rewrite this title AI play Pure Storage soars 21% after touting it won a contract with an unnamed big tech company

Pure Storage shares rallied after announcing a contract with an unnamed “top four” AI hyperscaler in tandem with its fiscal third-quarter results.

The shares were last up 21%.

The data storage management company topped Wall Street’s estimates and offered up strong fourth-quarter guidance. Pure Storage also upped its previously forecasted full-year outlook.

“We’re very pleased,” CEO Charles Giancarlo told CNBC’s “Closing Bell: Overtime” on Tuesday. “This is the first time ever where a hyperscaler, for their standard customer-facing storage, is going to be using a system vendor … and what we’re providing them is a very cost effective, high performance solution that can replace 90% of their storage.”

Pure Storage refrained from sharing the name of the contracted hyperscaler company, but Wall Street analysts regarded news as a big win contributing to the post-earnings pop. A hyperscaler refers to the major cloud computing companies with massive data center that can rapidly size up to meet shifting storage and demands. Some of the key players with major cloud units include Amazon, Microsoft, Alphabet and Meta.

Piper Sandler upgraded shares to an overweight rating following the results. Shares are already up about 50% this year as investors seek out alternative methods to playing artificial intelligence trends and companies search for new ways to manage AI’s data-heavy needs.

Analyst James Fish said the contract creates a “pure opportunity ahead” and “removes the “coinflip risk” previously price into the stock. Agreements with additional hyperscalers represent and additional potential upside catalyst for the stock, he wrote, moving to a $76 price target.

“Hyperscaler interest in flash creates a secular tailwind for the space, as these vendors have historically represented 60-70% of [hard disk drive] shipments,” wrote James Fish. “AI throws ‘gas on the fire’ for utilizing” its storage operating system.

Fish isn’t alone in his bullish take on the stock. Wedbush Securities analyst Matt Bryson called the news a “margin accretive” win for the company and upped his price target to $75.

“We see no reason to shift our constructive view on PSTG, given the promising incremental revenue opportunity and our continued belief that PSTG offers a superior enterprise storage solution,” he wrote.