What happened

Shares of Pure Storage (PSTG -1.50%) were up by 13.5% as of 1:33 p.m. ET on Wednesday after the company reported its third consecutive quarter of accelerating revenue growth.      

The company's improving profitability and growing demand across its portfolio of data storage hardware and software products could lead to further gains, but management warned that it faces near-term obstacles involving the supply chain.

PSTG Chart

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So what

In its fiscal third quarter, which ended Oct. 31, revenue grew by 37% year over year. Demand was strong across all product lines and in all of its geographic regions. Pure Storage is also seeing success with its storage subscription services; revenue in that business grew 38% year over year to $187.8 million, amounting to a third of the top line. 

Most importantly, Pure Storage also saw a significant year-over-year improvement on the bottom line as its net loss narrowed to $28.7 million compared to a $74.2 million loss in the year-ago quarter. 

A person using a computer in an office.

Image source: Getty Images.

Now what

Pure Storage is a leader in the data storage market -- a market opportunity that is worth over $50 billion. The company is seeing strong demand from both the public and private sectors. During the quarter, the commonwealth of Massachusetts selected Pure's FlashArray and FlashStack subscription-as-a-service solution. Pure Storage also now serves more than half of the Fortune 500.  

While the demand outlook looks solid, investors should be aware that Pure Storage is not immune from the supply chain problems impacting numerous industries right now. Management reported during the earnings call that the global semiconductor shortage was "more challenging" in the quarter. CEO Charles Giancarlo added that they expect "this environment to continue into next year." 

That said, its guidance calls for fiscal Q4 revenue of $630 million, which would amount to growth of 25% year over year. Investors should also watch for improving profitability; guidance calls for the non-GAAP operating margin to reach 14%, up from 12.3% in fiscal Q3. This is likely a key reason that the stock is up after earnings.