Nutanix NTNX reported second-quarter fiscal 2025 non-GAAP earnings of 56 cents per share, which surpassed the Zacks Consensus Estimate by 19.15% and increased 21.7% year over year.

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Nutanix’s revenues climbed 16% year over year to $654.7 million, beating the Zacks Consensus Estimate by 1.88% and the guided range of $635-$645 million.

The top line was driven by new customers landing on the company’s platform through various incentive programs, increased customer engagement considering NTNX as an alternative amid industry M&A, and stronger support from its OEM and channel partners.

NTNX noted that the average contract term length in the fiscal second quarter was 3 years, down from 3.1 years reported in the first quarter of fiscal 2025.

Top-Line Details of NTNX

Product revenues (54.09% of total revenues) increased 18.2% year over year to $354.2 million. Support, entitlements & other services revenues (45.9% of total revenues) rose 13.16% to $300.5 million.

Subscription revenues (95.37% of total revenues) climbed 17.37% from the year-ago quarter’s figure to $624.4 million. Professional services revenues (4.28% of total revenues) improved 12.08% to $28.03 million. Other non-subscription product revenues (0.35% of total revenues) decreased 72.42% to $2.27 million.

Billings were up 25.93% year over year to $776.36 million. Annual recurring revenues climbed 18.54% to $2.06 billion.

During the fiscal second quarter, Nutanix added 710 customers, taking the total number of clients to 27,870.

Operating Details

In the fiscal second quarter, Nutanix’s non-GAAP gross margin expanded 100 basis points year over year to 88.3%.

Non-GAAP operating expenses increased 13% year over year to $417 million.

Non-GAAP operating income came in at $161.3 million and increased $37.4 million compared with the year-ago quarter.

Non-GAAP operating margin was 24.6%, higher than the guided range of 20-21% and increased by 270 bps compared to the year-ago quarter. This was driven by higher revenues and slightly lower operating expenses.

Balance Sheet & Cash Flow

As of Jan. 31, 2025, cash and cash equivalents plus short-term investments were $1.743 billion, up from $1.075 billion at the end of the first quarter of fiscal 2025.

During the second quarter of fiscal 2025, cash generated through operating activities was $221.7 million, and free cash flow was $187.1 million.

Nutanix announced on Dec. 16, 2024, that it completed the issuance of $862.5 million in convertible notes due 2029 with 50 basis points of coupon. It also entered into a credit agreement on Feb. 12, 2025, providing for a senior secured revolving credit facility in an aggregate principal amount of $500 million.

Outlook

For the third quarter of fiscal 2025, revenues are estimated between $620 million and $630 million. Non-GAAP operating margin is expected in the band of 17-18%. The company expects fully weighted average shares outstanding to be approximately 296 million.

For fiscal 2025, revenues are estimated in the range of $2.495-$2.515 billion. The company expects free cash flow in the range of $650-$700 million.

Non-GAAP operating margin is expected in the band of 17.5-18.5%.

Zacks Rank and Other Stocks to Consider

Currently, NTNX carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader sector are Broadcom AVGO, Ballard Power Systems BLDP and Ciena CIEN, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Broadcom is scheduled to report its first-quarter fiscal 2025 results on March 6. Ballard Power Systems is set to post its fourth-quarter 2024 results on March 13 and Ciena is scheduled to report its fiscal first-quarter 2025 results on March 11.

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