Nutanix NTNX shares have lost 11.6% in the past month, underperforming the Zacks Computer and Technology sector, the S&P 500 index and the Zacks Computers - IT Services industry’s decline of 6.6%, 4.7% and 8.4%, respectively.

Nutanix is considered a pioneer of the hyper converged infrastructure (HCI) market, which is projected to grow rapidly in the long term, but faces significant competition in most of the markets it operates, from the likes of Hewlett Packard Enterprise HPE, Cisco Systems CSCO and Dell Technologies DELL, among others. Hewlett Packard Enterprise and Cisco Systems compete with Nutanix in the hybrid multicloud segment, while Dell Technologies poses a challenge in both the HCI and hybrid multicloud markets. Shares of Hewlett Packard Enterprise, Cisco Systems and Dell Technologies have lost 5.3%, 6.1% and 12.5%, respectively, in the past month.

While shares have declined alongside broader technology names, Nutanix’s strategic positioning in HCI and hybrid multicloud solutions continues to draw attention. To better understand whether the recent dip warrants a hold or a potential sell, let’s take a closer look at the company’s current fundamentals, growth trajectory and emerging risks.

Nutanix Expands Customer Base, Yet Risks Remain

Nutanix continues to scale in the hybrid multicloud space, owing to its software-defined HCI platform and unified management across multi-cloud environments. The company’s built-in hypervisor has been gaining significant traction as customers continue to select it as a low-cost alternative to other vendor offerings, and the Xi Cloud Services platform offers a differentiated approach to IaaS. 

In the second quarter of fiscal 2025, the company added 710 customers, expanding its base to 27,870, and showed strong recurring revenue momentum backed by large enterprise and federal sector wins. It reported record quarterly revenue of $655 million, higher than the guided range of $635 million to $645 million, representing a year-over-year growth rate of 16%.

However, several execution risks persist. Sales cycles remain stretched, and the timing of large enterprise deals continues to be unpredictable, impacting revenue visibility. Third-quarter guidance signals a sequential decline in revenues, and margins are projected to narrow in the second half of fiscal 2025 as the company ramps up investments in sales and R&D.

NTNX’s Q3 Fiscal 2025 Guidance

Nutanix expects revenues in the band of $620-$630 million in the third quarter of fiscal 2025. The Zacks Consensus Estimate for revenues is pinned at $625.44 million, indicating year-over-year growth of 19.23%.

The consensus estimate for third-quarter fiscal 2025 earnings is pegged at 38 cents per share, which has remained unchanged over the past 30 days. The estimate implies a year-over-year increase of 35.71%. 

NTNX beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, with the average surprise being 38.59%.

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Here’s Why You Should Hold NTNX Stock for Now

Nutanix’s long-term growth potential remains intact, supported by a strong recurring revenue model, expanding customer base, and differentiated cloud offerings. While near-term headwinds like stretched sales cycles and margin pressures persist, the company’s solid fundamentals offer reasons to stay invested. For now, investors may consider holding the stock and monitoring upcoming quarters for improved profitability.

NTNX currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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