Nutanix recorded a double-digit revenue increase, at least partly ascribed to sales to disgruntled Broadcom VMware customers who jumped ship to its hyperconverged alternative.
Revenue in the second fiscal quarter ended January 31, 2025, was $654.7 million, 16 percent more than a year ago, with a GAAP profit of $56 million, 70.8 percent more than last year’s Q2. Annual recurring revenue (ARR) grew 19 percent year-over-year to $2.1 billion. The customer count jumped by 710 since the prior quarter to 27,870, the highest quarterly increase in 18 consecutive quarters.
Rajiv Ramaswami, Nutanix CEO and president, said in the earnings call: “We’re happy to report second quarter results that came in ahead of our guidance … We delivered outperformance across our guided metrics.”
Financial summary:
- Gross margin: 87.0 percent vs 85.6 percent last year
- Free cash flow: $187.1 million vs $162.6 million
- Operating cash flow: $221.7 million vs $186.4 million
- Cash, cash equivalents, and short-term investments: $1.74 billion compared to $1.08 billion at the end of the prior quarter.
William Blair analyst Jason Ader told subscribers: “Nutanix continues to see strength in landing new logos as more enterprise and mid-market accounts see the Nutanix platform as the best alternative to VMware in the wake of its acquisition by Broadcom.” He also said Nutanix was “benefiting from a rebound in US federal spending and better conversion of large deals in the pipeline.”
Nutanix strengthened its balance sheet and increased its financial flexibility with the issuance of $862.5 million of convertible senior notes and by establishing a $500 million revolving credit facility.
A focus of analysts’ questions in the earnings call was on the magnitude and duration of the VMware migration opportunity. Ramaswami said many customers had multi-year contracts with VMware and a hardware refresh was needed for the conversion to Nutanix.
Migrating customers could go to Nutanix on the public cloud, such as AWS, or on-premises. They could migrate within the existing virtual machine environment or modernize (containerize) the workload and move to Kubernetes. Some VMware Cloud Foundation on AWS customers have already migrated to Nutanix running in AWS.
Some existing three-tier architecture customers are still looking to move to a hyperconverged environment, which was the core Nutanix attraction. That has now been bolstered with the VMware migration opportunity. Ramaswami said customers like this are re-evaluating their entire IT stack “because if they’re being forced to look at an alternative and migration, it’s also a good time for them to reexamine the overall stack.”
“At a big-picture [level], that means, OK, maybe I should take some of these applications, put them in the cloud, maybe that should modernize some portion of my estate, and maybe I should move to a new stack.”
Customers are moving toward a modern stack that can handle virtual machines and containers, as well as work on-prem and in the public cloud, “and that’s the kind of platform that we are providing today in the market.”
Ramaswami also sees AI inferencing driving more GPT-in-a-Box and Nutanix Enterprise AI (NAI) software stack sales over the next few years.
Nutanix’s original steady growth vector of three-tier customers converting to hyperconverged storage is being strengthened by distressed VMware customers fleeing from Broadcom and also by existing customers building up their Nutanix environments to support AI inferencing. These three trends have multi-year time scales and Nutanix sees itself positioned to benefit from them for quite some time.
Next quarter’s revenue outlook is for $625 million ± $5 million, a 19 percent increase over the year-ago Q3. The full FY 2026 outlook is for $2.505 billion ± $10 million, which is a $46 million increase on its original full year outlook and a 17 percent uplift from a year ago at the midpoint. This assumes the high customer acquisition rate continues as well as continuing revenue expansion with existing customers and good subscription renewal performance.
