Shares of Nutanix (NTNX) reached a new record high of $66.99 earlier this month following the release of the company’s better-than-expected fiscal Q2 results. The stock is currently trading around $61.75, marking a 29.4% increase year-to-date. Nutanix’s hybrid multi-cloud software platform continues to see strong demand as it helps companies reduce complexity, boost efficiency, and control expenses. The company is now attracting a larger pool of larger organizations, driving revenue growth and expanding its market reach.
In FQ2, total revenue increased by 16% to $565.2 million, exceeding the consensus estimate by 2.5%. Annual contract value (ACV) billings also saw a significant increase of 23% to $329.5 million, surpassing the high end of the guidance range. Total annual recurring revenue (ARR) reached $1.74 billion, up 26% year-over-year. Nutanix also reported improvements in gross margin to 87.3% and operating margin to 21.9%. Per-share earnings of 46 cents outperformed the consensus by 17 cents, demonstrating the company’s strong financial performance.
Nutanix’s Cloud Platform offers customers modernization and a seamless path to the public cloud, enabling them to run and manage workloads efficiently and cost-effectively. The platform’s appeal to organizations looking to adopt hybrid multi-cloud models and optimize workload performance while reducing total cost of ownership was evident in the company’s largest wins in FQ2. Nutanix CEO Rajiv Ramaswami highlighted the platform’s success in winning over customers from VMware, particularly those unhappy with changes following Broadcom’s acquisition of VMware.
Q2 saw strong renewals across Nutanix’s customer base, including early and co-term renewals, further driving growth. The company’s pipeline is now filled with larger deals, which present both opportunities and challenges due to the variability in the timing of new business closures. As Nutanix continues to attract larger customers, it has assembled a dedicated sales team to target this segment and capitalize on the expanding opportunity to win business from VMware. The company’s ability to support bigger enterprises and offer an alternative to VMware has positioned it for further growth in the coming years.
Despite the uncertainty surrounding VMware’s pipeline expansion and the impact of legacy infrastructure on customer decisions, Nutanix remains confident in its ability to gain market share and drive revenue growth. The company is actively targeting VMware customers with incentives for partners assisting in evaluations, offering price incentives for early migrations, and investing in advertising to raise awareness of its platform as a viable alternative. Looking ahead to FQ3, Nutanix expects total revenue of $510 million to $520 million, with continued growth forecasted for FY’24 and FY’25 driven by a larger customer renewal cohort and strong free cash flow generation.
