Nutanix loves HPE (and Wall Street loves Nutanix)

Nutanix posted the biggest loss in its short history yesterday – and was rewarded with shares jumping 20 per cent in overnight trading.

The hyperconverged infrastructure vendor generated revenues of $314.8m in fiscal Q1 2020, a little better than expected. And Wall Street was further encouraged by the company’s performance as it nears the completion of its transition from hardware-led sales to subscription billing. A good showing from the company’s new OEM relationship with HPE was the icing on the cake.

Wells Fargo senior analyst Aaron Raker’s take is: “Shares of Nutanix traded up 20 per cent (post close) following what we would consider positive F1Q20 (Oct ’19) results w/ total revenue at $314.8m, 2 per cent above our $308.8m estimate.”

Dheeraj Pandey, chairman and CEO of Nutanix, issued a quote: “Our solid Q1 performance, particularly in the Americas, gives us confidence that we have the right formula… We have also seen momentum in key areas of our business, including the transition to subscription and an improved 28 per cent attach rate of new products onto our core HCI platform.”

Revenues and growth

Q1 Fy220 revenues were $314.8m compared to $313.3m a year ago. Net loss jumped from $94.3m to $229.3m. Nutanix attributed this third quarter in a row of little or no growth to “revenue compression” caused by the switch to subscription billing.

Nutanix gained 780 new customers in the quarter, taking the total to 14,960. There were 66 deals worth more than $1 million, a record, with nine deals worth more than $3m.

HPE effect

In the earnings call Pandey singled out the partnership with HPE. Rakers told subscribers the “initial ramp has been stronger than past OEMs with $8m in sales; 25 new Nutanix customers [and] more than 50 per cent of HPE customers are new to Nutanix.”

Nutanix sees no adverse effect of the general economic situation on large enterprise sales, as has been reported by NetApp and others. “Large enterprise in Americas, we actually do see doing well.”

Nutanix expects Q2 fy2020 software and support billings of $410m- 420m, and software and support revenue of $330m-$335m, with a non-GAAP loss of $0.70/share. This quarter’s $229.3m loss was based on $0.71/share. We might reasonably expect a loss of $220m.