Software-Defined Storage

# Executive Summary * The Software-Defined Storage (SDS) market is experiencing robust growth, projected at a 25-28% Compound Annual Growth Rate (CAGR) through the end of the decade, fundamentally driven by the exponential increase in enterprise data. * The rise of Artificial Intelligence (AI) is the most significant new catalyst, creating a premium market for high-performance, AI-optimized storage solutions and driving a new wave of infrastructure investment across the industry. * Heightened cybersecurity threats, particularly ransomware, have made data resilience a non-discretionary spending priority, fueling demand for specialized, high-margin security platforms, as exemplified by Rubrik's hyper-growth. * The competitive landscape is diverging between large, integrated hardware and software providers like Dell and HPE, and high-margin, software-centric specialists such as Nutanix, NetApp, and Rubrik. * A strategic shift to hybrid multi-cloud architectures is accelerating the adoption of as-a-service (aaS) and subscription consumption models, altering vendor financial profiles and emphasizing recurring revenue streams. * Strong financial performance is evident across the sector, with software-focused players like Nutanix and Rubrik exhibiting superior revenue growth and gross margins, often exceeding 80%. ## Key Trends & Outlook The primary force propelling the Software-Defined Storage industry is the relentless and exponential growth of data, which necessitates the scalable, flexible, and cost-effective solutions that SDS provides. This secular trend is driving consensus market growth forecasts of 25-28% annually through the end of the decade, with the global software-defined storage market size estimated at USD 19.37 billion in 2025 and anticipated to reach around USD 576.82 billion by 2034. This dynamic expands the total addressable market for all vendors, as legacy storage architectures struggle to keep pace with modern data demands. Enterprises are increasingly adopting hybrid and multi-cloud strategies to manage this data explosion, requiring a unified storage layer that SDS delivers. Companies like NetApp are capitalizing on this by deeply integrating their software with public clouds, while Dell addresses it with a comprehensive on-premises portfolio. The emergence of AI workloads is creating a distinct and urgent demand for new, high-performance storage infrastructure. This is not just an incremental upgrade cycle; AI requires specialized capabilities in performance, networking, and power management, such as the Direct Liquid Cooling technology pioneered by HPE. The global market for AI-powered storage is projected to rise to $66.5 billion by 2028, expanding at a CAGR of 24.5% between 2018 and 2028. This trend is creating a significant, high-margin revenue opportunity for vendors who can deliver integrated, AI-ready platforms. The most significant opportunity lies in data resilience, where the acute threat of ransomware has created a non-discretionary, premium-priced market segment, exemplified by the hyper-growth of Rubrik. Near-term growth faces headwinds from macroeconomic uncertainty and heightened IT spending scrutiny, which could temper purchasing cycles in the next 12 months. ## Competitive Landscape The Software-Defined Storage market is fragmented, with a mix of large, integrated vendors and more specialized software players competing for market share. The market is characterized by moderate concentration, with a few major players holding significant market share but numerous smaller niche players also competing. Some large firms, like Dell and HPE, compete by offering comprehensive, integrated portfolios of hardware and software. Dell, a formidable player in the global technology industry, leverages a broad product portfolio, powerful go-to-market engine, and extensive services capabilities to deliver end-to-end solutions. Its ability to deliver integrated rack-scale solutions, combining its PowerEdge servers with PowerScale storage and co-engineered AI software with NVIDIA, shows this model in action. HPE is transforming into an edge-to-cloud platform company, delivering its entire portfolio as-a-service (aaS) via the HPE GreenLake cloud platform, and showcases expertise in Direct Liquid Cooling (DLC) for managing energy densities of GPUs/CPUs in AI and high-performance computing. This contrasts with the approach of software-centric specialists. Some, like Nutanix and NetApp, focus on providing a flexible software layer for hybrid cloud environments. Nutanix, recognized as a Leader in the 2025 Gartner Magic Quadrant for Distributed Hybrid Infrastructure, has evolved into a hybrid multicloud platform leader with its Nutanix Cloud Platform (NCP) designed to run on a wide variety of hardware and manage applications and data seamlessly across AWS, Azure, and Google Cloud. NetApp, an intelligent data infrastructure leader, provides flexibility, simplicity, and security at scale through its foundational ONTAP operating system and deep integration with hyperscalers like AWS (Amazon FSx for NetApp ONTAP), Azure (Azure NetApp Files), and Google Cloud (Google Cloud NetApp Volumes). Others, like Rubrik, build a deep specialization in a critical area like cyber resilience. Rubrik's entire business is built on the Rubrik Security Cloud (RSC), a "Zero Trust Data Security" platform, which allows it to drive significant market share gains against competitors with broader but less specialized offerings. Key competitive battlegrounds include AI-optimized infrastructure, native cloud integration, and data security capabilities. ## Financial Performance The industry is exhibiting strong but bifurcated revenue growth. Growth rates diverge based on exposure to the key secular trends of AI and cybersecurity. Rubrik's +51% year-over-year (YoY) total revenue growth in Q2 FY26, with subscription revenue up 55% YoY, is a prime example of the cyber resilience tailwind. Dell's Infrastructure Solutions Group (ISG) revenue grew +12% YoY in Q1 FY26, driven by a 16% surge in Servers & Networking, demonstrating the powerful impact of the AI infrastructure buildout on large, diversified players. {{chart_0}} A sharp divergence in gross margin profiles is observed, based on the underlying business model. The margin divergence is a direct reflection of company strategy, as companies that sell software and subscriptions have an inherently higher margin profile than those that sell integrated hardware systems. Nutanix's 88.1% non-GAAP gross margin in FY25 exemplifies the profitability of a mature software-subscription model. This contrasts sharply with Dell's 21.1% consolidated gross margin in Q1 FY26, which reflects its large hardware footprint. NetApp's Public Cloud segment also demonstrated a strong gross margin of 75.2% in FY25. {{chart_1}} Companies in the SDS sector are pursuing a balanced approach to capital allocation, returning significant capital to shareholders while investing in strategic growth through R&D and targeted M&A. Dell's $2.0 billion in share repurchases in Q1 FY26, alongside an 18% increase in its quarterly dividend, exemplifies the commitment to shareholder returns. Rubrik's acquisition of Predibase, Inc. in July 2025 highlights the use of M&A to accelerate technology roadmaps in AI. NetApp also announced an additional $1.1 billion share repurchase authorization in May 2025. The balance sheets across the industry are generally strong and liquid. This is supported by robust free cash flow generation, particularly from the software and subscription models, which provides the financial flexibility to navigate economic uncertainty and fund growth initiatives. Nutanix serves as a representative example, with approximately $769.50 million in cash and cash equivalents and $1.22 billion in short-term investments as of July 31, 2025, showcasing a strong liquidity position.