Shares of supplier Meta soared 32% in a day. Is it too late to buy them?

Shares of enterprise storage systems maker Pure Storage jumped more than 30% after the company posted strong second-quarter results and raised its full-year revenue guidance. Cooperation with Meta Platforms helped the company to exceed expectations. Against this background, leading analysts raised their target prices on the securities, expressing confidence in the long-term growth of the company.

Pure Storage shares rose 32% in after-hours trading on Aug. 28 to close at a record high after the data management systems provider reported quarterly results that exceeded analysts' forecasts and raised its full-year guidance. Wall Street was particularly encouraged by the company's successful launch of its partnership with Meta, CNBC notes.

The company reported revenue of $861 million for the second quarter of fiscal 2026, ended August 3, versus FactSet's forecast of $846 million. Earnings per share of 43 cents, compared to the consensus of 39 cents. Full-year revenue forecast was raised to $3.6 billion to $3.63 billion from the previous $3.515 billion.

A key driver of the earnings growth was a March agreement with Meta to supply storage for the social network, MarketWatch writes. This comes three months after Pure hinted at a new contract with one of the "top four" AI hyperscalers. The deal was a major win for the company as internet giants look for more cost- and power-efficient ways to meet growing AI storage needs.

Pure Storage already recorded its first revenues from the partnership in the second quarter. The company expected to deliver 1 to 2 exabytes of data by the end of the fiscal year and said that "confidence in these forecasts is growing," adding that volumes could be even higher (one exabyte equals 1 billion gigabytes).

In an interview with CNBC, Pure CEO Charles Giancarlo said that the company, which has primarily focused on the enterprise segment since its founding about 15 years ago, is now focusing on hyperscalers (large cloud providers): "We believe this is an area that will scale in the coming years."

The collaboration with Meta was a watershed moment for the storage industry. While hyperscalers used to build their own HDD and SSD systems, the increasing volumes of data for training language models make such solutions less efficient, MarketWatch notes.

Flash storage is becoming a more powerful, scalable, yet energy-efficient option - which is especially important for energy-intensive data centers.

In March, Pure Storage unveiled a flash solution specifically designed for AI workloads. The deal with Meta could open the way for new contracts: according to Giancarlo, the company is already in talks with other hyperscalers.

Pure's market capitalization rose to $26 billion after a record jump on August 28. The stock surpassed the previous high of January. The previous best result for the day was in December, when the securities added 22% after the company reported the first contract with hyperscaler, specifies CNBC. At the premarket on August 29, the securities are slightly recovering yesterday's gains, trading down 1.09%.

According to Guggenheim analysts, this market reaction is "justified". They called the last three months a "pivotal quarter for Pure" and reiterated a buy recommendation, setting a target price of $93.

Needham experts raised their target price on shares of Pure Storage from $75 to $85 and maintained a Buy recommendation on the stock. Raymond James raised the target from $76 to $88 and also reiterated a positive rating.

At the same time, Raymond James noted that the potential for a deal with Meta is not yet reflected in the quotes. Meta is now testing Pure Storage solutions on a limited scale. It expects to move to full-scale deployment in fiscal 2026, with possible shipments in the tens of exabytes for next-generation data centers in 2027.

"There is not enough data yet to include Meta in forecasts," Raymond James analyst Simon Leopold wrote, but added that the contract has the potential to deliver double-digit growth rates for the company.

William Blair analyst Jason Ader said the results "bolster investor confidence in the company's ability to capture enterprise market share growth, monetize hyperscaler partnerships and capitalize on growing AI demand." He rates Pure Storage's stock as Outperform ("outperforming the market"), Investor's Business Daily writes.

Evercore ISI noted "impressive exceeding expectations and raising guidance" for the quarter. According to analysts, Pure's management gave strong guidance for the second half of the year due to "improving macro environment and growing demand for key products." The experts raised their target on the stock from $70 to $80 and reiterated their rating for the stock as Outperform. They estimate Pure Storage is capable of delivering solid mid double-digit revenue growth and earnings growth approaching 20%, Barron's summarized.

As TipRanks notes, according to Wall Street data, Pure Storage shares have a Strong Buy rating, with 13 "buy" and four "hold" recommendations over the past three months. The stock has an average target price of $77.06, implying a potential downside of 2.56% from current levels.

This article was AI-translated and verified by a human editor