It isn't often that a stock drops 27% and analysts say "no big deal." Then again, investors don't often see shares drop that much when a company meets earnings expectations.

That is exactly what happened to Pure Storage, which reported third-quarter earnings after the close of trading Tuesday. The data storage company posted adjusted earnings of 58 cents a share for the quarter, in line with analysts' estimates. Revenue totaled $964.5 million, up 16% from the prior year and surpassing Wall Street's call for $955.9 million.

Still, the stock plummeted 27.3% to close at $68.85 on Wednesday.

Guidance wasn't the issue. The company boosted its fiscal-year outlook for adjusted operating income to $634 million at the midpoint, up from $615 million.

So what gives? To start, Pure Storage announced plans to reinvest some of its revenue from sales to artificial-intelligence hyperscalers into research and development, and sales and marketing. These investments could weigh on profit margins in fiscal 2027.

Second, the company's revenue beat was nice, but also narrower than its outperformance in the second quarter, analysts at Guggenheim Securities noted.

"For a stock that has significantly outperformed the market (we believe justifiably so), Pure likely needs to have pristine prints to continue that momentum," wrote Guggenheim's Howard Ma and Joseph DiBartolomeo.

The firm reiterated a Buy rating for Pure Storage stock and an $85 price target, arguing that the company's core business is still improving.

Investors also may have been concerned by the company's unwillingness to quantify its expectations for hyperscaler sales in fiscal 2027. Shareholders will get further color on the hyperscaler business, which counts Meta Platforms as a customer, on the fourth-quarter earnings call, Pure Storage said.

"We expect investors will wait for additional details before stepping in, " Citi analyst Asiya Merchant wrote in a research note Wednesday. Citi reiterated a Buy rating and trimmed its price target to $105 from $110 based on slightly higher estimated operating expenses.

Analysts at Susquehanna opted to move to the sidelines amid the uncertainty. The market for embedded solid state drives -- a flash memory product used by data centers -- is 460 exabytes, the firm said, and Pure Storage has claimed just 2 exabytes so far.

"The path to scaling this 2EB footprint and associated software revenues remains unclear," wrote analyst Mehdi Hosseini.

Susquehanna downgraded Pure Storage stock to Neutral from Positive but maintained its price target of $100 as it waits for greater insight into the company's hyperscaler business.