that's why we believe it's the disk is going to be done in the next 5 years. We're now at the point where it really doesn't make sense to buy disks anymore. We introduced our FlashBlade//E last quarter, had our first few sales. It started at about a 4-petabyte level. At this Accelerate, we introduced FlashArray//E, which we'll be selling next quarter. And that will start at the 1-petabyte level. And at these levels, we're now penetrating, if you will, the upper ends of the all-disk market. And as you'll see in a moment, over the next year or so, we're going to be able to penetrate all of the disk market from a pricing standpoint. So if I were to net this out, this really boils down to 4 unique and sustainable competitive advantages for Pure. What do I mean by that, unique and sustainable? These are competitive advantages that I don't believe our competitors can come up with any time in the near future and put -- give us a multiyear head start. One is our direct to flash management, what I mentioned with Purity. We are the only company who has built software to manage flash natively rather than going through this SSD translation. And it has been a 10-year journey for us to build this and to build it with all the features, functionality, reliability, et cetera, that's expected in an enterprise environment. And we don't think it's going to take anyone else any less time to be able to do it. The world's most consistent product line. Everything I told you about is block file object. It now scales from low price to high performance. It does it with the same DirectFlash modules on all the units, does it with 1 operating system all managed by a single management system. As I mentioned earlier, if you buy from our competitor, you may think you're buying from 1 company but you're buying 5 or 6 entirely different products, different management systems, different management procedures, different hardware, cloud operating model. We announced this 2 years ago. We introduced the first version of this last year. No competitor has yet even made an announcement about an intent to do this. You need to have consistent APIs. You need to have consistent products to be able to deliver something like this. And frankly, you need to have the vision to be able to do it. So this is something that will reduce both the amount of storage that a customer needs but also reduce the amount of labor that they need to manage it. And then finally, our unique Evergreen life cycle, where products never go obsolete, once purchased, and you never have a disruptive upgrade as you go from 1 version to the next or during a software or a hardware upgrade. So with that, I think I'd turn the stage over to our illustrious founder and leader, John Colgrove. Coz?

Thanks, Charlie. So I want to talk a little bit more about our DirectFlash advantage. So to start with, this is a hard drive. It's looked pretty much the same for quite a number of years now. And if you think about it, it's been an amazing journey. In 1970, give or take, 5 years, actually, maybe '65, hard drives became the dominant form of storage technology. And they went on a fantastic set of decades of improvement, exponentially getting better and better all the time. When I started doing this in the mid-'80s, a disk pack was like the size of a large pizza, about that high, went into a washing machine, held maybe a couple of hundred megabytes. Today -- or 10 years ago, [this thing] 4 terabytes, roughly speaking today, maybe 20, 24 terabytes, something like that. So in the last decade even, 5 or 6x improvement. That seems pretty good. It would for most things. It's actually not very good compared to the history of disks. So, and by the way, this thing, when we talk about e-waste and things, just so you're aware, it's kind of heavy. It weighs as much as I think everybody's laptop that I see in this room. You can actually get some laptops that weigh more, but trust me, this is heavy. So 10 years ago, we would have shipped one of these, right? An off-the-shelf consumer-grade SSD. The original flash array was 5.5 terabytes. The whole array. not one of these drives, the whole array, 5.5 terabytes. In fact, I have a couple of examples here. You can see in 2013, when we shipped our second generation, we were so proud, we got up to 35 terabytes in 1 whole array, 35 terabytes in 1 array, [hot dog]. In 2014, we doubled it to 70 terabytes. We were really proud of that one, too. So we've been through a lot of changes in this. But one of the biggest ones was the change to DirectFlash. So this was originally, as I said, 10 years ago, 512 gigabytes. Now currently, we're shipping these DirectFlash modules in 48-terabyte sizes is the largest 1 we ship. But this one, which we're introducing next quarter with the FlashArray//E we'll be shipping it and the FlashBlade//E, 75 terabytes. So think about it from a couple of perspectives. 2014, 70 terabytes was something to celebrate on the whole array. Now 1 device, 75 terabytes. 150x improvement over the last decade. So compare that disk, 5x improvement; flash 150x. If we do 150x over the next decade, I'll be standing up here showing you an 11.25-petabyte DirectFlash module. I suspect we won't be quite that dense because I don't think the market will demand it but it will be a lot bigger than 75. Now that 150x improvement, that's driven not by the hardware. I mean, I'm showing you the hardware because it's something I can show you. It's driven by the software. So over those years, we started doing this DirectFlash 10 years ago. Our engineers had to learn how to overcome all the things that, that drive did that this 1 doesn't, right? We've taken out of this, the wear leveling, the garbage collection. When you write to flash, you don't overwrite data in place. You write to that SSD and you write-block 1 and then you go to write-block 1 again and it puts block 1 somewhere else. Inside that SSD, it remaps the data because it's pretending to be a disk. That remapping requires a bunch of memory. It requires a bunch of compute and it does extra overhead to the IO. So if I opened up that SSD, roughly speaking, for every byte or for every 1,000 bytes of NAND that it has, it has 1 byte of DRAM. That means if you open up a 30-terabyte SSD today, you will see, roughly speaking, 30 gigabytes of DRAM. If somebody were to try to build a 75, they'd need to put roughly 75 gigabytes of DRAM in it. And if somebody went and built a 300-terabyte DirectFlash module -- or pardon me, 300-terabyte SSD, they would need to put 300 gigabytes of memory in it. There isn't room in that thing for 300 gigabytes of memory. One of the things that actually helps us in that is DRAM hasn't been improving as much lately either as it used to. So that memory, it adds expense, it adds instability. This thing, we've taken all that out. For DirectFlash, because we've removed all the mapping layers, we've removed the garbage collection. All of that is done in Purity, in our main controllers, not in the DirectFlash modules. Makes this simpler. It means it doesn't need that DRAM. So we need, roughly speaking, 1 byte of DRAM for every 1 million bytes of NAND, and that gives us a big advantage in cost but it gives us a big advantage in simplicity and reliability. When I talk to a customer and I talk about putting 75 terabytes in 1 device, the first thing they think about is, "Oh my God, when that fails, is that disruptive?" Well, it fails a lot less often because it is much simpler. Roughly speaking, we have about 1/6 the failure rate of an SSD and SSDs actually fail less than hard drives. That allows us to go larger because we have less failures, less disruption to deal with. But it's more consistent because it's not remapping, because it's not doing things inside. I don't try to read some data and find that the drive's off doing garbage collection and waits 0.5 second before it gives me back data. And for all the speed that people talk about with flash drives, they do have that inconsistency. Every once in a while, you do a read and it drives off like garbage collecting and it goes to sleep for 0.5 second before it gives you back the data. This thing doesn't. That simplicity, that greater reliability, that allows us to scale. In addition, people we talk about, okay, 75. And then this -- now this is a 3D-printed model of a 150-terabyte DirectFlash module. We will ship this next year. Same flash chips as that 75. Just we've managed to put 2 boards of them in there. You notice there's a little bit of horizontal space here in this. We've managed to put a second board, same flash chips, just more of them, 150 terabytes. We don't have to try and invent some new physics like the disk drive guys are going through now. We're just going to scale with that. In another year after that or so, I'm going to go to buy a new phone. And my kids take a lot of pictures. They want more memory in their phone. So guess what? That phone is going to have bigger memory or, I should say, bigger storage capacity, thus a denser flash chip because there's no more room in the phone. The flash vendors, driven by those consumer devices, are building denser chips. So a year after the 150, around the end of 2025, we'll be able to ship a 300-terabyte DirectFlash module. And it's not going to stop there. We'll go from 300, we'll go to 600 a little bit after that. And it's not coming again from new physics. It's coming from what the flash vendors are doing, just stacking more layers. You've seen all their road maps. They have the -- I think it was maybe SK Hynix just shipped a 238-layer flash chip, and they all have road maps that go up to 400, 600, 800 layers of stacking the NAND. So we're going to grow at scale. And those jumps sound astounding but they're actually not. If you think about it, disks went from 1 terabyte to 2 terabytes to 4 terabytes. Memory DIMMs, 4 gigabytes, 8 gigabytes, 16 gigabytes. We're kind of computer nerds, we like to double things. And so 75 to 150 to 300 to 600 to 1 petabyte and beyond sounds like huge jumps, but it's really just the standard thing happening that we do all the time. And it's the Purity software that enables us to drive that, and it really just changes the face of things because now you think about it, 300 terabytes, at that time, maybe, let's say, a disk is 30 terabytes, 10x fewer devices. The devices weigh 1/3 as much. That's 30x less e-waste. They last twice as long. That's 60x less e-waste. 10x fewer devices. The devices don't use as much power. That's more than 10x the power benefit. And as we go through these generations, because the disks are growing so slowly now in size, today, call it, a 24-terabyte disk versus a 75-terabyte DirectFlash module, we have a 3x advantage on the device count, on the power and stuff just inherent in the system, forget everything you put around it. Next year, we're at 150. They go to, let's say, '28, we'll call it 30 to make the math easier, 5x device advantage. Next year, we go to 300. They go to 34, call it a 9x advantage. Maybe a couple of years after that, we go to 600. They get up to 40, where we have a 15x advantage. It is a growing advantage because the flash is on a much greater exponential improvement curve and the disks have fallen off that. And that's the reason why we're so confident that the time is now that disk is just done and flash is going to wipe it out and replace it from all of those places. It's less power, less space, less e-waste, better reliability, better performance. And you look at the TCO when you factor in all of that space, all of that power, it's not about how much the raw media costs, it's about what does it cost to have it, and disk just has no chance to keep up. So with that, I'd like to ask Charlie to come back up and continue.

So we've seen the exponential technology curve. So what does it mean commercially? Well, if we were to sort of put in this pyramid structure, the -- what the -- storage, as you might imagine, is a big market. Whenever you have a big market, it's layered quite a bit and complex. If we put it into a pyramid scheme, you see your most mission-critical, your business critical apps, so-called primary storage on the top. And then slowly going all the way down to what might be called cold storage all the way on the bottom, all the way to tape, right, which is the coldest of the cold storage. And in between, we generally call it Tier 2. There are several different layers to Tier 2. The highest layer, meaning the most performant layer of Tier 2 tends to be called nearline. We're at that today in terms of pricing. I did something for the first time ever in my entire career on an earnings call, not this past quarter, the 1 before, which is I announced a price on an earnings call. I mean, you just never do this. You basically just gave your top -- the top of your price range on an earnings call. Everybody gets to negotiate against that, right? There was a reason why we did this, and that is because nobody really believed that flash could get to the price of hard disks. And by announcing it specifically in an earnings call, we said, no, it in fact, has reached the price now of hard disks in the secondary tier. And if we follow what Coz just said, by next year, we'll be at the next layer. And by the year after that, at the next layer, in fact, at the same pricing that we estimate that hyperscalers pay for their storage on a per gigabyte basis. So this is why we're quite confident that flash and in particular, Pure flash because we will be 3 years ahead of the same price curve for SSDs and that's a 3-year sustainable advantage. In other words, 3 years from now, we'll be 3 years ahead of the price curve for SSDs as well. All right. So this -- the E-Series, which we recently introduced now, really fills in this teal color here at the bottom that we couldn't really address the lower performance, higher capacity, lower priced market for disk, but now we can. This really changes, in a sense, our profile as well as the company. Up until now, customers had to buy from our competitors. We didn't -- we couldn't sell at that lower end of the market, which was 50% or 60% of the dollars. And so we never gave our customers the choice of standardizing on Pure across their entire estate. Now they can. Everything from the highest performance to the lowest price on all 3 major protocols, block, file and object protocols. And in addition to that, if you look at our track record, we are well known as being the leaders in high-performance storage. We've sold into well over 100 AI environments now, and now we're going after that low price level as well. We're especially proud, I have to say, though, about our environmental performance. And for us, it really boils down to something very simple. At compared to our competitors up to 1/5 of the power and space and compared to disks, 1/10 the power and space of the existing environment, I mean, this is substantial. If you follow the math, which is that about 2% of the world's power generation is used in data centers, and you understand that about 20% to 25% of the power in a data center goes to storage. And you take -- it's all disk mostly in the hyperscale environment today, and even the majority of data is disk in enterprise because mass storage, like its name, mass storage is the bulk of the data. And you remove 90% of that, you're basically giving back all 20% of both power and space, in fact, even more space than power back to the customer. Imagine, with 1 change, I mean, I have to tell you, data centers work on removing 0.5% of their energy through all kinds of difficult engineering. Imagine with 1 change, you can recover 20% of your data center power. I mean, this is really quite substantial. And that's where our credibility, if you will, comes in, in the area of environmental. There will be a lot of companies greenwashing this system because if you buy, if you plant enough trees apparently, you can make up for all of the electricity that you burn, right? But I think it all -- it's much better if you just use less electricity in the first place, right? Not that we should still plant the same number of trees, just not burn as many of them. Less 1/5 of the power. As Coz mentioned, less e-waste, lower operational costs, much higher reliability. We're pushing [7 nines] of reliability. That is less than 5 seconds a year on average per array, which is a pretty amazing number. Less than 1/5 the space, so we recover a lot of space. These are -- this is, in my book, the best that can be done in the environmental -- environment. I'll just take us back to our -- these advantages are sustainable. It all comes -- it's all based on our Purity operating system but -- which is where we have the direct to flash because we use it on all our products, it makes them highly consistent. And then finally, I'll just highlight the Evergreen life cycle, which was built in from day 1, hard to replicate, hard to bolt on the side of something that already exists. So thank you for your time. I'm going to introduce our next set of speakers. Shawn Hansen and Amy are going to be coming up and speaking about our latest set of products. They each represent 1 of these 2 great products, each general manager, Amy of our FlashBlade business unit; Shawn of our FlashArray business unit. And Shawn and Amy, please, welcome to the stage.

Thank you so much.

Thanks, Charlie. Okay, I'm doing the clicker today, right? All right. So I thought that we'd take a quick second and just introduce ourselves in a little more detail. I think you've seen Coz and Charlie many times. But just for a little more context, Amy Fowler. I run the FlashBlade business unit here at Pure. And been here actually almost 10 years. My tenth anniversary is coming up soon. Been with the -- with FlashBlade, really since even before it [indiscernible]. So it's been a really exciting ride, and especially this past year has been just amazing and really fantastic of what we're bringing to the market, and I'm super excited to be able to share more of that with you all today.

Welcome. So happy to be with you. Shawn Hansen, GM for FlashArray. I've been about 3 years, not as long as Amy. When I first met Coz and Charlie, I've just come off of being a product manager for 3 different platforms that were successful in the industry. And when I first met them, I was blown away with the potential of the platform. Now it's very rare to have a very successful platform with a ton of leverage. And I imagined, what would take for the benefits of Evergreen and what's happening with, what Coz has shared with you to expand into all the other markets? And so we hope we could have with you a little bit of an informal chat about the growth opportunities that result as a part of our expansion to these markets. From our side, we're going to walk you through 2 adjacent markets. We're going to walk you through besides just the E-side, we're going to walk you through what's happening with expansion into the file or the filer market and also the adjacent market with the cloud. So Amy, just to kick this off. It's great to share a stage with you. Maybe you can walk us through a little bit about the great accomplishments you're most excited about this last year.

So when you think about this as a whole, we're really just focused on addressing a broader set of our customers' business and data center requirements, right? So we want to extend Purity into more use cases, and that's what we've been focused on delivering. From a FlashBlade perspective, we've been delivering fast file and object, actually unified fast file and object. We were the first to bring that to market for many years now, specifically broadly used in technical computing, analytics and AI-type use cases, like Charlie just mentioned. But last year, actually about exactly a year ago at Accelerate, we were really excited to introduce our next generation of FlashBlade, the FlashBlade//S, which has a modular architecture that provides a lot more flexibility and scale in all of the Evergreen Forever benefits. It also uses those same DFMs that we've been using in FlashArray for a few, years, so we broadened the consistency of the platform lines. So that modularity where we actually disaggregated the compute, where the blades used to have both the processing and the storage on them, we pulled that apart so that we can scale those independently. And that ensures that we can leverage the same building blocks and also open the door beyond super high performance, fast file and object and go into that secondary tier, which we've been talking about a lot this week. And so that's what enabled us to introduce FlashBlade//E. And I know we're going to talk about that a lot more in the next few minutes. But Shawn just mentioned talking about file, and we've been doing unified file and object on FlashBlade for a while. But I think it would be great for us to talk a little bit more about the other unified that we're doing these days, especially as it's allowed us to win some tremendously large deals in international right off the gates.

Awesome. Now in the last couple of years, if I were to characterize the most common conversation with a customer, it sounds like this. Now Shawn, you changed my -- Pure has changed my life with simplicity in Evergreen. I've gotten my weekends and my nights back, and the storage infrastructure manager or the IT director is full of almost an emotional response for the impact that Pure has made in the life on the block side." But then they say, "But what about this other thing? I have this other thing in my data center that caused me a huge amount of pain. There's 30 years of complexity built up with this. It's not simple. It's disruptive. Can't you help me replace this thing?" And typically, they wave over at their filer, which is the [NASA] side of the market. And so we've worked really hard in the last couple of years to figure out how to take the advantages of Evergreen and simplicity for FlashArray and Purity in general and extend that into this new market. Last month, we were really pleased to announce the general availability of what we believe is the industry's first unified block and file platform. And what this does is we really try to do it the Pure way. We're not trying to bolt 1 on to the other or try to [cobble] these things together but really address this core vision of simplicity. Now if you're unifying block and file together, the way people usually think about it is hide those CapEx savings and place them on the same platform. But really, the savings come from operating expenses. And so if you cobble these 2 worlds together, the problem and the complexity becomes even greater. And that's the most common complaint that we hear from our customers. And so we announced this. Came up in the last earnings call that we landed one of the largest international deals we've ever had in our history with a missile defense system for a large country outside the United States. And what happened in this case is they needed both file and block, and we are very excited to deliver that. So this, we believe, is an example of taking 1 step to the side to an adjacent market, a large growth market where the platform has great leverage. And we believe we can do this over and over again with multiple adjacent markets. So we're super excited about that. So let's go back to another large adjacent market. Let's go back to the E.

Back to the E. Yes. All right. So it's one of my favorite topics these days because as Charlie mentioned, this is -- there's so much disk-based data out there for us to be able to go after. There are so many petabytes that just continue to live on disk. And the fact is that there are so many data sets, so many parts of applications that don't really need the performance of all-flash, right? So customers were not going to pay a premium for all that performance, but that's not really what they needed. And our ability to actually deliver on all of these compelling power space cooling savings along with the higher reliability that Coz explained a minute ago, with all-flash at it's acquisition price that is comparable to disk, that really is a huge game-changer for everyone. And the reason I talking about it so much is because people are really excited about it. We saw that very fast uptick of it. And that being said, as we also have started talking through like, FlashBlade's really optimized as a scale at architecture for larger scale, right, for -- in the case of FlashBlade//E, 4 petabytes and beyond. And I don't know if you remember this, when Coz and I called you to talk about the fact that we were going to do FlashBlade//E, and we were already thinking, customers, there are going to be people who want a smaller form factor, smaller system. And that was, I think, probably the first breadcrumbs towards FlashArray, right?

Yes, that's right. Now can you imagine being in a project team that usually -- these large projects take 18 to 24 months easily to deploy. And you get a call is how fast can you do this new project, FlashArray//E and go down and drive the entry point down? Now this is really a testament to what Charlie talked about, about the simplicity and the consolidation of this consistency for Purity. And so from end to end, low single digits number of months, we were able to release, and we just announced this, the FlashArray//E, which pushes that entry point down to 1 petabytes. Many of our customers want to get in. They have several islands of consolidation they want to bring together. And we think this really shows, for the first time, this contiguous line between 1 all the way up to 20-plus petabytes with a consistent experience. This is a great example of how we are extending the conversation beyond 1 workload. So one of the most consistent things I hear from analysts at the show over the last couple of days, I met with many of them is, "Pure, we've known you as this -- as a single point solution for so long. You did such a great job reinventing this space. But now it feels like you have this portfolio sale across the entire data center. And really what it's done for us is it's opened up great strategic conversations with our customers at much higher levels, which is really important as we start to rise and grow into the enterprise and stretch both up and stretch down. So while death of AI might be our -- death of disk might be our favorite topic, AI is the other great favorite topic. So Amy, we can talk about that.

Yes. Just to elaborate a little bit more. So AI and the enterprise, which is a big place we're focused is not about speed and scale but also very importantly, simplicity. There's a lot to do to get these systems stood up. And the simplicity part of our value proposition has been a huge reason that we have over 100 customers who are leveraging us for this use case. Now I feel like we actually started the AI party or joined the AI pretty really early, like many years ago, because our Ares solution, that's our AI-ready infrastructure with NVIDIA, I mean, we announced that over, I think, 5, 6 years ago. And we've made it even more relevant with the introduction of FlashBlade//S and therefore, [ares] as well. We've talked a lot about Meta, which is a great example of our ability to deliver at a massive, massive scale. But we're really excited to be able to see continued success across this broad range of verticals and use cases. Oh, take me back. I hit the button on accident. So a great example of this is like a university medical center, right? There's 1 in the Midwest that is doing training -- they're training their models with thousands of CT scans. And it used to take them 6 to 8 months to do this, and now they can do it with FlashBlade in 6 to 8 days, right? So pretty remarkable. We also keep their GPUs busy. And if you haven't heard, GPUs take up a lot of power. So the power efficiency combination of FlashBlade and of our entire portfolio is extremely compelling in this space. Another 1 is MediaZen, and they develop voice recognition technology for various industries. And in their use case, some of the tasks that involve speech-to-text modeling that used to take 12 months can be done in only 2 weeks. So they're leveraging, again, the performance and the flexibility and the scalability to just deliver so much faster for their customers. So that's the AI hot topic. But I think the other 1 that's usually at the top of the list maybe right after that is cloud, right? So there was a lot of discussion about this recently also in the last earnings call. So let's talk a little more about Cloud Block Store.

Wonderful. So cloud is yet another adjacent market for us. Just to rewind the clock a little bit, I was an early Azure product manager back in the early days when we first started getting going. And there was a common conversation around the table around Azure, that enterprise workloads would be the last workload to move to the cloud. Well, why is that? Well, the enterprise workloads have a huge moat. There's a lot of features around high-end mission-critical workloads that simply aren't about scale of commodity components. They're about reliability. It's got a different kind of scale and they're cost optimized in a big way. So we had this hypothesis when we began that Purity as an operating system had many enterprise features that would offer value in the cloud. So an example of that is at top -- is a top 500 health care leader who had this interesting idea. They came to us and they said, "We currently have a run rate of 11 petabytes a year in Azure storage." And that was a snapshot at that point [Azure] actually growing very, very quickly, but they had a challenge in that Azure storage does not have data dedupe. Basically, they don't have the ability to reduce data in their cloud. They haven't optimized for that. That's an enterprise feature. Now if we're sitting here on the stage with you talking about enterprise storage, that's been in place for a long, long time. But that feature set has not made it into the cloud. And so this customer came to us and said, "What if you were able to take that and make that available? We gave you the ability to do encryption in the cloud, and you took that and then saw what you could do with deduplication." We began testing it, and almost immediately, we found with early sets that there was a 1:5 ratio of reduction. And so almost immediately overnight, they saw this huge benefit of being able to reduce their storage footprint. And that immediately saved them about $10 million a year. It's a great value proposition to be able to cut almost half the cost out of that. So the next question obviously is, is Azure happy with that? Like do they want to be able to have that kind of reduction in their costs. Well, they're a great partner. They're a great strategic partner. They're very strategic with their customers. And they told us 2 things. One is we want these enterprise workloads to come over from on-prem into the cloud. And they said, this is the last workload. We've been working on this thing. But their competition is actually not themselves. Their competition are the optimized workloads that exist on-prem. And they have to address the fact that we've already optimized the cost out of those things. So they have to be able to move that over. And the second is that being able to free this up, the spend in their EAs, their enterprise agreements, allows them to be able to move that to other high-value services as well. So we think this is the beginning of the process. We're just exploring this. But we think that there is a great value advantage of taking 1 step over and moving these workloads over using enterprise value-added features in the cloud. And so 1 thing I just want to illustrate is that now we talked about this rapid introduction of things that come as a result of the platform. This is leverage. So in the beginning, we have Purity working on a block environment. And in the last 4 -- last 12 to 18 months, we've been able to introduce new platforms at a breakneck pace. It's been amazing. In 18 months, 18 months ago, we introduced XL and then we have FlashBlade//S. We had the introduction yesterday of the fourth generation of FlashArray//X and C. We have FlashArray//E. We have these new introductions of platforms in the cloud that are being deployed. This ability to rapidly move and get leverage as we move up and down through the top end all the way through Tier 1 -- Tier 0 down through the bottom of the pyramid, you're going to see more and more of this leverage as we gain acceleration from the leverage of this amazing platform. One last thing to bring up is Charlie talked about Fusion a little bit. Fusion is our cloud control plane that allows you to basically bring the cloud operating model to customers behind their firewall. This basically hides the underlying infrastructure and gives someone the experience of rapid provisioning, being able to deploy advanced data services, most simple being load balancing all the way up to more sophisticated things. But we've got great plans for Fusion across our portfolio to do this, and I'm very excited about that. But I think, Amy, you're probably in a great position to share your thoughts about Fusion in the future.

Yes. So from our perspective, right, it's been tremendous to see Fusion get delivered for those block workloads, but we certainly wanted to be able to deliver that across the portfolio. And so our teams have been collaborating and working together extensively to develop a common file model across the unified file part of FlashArray that Shawn talked about earlier, and the fast file on FlashBlade that we've had as well as object. So the ability to deliver that end-to-end cloud operating model across the entire portfolio of Pure's platforms is something that we're really looking forward to just the continued collaboration and bringing this to market over the course of the future. We don't have a date yet, but that's a big area of collaboration between our teams.

Great. Wonderful. 100%.

I think that is everything we had, and we are going to bring up our good friend and scuba diver extraordinaire, better than what I told you, I was going to say, Rob Lee.

Thanks, guys. If you'll excuse me, I've been talking a lot this week so I'm bringing a drink up here with me. Thank you guys for coming all this way to see us. Like Charlie said, I know you guys have busy schedules. We really appreciate the time. I'm going to try to wrap us up here. We've heard a lot today starting with Charlie, certainly Coz in terms of where we're heading and the efficiency road map. Shawn and Amy walking us through some of the exciting growth areas in the product portfolio. I'm going to start by going back to our 4 unique sustainable competitive advantages, really the 4 corners of our moat, if you will. We'll spend a few minutes diving into each of these areas in a bit greater depth and hopefully drive a bit of a better understanding with you all and the community as far as why we're so convicted that these are both meaningful advantages but more importantly, sustainable over time. So I'm going to start with our DirectFlash management and more specifically focusing on the software elements. I think Coz touched a lot on the hardware. You got to see the density. You got to see the mockups in terms of where we're headed. But he did make a comment which I want to start with, which is the hardware is only 1 piece of it. It's actually, I would say, a minority piece of it. What enables the hardware, what enables that road map is the software that we've built really over 10, 11, 12 years that makes that hardware possible. And I'm going to start by kind of discussing a little bit what the rest of the industry has to cope with to work with flash. Everybody else that's working with SSDs, everybody else is stuck on the SSD road map. As you know, as Charlie mentioned, flash at its core from almost a physics level, behaves very differently than disk. It has to be treated very differently. The way that an SSD operates, it has to solve all of those problems within the SSD, within the small form factor. Coz gave a great example, right? You want to write data to a certain block on flash. Some point later, you want to overwrite that block. You can't just overwrite it. You have to write it somewhere else. You have to leave yourself a little note, a little pointer, if you will, and remember that you did that. And at some later point in time, you've got to go clean that up. With Purity, with our DirectFlash approach, we can do that in the Purity software running on our controllers, running on our array controllers or our blades. Everybody else is forced to do that within the SSD. Let's take another example. Flash, as the consumer industry, as these guys keep pushing for denser and denser chips, the bids are getting a lot more close together, right? You've got to do a lot more work to kind of keep the data that you wrote healthy. If it turns out if you write data to a die, a chip within flash, if you just read data from 1 place, if you read it enough, you'll jiggle the electrons enough. You'll change the [voltages] enough of data that's written next door to it. So you've got to actually go and keep track of how many times you read data from 1 place to have that effect, how you go in and rehabilitate and move data around [and] is sitting right next to it. Very, very complex, right? Where does everybody else have to solve that? They've got to solve that within the SSD. That's more work to put it here. We get to do that at the system level, right? As each generation of flash progresses, right, there's a market demand to drive denser and denser flash. The bits are getting closer and closer together. That problem just magnifies. Okay. So how do the SSDs cope, right? So they've got to do all this work. You've got to do a very, very complex firmware, as Coz mentioned. You need significant resources to run that firmware. You need a lot of DRAM, right? You also, it turns out, need a whole bunch of extra flash because to do this work, you need scratch space as you're moving data around, as you're rehabilitating, rewriting data that was written on flash here. You've got to write it into a temporary scratch space and then you've got to move on. That over-provisioning, that setting aside of additional flash is just straight up, off the top, inefficiency. It's a tax that SSDs are forced to pay in terms of the flash that they deploy. It's flash they have to put into the form factor that cannot be effectively used, cannot effectively be given to use for the end application, in this case, our competitor's software systems. Now the last thing I'll mention, right, is that because we have pulled the software, we have pulled all of this hard work, right, out of the SSDs and we've pulled them up into the system software, we get to solve problems once. We get to do it globally. Everybody else is relying on commodity SSDs to solve that problem all throughout their system multiple times. Charlie brought up a great example or a comparison before between Blockbuster and Netflix. Well, one of the differences between Blockbuster and Netflix is Netflix got to solve the inventory management and distribution problem once centrally, way more efficiently. Blockbuster had to do it in every store. Same thing going on here, right? These SSDs have to solve that problem all over the place in an extremely inefficient manner. We get to do it once, we get to do it globally. And that's why, right, when we talk about the densities we can push, when we talk about the expansion, right, of our advantages in terms of efficiency, performance, reliability, we're so convicted that not only to borrow Charlie's words, not only do we have a 3-year lead now, we're going to have a 3 or a 3-plus year lead 3 or 4 years from now. This curve, right, we've been very vocal in this conference and really over the last quarter or 2, our opinions of disk, hard disk is done. What we're now seeing and really trying to educate the community on is SSDs are really not the answer. SSDs have been a technology industry's coping mechanism for having to deal with flash, we found a better way. All right. So let's move forward. So let's talk a little bit about the highly consistent portfolio, right? This is kind of the second unique competitive advantage we have. And I want to dive a little bit into the software. And unlike Coz, I don't have props. Software is a little bit harder to show. But I want to show what's going on with the software in our system, right? If -- as we discussed before, we have 1 hardware technology, which you've seen, DirectFlash. What makes that DirectFlash technology work is the common Purity operating system. All right, so what does Purity do? Let's start at the application or the customer visible level. At its most basic form, right, we provide storage to make it accessible through industry standard protocols, be it block, file, object. Because it's a shared and common Purity operating environment, we make those protocols available and unified across the various platforms we support. In order to serve those protocols, in order to store customers' data, we provide a number of services, whether they're data reduction, data protection, management of the system, right, availability, reliability. And then at the lowest levels, we translate that to and kind of deal with the work of flash management. Now one of the things that's important to realize is every layer of the stack, right, is designed inherently and natively for flash. Well, what does that mean? Let's take a look at data reduction, right? One of the things that we've really pioneered since really the early days of our first products is this idea of deduplication, right? You store a file, your colleagues store nominally very similar file. If I can recognize that those 2 files are very similar, have a lot of the same content with just a few words changed, I don't have to store a whole second copy of the file. I can just store the words that were changed and store a pointer and kind of remember that your copy has a couple of words changed. It turns out the way that you would design data reduction for something like that, if you're a legacy competitor that has software design for disk, puts you in a place where you don't make the same decisions, right? If you look at how you optimize for disk behavior, the disk has a spindle. It spins, right? The magnetic -- it's not a tape. The magnetic medium basically spins around under a head. And in order to optimize for performance, you need to lay out data sequentially. So as it spins around, you put the magnet there, you [slurp] up all the data and you send it out. Okay. Well, if you're doing that, that's kind of going directly against chopping up your data and managing pieces and chunks and remembering that part of your file is somewhere else. It's a duplicate. You don't design data reduction the same way, right? Conversely, if you have software that's heavily optimized for this, you really can't deliver performant data reduction. Let's take an example in availability, right? All enterprise systems have to protect against potential hardware faults, failures. People can pull drives out. When you design software for magnetic spinning disks, if you pull a drive out, well, now all of a sudden, in order to rebuild the data on this drive, you've got to go light up every other drive and you've got to spin them like crazy. They're creating all kinds of performance spikes. You're destabilizing the system. With flash, because we have highly parallel access, because we control what we're doing at the flash down to the die level, we can fine-tune that process in ways that, to Coz's point, drive higher reliability, higher availability. So every layer of the stack of software, even above the ins and outs and bits and bytes of managing flash, are purpose-built and heavily tuned for the flash environment. So what does that mean? Well, we had the advantage when we entered the market of only contemplating building for flash. All of our competitors, right, are starting with software stacks that were designed for disk. They haven't been able to retrofit that software to deal with flash. They're relying on the SSD retrofit to do that translation, right? I've walked you through why the SSD translation is going to fall behind. This is a lot of work. They don't have it. Now we've done this hard work. We've done it once, to borrow a term that Shawn just used. We have leverage to be able to deliver this across 2 platforms, scale-up platform with FlashArray, scale-out platform with FlashBlade. And as Shawn mentioned, an example in data reduction, a cloud platform on top of AWS or Azure with Cloud Block Store. So 1 software base, 2 architectures, scale-up, scale on hardware, a cloud architecture back end, driven by the same management paradigm, right? So whether you're managing our products through command line interfaces, APIs, Pure1, our SaaS portal, or Fusion, you get 1 experience, right? This is something that our competitors simply can't reproduce. And it's something you can't put them back. If you acquired your way into 6 or 8 different products, you can't make them the same where it's really, really hard. All right. So number three, the cloud operating model. So I want to start by putting this in the context of Pure's broader cloud strategy, really see that as 4 pillars. How do we go help customers run like the cloud everywhere? How do we help them run better when they're in the cloud? How do we help them build for the cloud natively? And how do we power the cloud directly with hyperscalers, right? So I talked a little bit about running like the cloud. And really, what we're trying to do here is give customers the best attributes of the cloud experience. What do they like about going to public cloud? Well, when I talk to customers, they like the flexibility, right? They like the agility. They like the consumption models. They like the fact that they can describe what it is they want without having to manage the ins and outs of delivering it. When a customer goes to AWS, they order up a service, they care deeply, they get the SLAs and the performance that they're paying for. They care deeply that there's good hardware behind it. They don't really want to know its name. They don't want to have to manage it at the bits and byte level, right? We want to deliver that same experience to customers on their own premises. They want services that are just going to get better over time transparently, right? Again, you go to AWS, you go to Azure. If you sign up for any one of their infrastructure services, they're doing hardware modernization. They're doing software updates behind the scenes. Customer's not managing it. right? And so that's the experience that we're developing with Pure Fusion, as Shawn and Amy walked us through. All right. So let's cap off with Evergreen. So Evergreen, as you saw in the video upfront I was discussing, Evergreen is essentially our promise, our architecture, our business model to ensure that customers that start with Pure are never left on an obsolescence road map, right? They're never left obsolete. They're always modernized and we're able to deliver that completely nondisruptively. Now Coz and Charlie walked us through the dramatic improvements that we've made over time in terms of density and efficiency. Evergreen is our vehicle to deliver these improvements both over the past decade as well as into the next decade to customers completely nondisruptively. As an example, just to illustrate some of the stuff that Coz talked about, 11 years ago in 2012, 5 petabytes of FlashArray would have looked like that, would have been about 26-rack storage. Today, we can deliver that in 5-rack units. Next year or the year after, that's going to be even smaller, right? So you've got 500x roughly improvement in terms of space efficiency. You've got hundreds of new software features, massive orders of magnitude improvement in terms of performance. Evergreen's our vehicle to go and deliver that to customers completely nondisruptively. So now if you go back to 2012, right, to be honest, nobody was really buying 5 petabytes of flash. So what does this look like from an individual customer's journey? Well, the core promise of Evergreen is that we're never going to leave a customer obsolete. Our products are always going to be modernized. We're able to keep that customer up-to-date nondisruptively without ever having to take downtime. Now if we compare this to the industry standard, if we compare this to what basically all of our competitors force their customers to do, our competitors force their customers to go through regular cycles of forklift migrations. Customers start off making initial purchase. They'll run for some period of time. And at the end of that period of time, typically 3, 4, 5 years, that asset is going to fall off of support. Before that happens, they have to buy the new thing. They have to take a disruptive event. They have to migrate to the new thing. That's to pay double support, by the way, in this overlap, right? And that buys them a few more years when they get to do that again, right? And they get to do that again and again and again, ad nauseam. And oh, by the way, this is 1 array, right? If you're managing a larger fleet, you've got tons of assets that you're constantly running this treadmill on, right? This is a terrible, terrible, terrible experience. Now from our point of view, we love this because every one of these is a rebid opportunity. Every one of these is a sales opportunity for us. We never return that favor. So with Evergreen, we completely flipped this on its head. Charlie mentioned our -- an early customer before. We took a look at what that customer bought and what that environment has looked like over time. That customer actually started with us on one of our preproduction units back in 2012. That's a FA300. We didn't even have snapshots at the time, right? What that customer bought, and over the years, that customer has gotten dozens of major new software features, hundreds of smaller software features. They've been able to go through a series of software, nondisruptive upgrades, full system hardware nondisruptive upgrades. Across the years, we've modernized them across 4 different generations of FlashArray, modernizing the controllers. At some point, they did -- they were able to take advantage of denser drives, consolidate some of their capacity into denser drives, shrink their footprint, store more data in the same physical space. And they're now on the latest generation FlashArrays, never having been forced to take a downtime. Getting back to the previous slide, versus our competitors who present us with a rebid opportunity every 3 or 4 or 5 years, this is a customer that we've never put back on the market. All right. So I've gone way long. Let me bring this back to the top. Hopefully, this gives you a little bit of a deeper insight into the 4 unique sustainable and competitive advantages we have, again, the 4 corners of our competitive moat. And with that, I'm going to transition us over to the Q&A section. Paul, do you want to come to the stage?

Thanks, Rob. Okay. While we transition here to Q&A, I'll echo a little bit of what Rob said. We hope this session thus far has helped you deepen your understanding of the outcomes that we drive for customers as well as the differentiators that drive our 4 unique sustainable competitive advantages. And before we begin the Q&A, I'll mention that you do not need to limit yourselves to 1 question consisting of 1 part. Please feel free to ask as many questions as you'd like. We just ask that you be considerate of others because we would like to get to many questions today. And finally, I'll also remind you that this is a product and technology-focused meeting so we won't be addressing financial questions. So let's bring everybody up and we'll get ready to get started.

What is that? All right, Pinjalim, did you want to start this off? [indiscernible] will start right here, and we'll go to Amit after that and we'll work our way around. We'll start here with Pinjalim.

Thank you, everybody, for the presentation. I'm Pinjalim Bora from JPMorgan. I wanted to ask Coz maybe 3 part, 1 question.

I can't promise that I'll remember all the parts so you might have to reask the part.

Sure. But the -- obviously, you have a very ambitious plan to grow to 300, and I think you said 1 petabyte.

Eventually, and not as far in the future as some people might think, but further out in a couple of years.

Right. And when you're presenting just now, it sounded like a lot of that would come from the higher density chip as well as it's layering in. I wanted to ask you how much of that is dependent on the new flash mediums as they come in, like PLC or whatever else is going to come in? Second, I guess on the Purity OS, maybe this is for Rob, how much change do you need to do as those new mediums come in? Like how much can you reuse? What is the incremental? And lastly, maybe this is for Charlie.

That's a 3-part question for 3 recipients. I love it.

You remember that easily. And maybe, Charlie, as the price points, as we look into 2025, the price points get to $0.05 as you were showing, it becomes attractive for the hyperscaler opportunity, right? How are you thinking about that? Because on 1 hand, the hyperscalers have that ethos of, we will do it on our own. Can you break that? How do you think about that?

I think you're first, Coz.

I guess I'll start first. So -- and I'm sorry, Rob, I'm going to leak into some of your things because I have to. So the doubling from 75 to 150 is just us building more mounting points. The flash vendors, we're not counting on PLC until quite a ways out. QLC has a long way to run. They will increase the density of the chips. Think of it probably every couple of years, and so we'll just go up every couple of years with that. Maybe it's 18 months, maybe it's 2.5 years sometime, but it's going to run into that kind of a thing. The key difference is you can look at Western Digital's road map for flash, SK Hynix and their road map for flash, Samsung and their road map for flash, they all are showing, hey, we're at like 200 layers now. We're going to go to 400 and 500 and 600 and 800 and 1,000. And they have a clear road map, right? The disk vendors have been stuck trying to transition to energy-assisted recording for a long time. There's a lot of problems to solve with that. The flash vendors, they're just going through kind of the same thing that we went through for many years with integrated circuit, with DIMMs and DRAM with processor chips before that. We can -- instead of shrinking the cell size, like we stacked more layers.

You're also about 5 or 6 nodes behind processors and memory so it's not -- they have an easy path on that.

Yes. And then the software does have to evolve a lot. Now if you think about it, the first FlashArrays were 5.5 terabytes. And we're now at a point where we're starting to sell FlashArrays that are almost 1,000x as large. That's raw capacity, no data reduction. The software has had to change a bunch. Right now, we're starting the projects to scale the software to support 300-terabyte DFMs in 2 years because it does take time. There's a lot of work around dealing with the different generations of flash and the different families. We've been doing that for a long time. That's part of it. One of the things actually that I think Rob and I, neither 1 of us in what we're saying, expressed as adequately as an advantage. The storage subsystem takes in data and it's remapping it, right? A customer has a volume. Let's assume it's a block device for a minute rather than file, and they write block 100 of that volume. And then the storage subsystem translates that and, okay, I'm going to put block 100 of this volume over here on this device. And then with an SSD, the SSD is like, "Well, oh, I get block 100 of my device and I do some other mapping." We actually -- we only do 1 level of mapping, right? And that's an advantage that I don't think either of us articulated as clearly as we should have. By having Pure heat map directly to the flash, we cut out a whole layer. And that actually cuts out a bunch of work we have to do. It cuts out a bunch of complexity from the entire stack. And that gives us an advantage in scaling this software, but it is a bunch of work to scale the software and to have it be as efficient. And I don't go tell the engineers is like, "Oh, you're going to scale that and you can have twice as much memory because twice as much memory costs money. And every component you add to the box makes it less stable." So you want to build the simplest product you can that gives you the most reliability, and reliability is so important in scaling this.

I think the only other thing I'd add, Pinjalim, is to the other angle of software changes to manage flash, to Coz's point, we've been shipping now probably dozens -- over dozens of generations of flash from multiple vendors. Before DirectFlash, we were already building the understanding of what the SSD was doing internally and building that into our Purity software. And so what that's given us is the right level of extraction, if you will, to go and make the tweaks and the tuning that are needed for each generation of each vendor of flash. And so for us to pick up the next generation, the next vendor, yes, there's work. But we've done a lot of the general work to kind of make that task a lot easier. Were any of our competitors or hyperscalers, for example, to head down the same path, they would have to overcome that hurdle. And it's a significant 1 because it's not just about developing the flash know-how once. It's doing it in a way that's repeatable with lower incremental costs. And we've got that figured out because we've been doing it for 10, 12 years.

Yes, on the pricing, I just want to remind everyone that when we talk about the $0.05 or the $0.20, there are different performance levels as you go up and down that range, right? So it's not as if all-flash storage will be at $0.05. There's always going to be a range of price performance. It was only that flash couldn't get to the lowest part of that range because of a variety of factors, including the price of flash, right? And frankly, density makes a huge difference in terms of being able to get down to that level overall. But as we -- as most people suspect, the hyperscalers are able to get to the lowest -- they're able to get the lowest unit cost from purchasing a hard disk, right? And they benefit from that. On the other hand, for example, they don't have data reduction. That allows us to get to lower -- even lower costs, right? And there's a variety of other techniques than provisioning, and we can go through all of this that -- so we always think about this at the system level cost. And we would argue that at a TCO basis, total cost of ownership basis, the way that hyperscalers use storage today even on, let's say, nearline disk, we're already at a total cost of ownership that's equivalent to what they have in their own environment, let alone in a customer environment were far less than what they charge for those capabilities. So we do have to fight against NIH. We're in that fight. And now in a sense, we have to sell at a higher level because the question, you get to a point, having been through similar sort of things in different companies at different times, where management has to believe that not only do we have an advantage today but then we're going to maintain that advantage for the foreseeable future. And two, that we're an organization that they could trust, and that's probably the most important element. Yes.

So you won't hear me say this on the earnings call, but did you have any follow-ups for all this?

I'll come back.

Okay. Let's go to Amit here and then we'll go to Aaron after that.

Perfect. Amit Daryanani, Evercore ISI. Super helpful. I guess I'll go with 2 questions as well. Maybe to start, but can you maybe spend some time talking about how do customers think about the storage need when it comes to deploying these AI clusters? How is that different from the traditional workloads they do? And specifically, I think the big debate everyone tends to have on this is, can they just deploy raw flash and build their own software around it? Or are they better off buying Pure's operating solution all in? Can we just talk about how the contrast any difference between hyperscalers versus enterprise, that would be really helpful. And then on FlashArray//E, Charlie, you sort of talked about enterprise mass storage, hyperscale are the 2 buckets. I'm curious, so up until now, where is the solution resonating more? Where are you seeing better traction? Is it on the enterprise or hyperscale side? And do you think you need to have more offerings around helping customers migrate everything they have in drives to get to the FlashArray//E models because I think that's a big choke point that they have right now?

Yes. All right. Let me start actually -- and let me start on the AI question. I believe that's a very rapidly evolving space. And so I think we're all a bit under-informed to be direct and honest. And I'm talking now about the generative AI. I think we're all talking about the generative AI versus -- and the -- and ChatGPT versus what we're now after about 5 years of real use calling the traditional AI. In traditional AI, we have a lot of experience in that space, which is they deployed GPUs. If and when they deploy them on their existing storage space, as Rob kind of alluded to, they become upset because the GPUs are only about 20% utilized. They're very expensive on their own, let alone power. And so -- and that's why we've developed a great relationship with NVIDIA sales force because they know that when they work with us, that their GPUs will be fully occupied. Customers will be happier. And that's generally our FlashBlade product that goes in, in that environment. As we go into generative AI and ChatGPT, you have to -- as you think about that, there are really 2 different -- entirely different opportunities and 2 entirely different environments. One environment is creating the large language models. And we don't actually believe that there are going to be a lot of companies involved in building large language models. The hyperscalers will be some very large other organizations that want to do it on their own, potentially banks creating proprietary model, will build machine learning environments, okay? So you have the machine learning environment. Machine learning environment is a whole cluster of GPUs and very fast storage, right? And we are premier at that. But of course, NVIDIA also builds their integrated systems that have storage built in it. And in that sense, it's a bit of a competitor. And that's for the large language model. Once the large language model is created, then you put it in what's known as a neural network, but generally using general-purpose CPUs against large amounts of data for inference. That large data doesn't have to be the kind of data that goes into the machine learning environment, meaning hundreds of gigabytes a second. It just has to be available at reasonable performance. And that's where we think customers are going to want to get more of their data in from siloed cold storage, where the machines that they're on today are only built with the performance level necessary for their siloed application and want it to be in a somewhat more performant environment available for analysis. And we think that's a great opportunity for E because 1 thing we didn't talk about, E is now available, as we mentioned, at a similar price point to disk, but it's many times more performant. And so it really opens up a lot of opportunity for us.

I think 1 other thing on that, and this is a point Rob made on the main stage earlier that's really important, AI is changing rapidly and exactly the use that people need the -- for the different applications as they go to do it, the different ways they need to access their data, flexibility is important. And something that FlashArray is good at and FlashBlade is great at is you don't have to access it in 1 way to get the best performance. Large accesses, small accesses, lots of files, a few large files, you get great performance really simply and easily. And organizations that want to take advantage of AI, they've got to be adaptable. Evergreen is the essence of adaptable and the performance and the way we deliver that performance, it's the essence of adaptable, and that's going to be a gigantic advantage over the next several years.

And on the question of E, I might ask Amy and Shawn to jump in. Amy, if you wouldn't mind sharing some of the initial customer interest and uptake of FlashBlade//E. I'm thinking in particular, a customer that took [S&E], maybe a little insight there. And Shawn, if you wouldn't mind also adding some of the use case expectations perhaps for FlashArray//E.

Yes. We've been having conversations with customers for years where they're like, "Okay, great. So I have this 500 terabytes or this petabyte of data that I absolutely value, tremendous amount of scale, outperformance and FlashBlade is a great fit. But like I'm not going to put these other -- like a great example of this -- 1 great example of this is the rapid restore and ransomware recovery. Okay, I have 500 terabytes I want to be able to restore super, super, super fast. But then I also have the other copies of backup data that I don't want to pay that kind of premium for, and that's more like 5 or 10 petabytes, right? And so what we're seeing initially is all of those adjacencies associated with the use cases that our customers are already leveraging FlashBlade//S for, they're using something else for kind of that older or colder, relatively speaking, part of the data, and they're really excited at the opportunity to be able to drive down the density and drive up the density [indiscernible] to say, drive up the density, drive down the footprint and the power consumption associated with those workloads. We see the same thing in log analytics, right? People want to collect more logs, keep them longer, but not all of them need to be able to be delivered at the level of speed that we do in S. And so having E as that secondary tier associated with all of that data is a huge interest area for our customers.

I'll just say 1 thing, and that's that we've been incredibly pleased with the ramp that we've seen in pipeline growth for the E family. And we often get asked the question, is what verticals, what sectors we see it striping across all verticals. So we think we're very early in stages. We just launched this. We're really bullish.

And just because 1 part of your question was hyperscalers versus enterprise. Enterprise, because they buy finished systems, that's the way that they're used to buying, it's obviously going to be first at this. Their decision cycles are -- the -- they're a little bit longer today, of course, but 6 months is a normal decision cycle. Hyperscale, it's a co-engineering activity. Decision cycles can be as long as 18 months, possibly longer, because it's all part of their next-generation data center design. And it's a design win that you have to get into. So by definition, that will be longer. And of course, until we have one of those where we haven't announced it yet.

Just before you ask Aaron, Ajay, I think you might have something to add on.

Yes. mentioned that, so as you think of the hyperscaler, you should think of it in 2 opportunities there, the core which has a lot of the NIH, the teams really defend that, and you've got to go more senior and all that. But then there's adjacent applications as well where a lot of times, just our standard systems would be very attractive for them. So the [indiscernible] win has been more in the adjacent space. And of course, we've got -- they're really happy and we've got more opportunity over there. And I think the other thing with the E family, the big advantage we get with the E family is, a lot of times, whereas with our traditional high-end performance systems, our competition can actually kind of -- they've got a standard play against us because they can just lower their price point. The structural cost disadvantage doesn't really come up because there's enough margin in there for everybody. So they will lower their price point and they'll compete with us. But for E, they really don't have any competitive product. So we can actually penetrate with E and then go back up and sell our standard S. So you get the portfolio effect with that combination.

Please, Aaron, go ahead.

It's Aaron Rakers at Wells Fargo. I appreciate you guys doing the [indiscernible] and Great to see you all. I think this is going to build a little bit on these last 2 comments, Charlie and yourself. And I guess when I'm looking at this pyramid that you threw up there, $30 billion to $50 billion from the hyperscale vertical. Charlie, you mentioned it, it takes customization and design in these cloud companies. I believe today, 90% of that data capacity is probably [indiscernible] based. So I'm trying to understand what do they need to do if they don't use Pure, right? And how do they evolve off of their own intelligent layers of writing the hard disk drives? Do you see these cloud guys doing that on the flash side? Or does this just naturally open up? And then I'll throw out the secondary question. It builds on your answer there. There's been this discussion around AI RSC being completed. And there's other iterations, new data center build-outs at Facebook. Am I to assume that you are equally as involved in those future data center build-outs, expansion within Meta as well as we look forward?

All right. So I think the best way to describe how one or how the hyperscalers look at flash from a historical perspective, okay, first. Obviously, they started out with hard disk because that's what was available. Hard disk, having been around for such a very long period of time, open source software, the software necessary to manage hard disk environments had been around a long time. And of course, hyperscalers are expert at using open source software. So all of their software was designed to be able to operate on hard disks. And when they do use flash, they use SSDs, right? So again, they're managing it as if it were a hard disk. Easiest thing to do gives you an immediate performance advantage. Most of their flash, not all, but most of their flash is embedded in the servers themselves because servers still carry local storage, right, so-called DAS. So they have the same challenge as our competitors in terms of if they wanted to use flash directly. They would have to build into their core software, which today, they didn't -- I would argue they didn't really build an expertise around hard disk management. I think that came with open source software. They manage the large-scale use of hard disks. So now they have to go back to really fundamental basics, start to do the type of analysis that we've been doing for 10 years in terms of analyzing not how flash works but how individual flash chips, based on a specific run of that particular manufacturer and the specific strengths and weaknesses of each row and column inside that flash chip, and do that for every new generation of flash chips that come around. Then they'd have to rewrite the software that they use to manage hard disks, knowing those differences now in flash in order to get all this advantage. So you're talking about many, many years. And you have to ask yourself, is that really worth the investment that they put in it versus all the other opportunities that they have in place. The second thing I would say is that there are ways that we can modify our product specifically to use in a hyperscale environment that would bring our costs down even lower, okay? Because they -- the way they structured their storage is quite different from an enterprise. And we know of many ways in which in their particular environment, we can reduce the costs even more. So really, I believe their easiest path, their least expensive path, their fastest path would be to go with us, which is why I think we have a shot. It doesn't mean we can beat and certainly not in all cases, their internal teams in terms of just the not [indiscernible] type of point of view.

Absolutely. I mean, I think a lot of the big ones have fired up teams already and they're noodling on this problem and working on it. But we know it's a multiyear effort. It's a complex technology. And a lot of times when we meet those teams at various flash memory summits and all of that, we know that they've got ways to go.

And the NAND question?

So just I want to comment on the RSC being complete. What they meant by that comment was they got what they've built currently up and working. It doesn't -- we had talked about before how and they had spoken before about how their plan was to get to an exabyte. They're currently -- they've done 2 phases. They're currently about half an exabyte. There's no reason for us to believe that their plans have changed in that. The complete statement meant that they had done that first build-out and it was up and working. Because there was some confusion in the market and I just wanted to make that clear. We continue -- we have a great relationship with them. The deployment is working better than their plan, better than their expectations. We're in a lot of conversations with them. It's probably the best way to put it.

Just to be clear, that question was on Meta for those that couldn't hear you, Aaron. Meanwhile, we have Meta with us. Would you like to ask a question?

I'll break up the kind of AI questions for a second. Again, Meta Marshall from Morgan Stanley. You talked about, I think, in the keynote that the cloud was a business model. It wasn't necessarily something people went to for costs or that was in somebody's script. And I guess I wonder, we've gone through this cloud optimization period. You're clearly talking about some of the advantages that you guys have in terms of kind of making on-premise storage more efficient. So I guess I'm just wondering like where do you think customers are in the -- are they going to kind of reaccelerate and get more workloads towards the cloud and actually move some of these applications towards the cloud using some of the software that you guys offer? Or are they thinking that they're going to leave more stuff on-premise?

Anecdotally, you're getting all sides of this right now. And I'm sorry. Anecdotally, you're getting all the sides of this. And we're kind of in the middle, I think, of the learning process for many organizations as to the difference between developing in the cloud and running production in the cloud. For any developer, if you're not developing in the cloud, I think you're a little bit crazy because it's easy. You pay as you go. Development typically is not a lot of compute time or a lot of storage time. It's when you get into production that the costs really start to build up and come against you. And so we see customers who all of a sudden get sticker shock once they get into production as to what it's costing them, are starting to pull back, but you still have a lot of customers in the early phases of their development environment. And so I think you're hearing both. But I think there's going to be a balance. There is going to be a balance of on-prem and in cloud as customers figure out the right economic balance.

Sean, did you want to add any comments on this?

You read my mind. Actually, just 2 hours ago, I met with a large Fortune 50 company that explained this exact issue. They said, "We've invested and we've moved things over to the cloud. We're thinking about bare metal deployments. We're thinking about on-prem. We're trying to evaluate how much to repatriate," and they walked through their model of trying to figure out this balance between the 2, between agility and the long-term footprint. And they simply said, "Please help us. Like how do we make this transition happen? What are the technology building blocks to help us get there?" So I think they're -- I mean, they're a very sophisticated shop. They brought in some very outstanding technologists and they're in the early phases of trying to figure this out.

I do want to add that, I think you made the comment about on-prem. But we certainly look ourselves as with ambitions to -- with strong motions to go into the cloud with Cloud Block Store, with Portworx, [hyperscalers] too. So we kind of see the opportunity not just on-prem but across the entire store space.

Yes. And mean,I'll just add 1 more thing to that. So one of the things that I've seen, certainly driven by closer -- paying closer attention to cloud costs is much more, I would say, balanced thinking from customers in terms of what -- where are they truly getting value from the cloud versus consuming infrastructure on-premise? I think there's a couple of things that we've highlighted. One I'd add to is, I think that a lot of customers I speak to have been surprised at not just the headline costs but all of the costs they didn't really realize that they were signing up for, the access charges, the network transmission charges, the API calls. And I think it's indicative of 3, 4, 5 years ago, you have this wave of companies saying, "Oh, we're going on the cloud." And I think what people are realizing now is just going to the cloud but continuing to live an on-premise lifestyle is actually really, really expensive. And then the other question I get sometimes is, "Hey, so there's a lot of hype around AI. There's a lot of people looking at analytics. Is all of that stuff going into the cloud?" And I think that's another area where because of the recent focus on cloud cost awareness, I think people are going into that with an understanding of, hey, the whole game of AI or analytics is get a bunch of data but then process it a lot. Well, if I'm getting charged to touch my data every single time I read it, that's a pretty heavy tax to go into it with. And so I think there's -- like I said, just overall, everything the other folks said, but I think there's just, overall, a much more balanced and mature view as far as, hey, where am I getting value versus where is the on-prem technology set going to do better from me?

I think, Meta, did you have a follow-up?

No, I was going to [indiscernible] if anybody's name was Microsoft.

Okay. Sidney, then we'll go to Wamsi after that.

I'll go first then. One of the pushbacks I'm getting for the low-end E family is that hard drive companies are claiming that their cost per gigabyte improvement is going to reaccelerate with the hammer of the world, whatever technology that is going back to maybe [indiscernible] 10% a year, maybe 15% a year. On the other hand, flash memory prices are -- well, maybe now is low, but the cost is actually going to be increasing, getting more expensive. Capital intensity is higher and all that. Does that really change the calculus how you think about? If that is true, let's say, that is true they are equivalent in terms of cost improvement. Does that change the way your customers think? Is it really just more the energy savings, the space savings, all those things are more important than customers [indiscernible a hardware [indiscernible]?

Let me start. I'm a very big believer, in fact, most of my career, I have just followed exponential cost performance curves, Moore's law, if you will, for each of these different industries. Just look at the last 20 years or 30 years, for that matter, of price performance improvements in flash and disk. And don't get confused by what it's doing this quarter or last quarter or even on an annual basis. It goes above and below the line. But any 5-year period of line, you'll see is very, very steady. Flash has been decreasing faster than disk for many, many years. And if anything, disk has flattened out, all right? And these things don't change. The second thing is more important. They love talking about exactly what you're talking about, right? But you have to remember, there is a single head operating on that disk. So let's imagine you have a gallon bucket of water and you have put up a 1-inch spicket on that gallon bucket, right? You can get water in and out of that bucket pretty fast. Now imagine you don't have a gallon bucket but you have a town water tower. And you put a 1-inch spicket on that town water tower. How well do you think it's going to supply the town with water? You can put more bits on the disk. You just can't get them in and out any faster. And that's -- if not the dense -- the slower density improvement of disk, but the IO is just not going to allow it to keep up.

So a few things. If you remember the chart Charlie showed about disk versus NAND, you'll notice that peak disk was basically 2012, not coincidentally the year [indiscernible] something. Okay, that was a coincidence that we got lucky on that one. But disk, yes, the cost is still cheaper if I'm just buying a byte of disk. Power that disk, maintain that disk, the human effort to run that disk, that's where the advantage is just overwhelming. And that's not even counting data reduction. When we started with the E family, we talked about pricing and talked about TCO without counting any data reduction. So if we get data reduction, we're blowing away the disk by miles. But think about the progression as we get to where we have 1/10 the devices, and the devices are 10x more reliable. I think 1/100 the number of incidents happening in your data center, where you have to go and swap something out, where an array has to rebuild a bunch of data. On disk, that rebuild disrupts the performance tremendously. The e-waste. I saw something from one of our sales people at our kickoff a couple of months ago, a midsized data center in Europe will supposedly pay EUR 15 million more for power this year than last year. About EUR 15 million for power, it's EUR 15 million more. And I don't think any of us think power costs are going to plummet anytime soon. So as flash pulls away from disk in the density, all of those TCO advantages get so gigantic. And yes, the flash will continue to get closer and closer and maybe 1 quarter or 2 quarters, the flash price will go this way and the disk price will go that way. Look at the disk vendors' road map, look at the flash vendors' road map look at what we're saying about our road map on the density and you see that gigantic divergence because none of the disk vendors are out there saying, "Oh, yes. We do 100 terabyte disk in a couple of years. We're going to do a 200-terabyte disk in a couple of years." And that's what's going to do it. Space in your data center. And if you work for a firm that has a data center in Manhattan, and I know many of you do, go ask your data center people, what is a square foot of that data center cost? What does it cost to cool it? What is the cost of power and what does it cost to hire the people to run it? Amy, I think earlier this week, mentioned, we're going to get to the point where in 1 rack, we'll be able to put 100 petabytes at the end of this year, okay? In a couple more years, we'll be able to put 400 petabytes in that rack. Think of how much of a difference that is. So it's not worrying about what 1 byte of disk costs versus 1 byte of flash. That will happen. That will happen several years from now. It's not going to happen in the next 5 years. When we're talking this time frame, that 1 byte of flash, 1 byte of disk, that will be when disks start collapsing okay? What's going to drive that collapse is the space, the power, the energy consumption and wastage, but -- and the human effort. All of those benefits going so much in favor of the flash. This is not a topic that we enjoy talking.

I was going to say that I know in the short term, just listening in some of the earlier calls, there has been a little bit of confusion on when we say $0.20 a gig, it's the acquisition cost plus 3 years of support. And sometimes what's coming back is, but oh, I can get my disk at this price but that didn't include support. So let's just...

It's also system level.

From system level, exactly.

At 1 point, if you watched [MTT], there was a gentleman named Scott on the stage during the first day. I asked him what is the most significant transformation that you've had as a [indiscernible] after the meeting. And he said, he's something I didn't talk about, which is what Coz's point, what happens with human capital? He said, before I began this journey, I had all of these storage administrators who were concerned about the failure of storage, right? They spent their time, specially pulling drives, walking up and down the aisles, yanking stuff out, trying to fix it. He said, "I no longer have any storage administrators in my entire [MTT] data center. They're all automation engineers. They're data engineers. They're working on a very different set of things." How do you capture that in the price of the individual bit versus byte of hardware? His whole environment is transformed. And I think that trend will apply vastly the evolution of the storage administrator will apply across the industry.

You got a follow-up, right?

I do have a follow-up. A little bit of financial impact here. Your revenue split today is roughly 50-50 between products and subscription. When the [Pure] C family starts to ramp up a bigger part of the revenue, should we expect that ratio to be relatively consistent because it's a much bigger dollar now for C, but I wonder if the attach rate of subscription will be similar?

You mean E, the new E family. Yes, yes. Well, I just want to remind everyone, even though we're not talking about financials, that Q1 is our seasonally lowest quarter. And because of the way subscription works, which is steady, it's going to be the highest quarter on a percentage basis, right, as we go through the year. Not that we wouldn't like subscription to continue to eventually get above 50%, but you're going to see that more in Q1 than you are in later quarters. Yes, we talk about this all the time. E, I think, which will also be available for subscription. But because we're entering a whole new area that wasn't open to us before, if it grows really fast, the CapEx portion of that will grow faster, than most likely, the subscription portion of that. So that could change the trajectory. But our commitment effectively is to grow ARR at 30% per year or better. So we're going to -- we believe we'll stick with that. What percentage it is of our P&L is less relevant.

Yes. To be clear, that bias on E for CapEx, I think that's really early.

It's early, right.

Because it's going to be really interesting to see how that plays out because we look at -- we had a record quarter with Evergreen//One. It was across our entire portfolio. I would be surprised if we don't see some bias over time to Evergreen//One for E series as well. But I do agree with Charlie, I think the early ramp will be probably a bias to CapEx, but I'm not so sure about medium and long term on that.

By the way, with Evergreen//One, say, for example, with the FlashArray//E, you can even start at a lower commit, half a petabyte. You don't even need to buy a petabyte because the lower reserve commit is lower. So that will drive more. And given the macro, I mean, I wouldn't be surprised.

So I know this group so this is not a slide ramp in the financial questions. We'll go back in the product and technology, please. Wamsi.

Yes, thanks, Paul. Well, maybe I'll go at this. Wamsi Mohan, Bank of America. Charlie, you opened today with your market share slide, and I wanted to just think through that a little bit as we look over the next few years. You had about 8 points of share gain that you showed in the storage industry. You've shown some very compelling features, products, potentially development road map. As you think about -- and actually, there was a chart about HDD, SSD and DirectFlash and kind of exponential, right? So when you think about that, how do you think about the rate and pace of share gains? Who do you think that comes from over the next few years? And then to throw in a slightly financial angle to it, sorry, Paul, but I think you've, Kevan, you said about 100 basis points of margin improvement as you think through annually over time. And kind of curious if -- is that a gating factor when you think of like exponential growth opportunities?

Yes. So as we look at our market, thinking through the last 10 years and looking forward, I feel like over the last 10 years, we've been fighting with 1 arm tied behind our back because we could only fight for the primary storage market. And so our competitors -- our customers had to buy from our competitors because they had a full range of equipment. Beyond that, remember, when we started out, as Rob had mentioned, we were feature-poor, right? And there are many features that customers have come to depend on in the enterprise market that even if they liked Pure and our value proposition overall, if we couldn't support some set of features that they had come to rely on, we also couldn't win that. So it's been a long journey to get to this point. Now I think we're feature-rich. We're certainly not lacking features. I mean, there may be 1 or 2 here or there that might prevent a sale, but I think that's getting smaller every year. And secondly, we no longer have 1 arm tied behind our back because now we can fight for the high -- for the low-price storage as well. So my expectation of my team, and I want to be careful how I answer this question, my expectation of my team is that we pick up market share even faster than in the past. Now I'm saying this in the middle of an economic slowdown. Economic slowdowns favor incumbents. So we're not quite there, but I think we're building up all the muscle necessary to grow faster than we've seen.

And that's with the expectation of modest operating margin expansion. And let's explain a little bit why on that. We always knew with our E family, we're going to be competitive on price. So that's -- we've been thinking about that for some time as well as when we've talked about our long-term expectations on operating margin expansion. And again, I've also talked about where we see those opportunities of expansion, right, subscription, gross margin, R&D in terms of our global expansion as well as sales and marketing as we continue to penetrate enterprise and hyperscaler.

And just who would you expect that share to -- who do you think would see the most amount of share? And also, you spoke about more file-based potential as well. So I mean, that squarely puts the filers in place. So just curious if you think that the relative share gains would be higher from some [indiscernible].

My overly simplistic answer is the weaker players. We compete with a wide variety of, let's say, competitive skill sets out there. Some of them more relationship in political, some of them more feature- and technology-based. The largest player is just a tough, tough street fighter. I think that's an area where getting the opportunity in those accounts is -- tends to be a little bit harder. But I think we're going to get it -- to be honest, I think we'll get the share pretty much equally from all of them.

Hadi Orabi on behalf of Krish Sankar from TD Cowen. Two questions, please, one about the cloud and the other more strategic high-level question. On the cloud, you guys talked about in one of the slides of data reduction ratios of 5:1. And I think we've heard before, 10:1 ratios. Just wondering how that compares to what the cloud service providers internally have because our understanding is they also have deduplication softwares on hard disks. Just wondering if you can give us any color on that. And in terms of power, I'm not sure if you're able to share that, but one of the clear reasons that Meta chose Pure is because of power savings. But you guys haven't quantified those savings compared to Meta's internal architecture, storage architecture. Just wondering like also, if you can give us any color about the difference between the 2, that would be helpful.

Yes. So, Hadi, let me take the first part of the question. So the cloud providers, I think the question was, hey, they've got deduplication. What are your issues, their issues? At the end of the day, it actually doesn't matter quite as much because the issue is to the end customer, the cloud providers are not providing that economic benefit if there is one of [interruption] back to the customer. Cloud providers are billing the customer based on how much storage they provisioned. Customer says, "Hey, I might use. I need a volume that might be up to 100 terabytes." Well, guess what, you're going to pay for the 100 terabytes. You don't write a data there. You're going to pay for 100 terabytes. You write entirely unique data there, you're going to pay for 100 terabytes. You write deduplicatable data there, you're going to pay for 100 terabytes. And so the same set of software features we've developed for our FlashArrays, that same set of data reduction technologies we can then go apply on top of the cloud infrastructure to drive that additional cost savings. I think the other part of your question is, hey, you've seen 5:1, you've seen 10:1. What's kind of -- where is the range? What's the deal there? There's really 2 things that kind of depends on. One is, hey, what's the application set? And then two, what's the customer doing in terms of data workflows. In this particular case, the customer that Shawn highlighted, they were using databases, right? So it was a database workflow, 1 an application. We serve quite a bit on premise. And so we know that application very well, very high data reduction rates. But this customer was also making use of our snapshot and clone features, right? They were using part of the cloud environments to do some testing. You've got a database and I want to clone it make some small changes. Well, guess what? If you do that directly in the cloud infrastructure, you're going to get charged for that entire clone, right? We can go offer the benefits of our thin clones, if you will, to that customer. And so that's where you can see a pretty dramatic range of benefits. I think the second part of your question was, hey, on the Meta RSC design win, we've highlighted -- Meta's highlighted significant power and energy savings. If I recall at the time, and again, we had early discussions about different ideas, they were evaluating generally disk-based systems, right? And so I think the benefits were in the order of 8 to 10x.

Yes. I mean, they had a certain number of racks that they needed the storage to fit into. They had a certain number of network ports available per rack, a certain amount of power per rack and then the space limited to a number of racks and they had a performance requirement for the storage. They looked at a number of alternatives. We also, when they came to us to talk about this, we were trying to judge who our competition might be. We went out and looked at the spec sheets of all the possible alternatives we can find. And most of them failed utterly in some way, shape or form. They needed 5x more network ports than was available or 10x more power than was available. Some of them could fit into 1 part of it and not come close on others. But the benefits were clearly there where we were the only solution externally to Meta that could come close to what they were asking for. And it was that combination of the density, the power efficiency and the performance.

And their own solution would have required them to get another data center.

Got it. And just strategic high-level questions. One of the areas that's underappreciated for Pure's growth potential is the international market. It's only 30% of sales. But I mean, the FlashArray's market is as big as North America. And your share there is around 10% versus being 25%, 30% in North America. Just as Pure makes a switch from focusing on North America to international markets, how should we think about that transition impacting the operating model of Pure? And how are like customers internationally different than customers here?

I don't think you'll see it affect the operating model because we've -- we're already investing more heavily internationally than we are in the U.S. And as we grow internationally, you would expect that to become more productive over time. So I think we have the right level of investment. I do believe that part of it has been that we've been growing successfully in the U.S. despite international growth as well. And clearly, our investment in Europe and APJ was subsequent to our coming out in the U.S. So a little bit behind in that area but we're trying to catch up. We're certainly investing heavily in this space and expect to do so. I'm sorry, the second part of the question was...

No, you hit them both. Yes, we're getting a little short on time. We're almost to the end so we're going to do 2 more questions. We're going to go here and then here.

Jeff Koche with Raymond James. I wanted to sneak in 1 more question on the AI and cloud. So back on the TAM slide, you had $30 billion to $50 billion that you thought was an opportunity from cloud. And I think you said 10% of that might be SSD. So that's like still $3 billion to $5 billion. And I'm assuming, I think it's probably pretty safe to assume that those are -- that's being deployed in these high AI/ML workload type areas.

No, I would say the vast majority right now of that storage is in, let's say, a near -- so-called nearline storage, meaning just warm storage, general disk-based storage for general-purpose storage.

So these AI nodes, these clusters, they're most likely probably going to be using flash?

That is correct, yes.

Yes. So in addition to high-performance storage, you need high-performance networking and GPUs, obviously. What about like InfiniBand versus like RMBA over converged Ethernet? Like has this been keeping you out? Is there maybe an opportunity for this standard to help you guys out as well?

Absolutely. It's a great question. And so we've had this partnership, the [indiscernible] and the [ares] partnership that Amy talked about with NVIDIA. And then certainly, the InfiniBand and the fact that at this point, we don't have support for InfiniBand does limit us in some of the more commodity where you're stemming out a lot of opportunities and it's a standard NVIDIA offer. And as Charlie alluded to, we do, therefore, in some sense, compete with them but we are looking to address that and be, over time, compliant.

InfiniBand has some scalability limitations over time so this is as customers really want to branch out and deployment, we think they'll prefer Ethernet overall. But as Ajay mentioned, certainly, InfiniBand or InfiniPlan deployments are areas that we're going to look to penetrate more deeply then today.

Okay. We'll take the last question, and then Charlie will have a wrap-up comment, please.

Ashley Ellis with Credit Suisse. [indiscernible] You've referenced a lot of products and software features that you've released over the last few years. I'm curious how you're thinking about R&D spend, potential to the portfolio [indiscernible]? And then my second question is [indiscernible] unified portfolio. How do you think go-to-market Has it changed? How are you thinking about the go-to-market? Should I repeat all that?

Please. Sorry about that.

So Ashley Ellis from Credit Suisse. You've referenced a lot of products and software features that you've released over the last few years. Are there areas that you want to invest more in, augment any holes in the portfolio? And the second part of the question was with the go-to-market as you have a more unified portfolio now, you're not selling what's on hand behind your back. How are you shifting that go to market or maybe you're not?

Yes. I'd say -- so from a portfolio standpoint, been discussing for us to kind of push the density road map and go denser and denser and then evolve the Purity, as somebody pointed out, to make sure it matches up. But that kind of -- that drives our core competitive edge. The next adjacency we are already going after the whole filer space. That's a huge untapped opportunity, so there's more work that we can do in the filer space. And then certainly beyond that, there are sort of other adjacent opportunities. The hyperscaler space is a big opportunity. Over there, we have to kind of modify it so to go into the core rather than go sell a complete array, we have to adjust it and sometimes maybe do a software license arrangement. But we sell our core IP that can potentially work with a more bespoke piece of hardware that they can go outsource it, buy from somebody else. So there's some flexibility, some flexible kind of investments we have to do that enable that flexibility. That opens up a huge market opportunity for us. And then certainly, on the cloud side, we talked about Cloud Block Store, and we have an Azure and AWS. Somebody mentioned what about GCP? And so tons to do. And the good news is we have a great investment profile. We invested a nice chunk in R&D. We have a global footprint so we can leverage the best talent in different locations and [indiscernible] higher in the upper quartile of the talent pool. So we get really tremendous talent in North America, in Prague, in Bangalore and using their footprint, we can truly go after all of these things.

Yes. I would say that another example of things that we expect to invest quite heavily in is Pure Fusion, which we mentioned which started off in our FlashArray product line on block, but we're going to be taking through the entire product line. And so that's an important area. So we do -- while we expect to get greater product, we're going to keep the same level of technology investment intensiveness for quite some time, but we do expect to get productivity improvements from this fact that we've gone from only 3 years ago, for the most part, 100% engineering in -- on the Western U.S. to now a substantial investment in Prague, substantial investment in Bangalore. And we're going to balance out where we do that R&D, which is going to bring productivity up a little bit. But the -- to the sales force, we've been signaling, for the last 2 earnings calls, this change or this focus on sales training and inspection and management and so forth. And a lot of that was in anticipation of being -- of coming out with E and across our entire product line. It really fundamentally changes the sales approach from selling individual arrays into individual use case opportunities into selling a portfolio and selling the company actually as a partner to enterprise companies. I won't underestimate the task. It's a significant change in focus for our sales team, ergo, the big investment in how we are training them and in the ongoing training that we're doing every quarter.

Just to add a little bit more on the go-to-market So and obviously, just on your training piece, look, the total cost of ownership advantages are so tremendous and really getting that cascaded down throughout our field is going to be really compelling for us on a go-to-market standpoint. And then I think we'll really focus again in terms of expansion on enterprise. Europe, international is a big area of opportunity that we see as well. We think there's opportunity for traction with the channel, especially in the E family and really giving some penetration even more so with the channel on that front. And then obviously, hyperscaler continues to be a big focus of ours as well. And then back to your question, Pinjalim, on investments for R&D. Coz and Rob need the Purity investments for 300 terabytes, so we're going to work at it.

On the R&D one, I just mentioned [indiscernible]

So the questions were fantastic. Thank you so much. Charlie, you want to bring us home?

Sure. Well, again, we really want to thank you all for not only your time today but obviously coming out. It's a big investment by all of you, both in time and money. We very much appreciate that. I hope that -- we do feel that with the ability now to compete for the entire storage estate in our customers' environment, and then it gives us this ability to really come forward with these really sustainable competitive advantages that we believe are compelling. We have to convince, of course, our customers, our channel, most of all, that this is something that they should be investing in as they go forward. But I hope we've been able to convince you that this is only a business that I'm in where a 10x improvement is still questioned us whether that's enough. It's a very conservative market. I hope we've been able to convince you that a 10x improvement is enough. We think it's going to be an exciting time for Pure, and we're looking forward to the fight. So thank you, all.

Thank you.