• Revenue: $655 million, representing a year-over-year growth rate of 16%.
• Annual Recurring Revenue (ARR): $2.06 billion, a year-over-year growth of 19%.
• Non-GAAP Gross Margin: 88.3%.
• Non-GAAP Operating Margin: 24.6%, higher than the guided range of 20% to 21%.
• Non-GAAP Net Income: $165 million or $0.56 per share.
• GAAP Net Income: $56 million or $0.19 per share.
• Free Cash Flow: $187 million, representing a free cash flow margin of 29%.
• Cash, Cash Equivalents, and Short-term Investments: $1.743 billion at the end of Q2.
• Convertible Notes Issuance: $862.5 million in convertible notes due 2029.
• Share Repurchase: $200 million in shares repurchased.
• Q3 Fiscal '25 Revenue Guidance: $620 million to $630 million.
• Full Year Fiscal '25 Revenue Guidance: $2.495 billion to $2.515 billion, approximately 17% growth at the midpoint.
• Full Year Fiscal '25 Free Cash Flow Guidance: $650 million to $700 million, approximately 27% margin at the midpoint.

• Warning! GuruFocus has detected 7 Warning Sign with NTNX.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nutanix Inc (NASDAQ:NTNX) reported second-quarter results that exceeded all guided metrics, with a 19% year-over-year ARR growth to $2.06 billion.
• The company achieved record quarterly revenue of $655 million, surpassing the guided range and representing a 16% year-over-year growth.
• Nutanix Inc (NASDAQ:NTNX) strengthened its balance sheet by issuing convertible notes at attractive terms and establishing a revolving credit facility.
• The company saw significant wins with large organizations, including a Global 2000 energy technology company and a national health ministry in the EMEA region.
• Nutanix Inc (NASDAQ:NTNX) raised its fiscal year 2025 outlook across all metrics, reflecting confidence in continued growth and market opportunities.

Negative Points

• Nutanix Inc (NASDAQ:NTNX) continues to face elongated sales cycles and variability in timing and deal structure, particularly with larger deals.
• The company noted challenges with data security, compliance, and performance as priorities for enterprises implementing GenAI.
• Despite strong results, Nutanix Inc (NASDAQ:NTNX) acknowledged the ongoing dynamic and uncertain macroeconomic environment.
• The company anticipates increased investment in sales, marketing, and R&D in the second half of the fiscal year, which may impact margins.
• Nutanix Inc (NASDAQ:NTNX) faces competition from VMware, with customers having multiyear contracts and hardware refresh cycles affecting migration timing.

Q & A Highlights

Q: What factors are contributing to Nutanix's success in acquiring new customers from competitive platforms? A: Rajiv Ramaswami, President and CEO, explained that the market remains dynamic, and Nutanix views this as a multiyear opportunity to gain share. The company has seen a 50% year-over-year growth in new logos for the last couple of quarters, driven by matured pipelines, recent go-to-market initiatives, customer and partner incentive programs, and increased leverage from OEM and channel partners.

Q: How is Nutanix performing in the US federal government sector, and what is the outlook? A: Rukmini Sivaraman, CFO, noted that the US federal business improved in Q2, returning to solid year-over-year growth. Although the federal sector accounts for 10% or less of annual revenue, the company has a good pipeline of opportunities. However, the impact of the new administration's actions remains uncertain, and this uncertainty is factored into the fiscal year 2025 guidance.

Q: What is the status of Nutanix's partnership with AWS, and how are Cisco and Dell contributing to growth? A: Rajiv Ramaswami stated that there is early traction with AWS, with some customers migrating from VMware Cloud on AWS to Nutanix's offering. Cisco has been a significant contributor to new logos, and the partnership is expected to grow. Dell's contribution is still early, with the Nutanix platform in the market for the second quarter and PowerFlex availability expected next calendar quarter.

Q: How is Nutanix addressing the challenges of migrating customers from VMware? A: Rajiv Ramaswami highlighted several challenges, including the timing of VMware license renewals, hardware refresh cycles, and the need for automated migration tools. Nutanix has developed automated tooling for migration and offers professional services to integrate with customers' current systems. The company views this as a multiyear journey and expects to win more customers over time.

Q: What are Nutanix's plans for investment in sales, marketing, and R&D in the second half of the fiscal year? A: Rukmini Sivaraman explained that Nutanix plans to increase investments in sales and marketing, focusing on frontline and inside sales, sales engineers, channel sales, and customer success. In R&D, the company is investing in strengthening the core platform, supporting modern applications and AI, and integrating third-party storage solutions like PowerFlex.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.