Everpure (P) Grew Revenue 38% but Free Cash Flow Was Negative. Will the Coming Hyperscaler Ramp Convert Into Cash?

Everpure, Inc. (NYSE: P ) reported results for the fiscal second quarter. Revenue increased 37.7% year over year to $1.19 billion, product revenue climbed 53.9% to $686.8 million, and subscription services revenue grew 20.4% to $499.1 million. Remaining performance obligations reached $4.1 billion, up 44%.

GAAP operating income at Everpure, Inc. (NYSE:P) rose to $63.2 million from $4.9 million. Company-defined non-GAAP operating income increased 77% to $230 million, or 19.4% of revenue, after excluding stock-based compensation, related payroll taxes and acquired-intangible amortization. Yet operating cash flow swung from positive $212.2 million to negative $136.3 million.

Hyperscale revenue was minimal, so the quarter could not test hyperscaler cash conversion. It instead sets the baseline before Everpure, Inc. (NYSE:P) expects most fiscal 2027 hyperscale revenue in the third and fourth quarters.

Everpure, Inc. (NYSE:P) raised the fiscal 2027 revenue outlook from $4.41-$4.51 billion to $5.03-$5.07 billion, a $590 million midpoint increase. Everpure, Inc. (NYSE:P) also guided for third-quarter revenue of $1.325 billion to $1.335 billion, implying approximately 38% growth at the midpoint.

The acceleration was not dependent on hyperscale revenue. Product growth reflected pricing, a shift toward higher-performance configurations, and capacity growth, which offset lower system unit volumes. Deals above $5 million grew 59%, while deals above $20 million increased 385%. Storage-as-a-service total contract value rose 121% to $277 million, adding future recurring revenue for Everpure, Inc. (NYSE:P).

Hyperscale could strengthen the second half. Everpure, Inc. (NYSE:P) expects the second top-five hyperscaler agreement to contribute minimally this year before beginning a meaningful fiscal 2028 ramp. Management expects hyperscale deployments to carry product gross margins of 75% to 85%, potentially supporting margins as volume increases.

Cash conversion from the core business remained weak. Everpure, Inc. (NYSE:P) attributed negative operating cash flow primarily to strategic purchases of NAND and other components supporting core demand, securing supply and limiting cost inflation. Prepaid expenses and other assets used $577.2 million, but management did not quantify how much represented component purchases. Accounts receivable used $137.4 million and inventory absorbed $33.8 million. Higher accounts payable and deferred revenue partly offset these outflows.

Capital expenditures used $101.3 million and supported the scaling of hyperscale and Evergreen//One. Everpure, Inc. (NYSE:P) therefore reported company-defined non-GAAP free cash flow of negative $237.6 million, calculated as operating cash flow less capital expenditures, compared with positive $150.1 million a year earlier. Management expects operating cash flow to normalize over the next two quarters and forecasts $600 million to $800 million of fiscal 2027 free cash flow.