VMware defections propel Nutanix to another strong earnings and revenue beat

Shares of the data center infrastructure company Nutanix Inc. were flying high late today thanks to a crushing earnings and revenue beat and bullish guidance for the current quarter and full year.

The company delivered fiscal second-quarter earnings before certain costs such as stock compensation of 56 cents per share, easily beating the analysts’ consensus estimate of 47 cents. Revenue for the period came to $654.7 million, up 16% from a year earlier and some way ahead of Wall Street’s target of $642.6 million.

The strong results were reflected by an improvement in Nutanix’s bottom line, with net profit rising to $56.4 million, up from just $32.8 million one year earlier. Investors liked what they saw, as Nutanix’s stock gained more than 14% after-hours.

Nutanix company is a pioneer of so-called software-defined hyperconverged infrastructure or HCI, offering full-stack hardware that integrates compute, storage and networking components into a single appliance or cloud service. Although it made its name selling physical hardware, these days it has reinvented itself as a cloud infrastructure provider, while putting more focus on its hyperconvergence software that can run on third-party servers and systems.

Nutanix Chief Executive Rajiv Ramaswami (pictured) highlighted how the company outperformed all of its guided metrics during the quarter. “Our results are benefiting from the strength of the Nutanix Cloud Platform, demand from businesses looking for a trusted long-term partner committed to innovation and customer care, and go-to-market leverage from our partnerships and programs,” he said.

The company has benefited immensely from an influx of customers looking for an alternative to VMware Inc. in the wake of its acquisition by Broadcom Inc. in late 2023. Since buying VMware, Broadcom has created a lot of uncertainty for customers with various changes to its pricing model and policies, and many have fled to Nutanix.

Analyst Steve McDowell of NAND Research Inc. told SiliconANGLE that he expects Nutanix to continue to benefit from the upheavals at VMware for the foreseeable future.

“It will see further growth from defections as enterprise licenses come up for renewal,” he predicted. “That’s going to happen for the next three years.”

The impact of those defections is apparent in Nutanix’s results. The company reported annual recurring revenue, which is a key measure of business consistency, of $2.06 billion at the end of the quarter, up 19% from a year ago. Its total billings came to $776.3 million, surpassing the $692.8 million analyst forecast by a wide margin. Billings is a key metric for investors to gauge Nutanix’s future revenue, representing the total amount invoiced for products and services not yet delivered to customers.

McDowell said Nutanix is making all of the right plays. Not only is it positioning itself as the easy alternative to VMware for virtualization, but it’s also investing aggressively to expand its product portfolio.

“Nutanix continues to grow its share of the cloud-native Kubernetes market, especially in the public cloud, he said. “That’s helping to fuel growth in AI, which is inherently cloud-native and overwhelmingly cloud-first.”

For the current quarter, Nutanix issued an optimistic forecast, saying it’s looking for revenue of between $620 million and $630 million. That’s well ahead of the Street’s forecast of $595.1 million. For the full year, it sees total revenue of between $2.5 billion and $2.52 billion, compared with the $2.46 billion analyst target.

“I like everything Nutanix is doing,” McDowell said. “I’m anxious to see Nutanix release its external storage solution. There’s a significant amount of pent-up demand for a VMware vSAN alternative, and that should be a solid revenue driver for Nutanix going forward.”

Photo: Nutanix