Nutanix (NASDAQ:NTNX), a leader in hybrid multicloud computing, reported its third quarter fiscal 2023 financial results on May 24, 2023. The company delivered strong performance across all its guided metrics, beating the consensus estimates for both earnings and revenue. The stock soared more than 15% in pre-market trading on Thursday, reflecting the positive market reaction to the earnings report.
Nutanix Q3 Earnings Highlights
– Earnings per share (EPS) came in at $0.04, just ahead of the consensus estimate of $0.03 and up from a loss of $0.69 in the same quarter last year.
– Revenue grew 11% year-over-year to $448.58 million, beating the consensus estimate of $433.12 million and exceeding the company’s guidance of $435 million to $445 million.
– Annual contract value (ACV) billings increased 20% year-over-year to $176.3 million, surpassing the company’s guidance of $165 million to $170 million.
– ACV run-rate grew 29% year-over-year to $1.41 billion, driven by strong demand for the company’s cloud platform and subscription offerings.
– Gross margin improved to 80.4%, up from 77.1% in the same quarter last year, reflecting the benefits of the company’s subscription transition and operational efficiencies.
– Free cash flow was positive at $32.8 million, compared to a negative $14.7 million in the same quarter last year, demonstrating the company’s improved cash generation capabilities.
Nutanix Q3 Earnings Commentary
Rajiv Ramaswami, President and CEO of Nutanix, commented on the company’s third quarter results:
> “Our business performed well in the third quarter against an uncertain macro backdrop, as the value proposition of our cloud platform continued to resonate with customers. We are also pleased to have completed the Audit Committee investigation regarding third-party software usage and to have filed our Form 10-Q for our second quarter of fiscal 2023.”
Rukmini Sivaraman, CFO of Nutanix, added:
> “Our third quarter results continued to demonstrate a good balance of growth and profitability, resulting in year-to-date ACV Billings growth exceeding 20%, combined with strong year-to-date free cash flow generation. We continue to execute on our growing base of subscription renewals and remain focused on sustainable, profitable growth.”
The company also announced that it had completed its investigation related to third-party software usage and had accounted for the estimated financial impact of this past non-compliant usage by recording cumulative estimated expenses of $11 million as of the second quarter of fiscal 2023. The company expects the incremental ongoing annual impact to operating expenses of this third-party software usage to be approximately in the low-single-digit millions of dollars.
Nutanix Q3 Earnings Outlook
For the fourth quarter of fiscal 2023, Nutanix expects:
– Revenue of $460 million to $470 million
– Non-GAAP gross margin of approximately 80%
– ACV billings of $180 million to $185 million
– Non-GAAP net loss per share of approximately $0.05
For the full fiscal year 2023, Nutanix expects:
– Revenue growth of approximately 10%
– Non-GAAP gross margin of approximately 80%
– ACV billings growth of approximately 20%
– Free cash flow margin of approximately 5%
Nutanix Q3 Earnings Analysis
Nutanix’s third quarter earnings report showed that the company is making solid progress in its transition to a subscription-based cloud platform provider. The company’s revenue and ACV billings growth accelerated from the previous quarter, indicating strong demand for its hybrid multicloud solutions. The company also improved its profitability and cash flow metrics, reflecting its operational discipline and efficiency.
Nutanix’s stock price reacted positively to the earnings report, as investors were impressed by the company’s performance and outlook. The stock has gained more than 50% year-to-date, outperforming the broader market and its peers in the cloud computing space.
Nutanix is well-positioned to capitalize on the growing adoption of hybrid multicloud environments by enterprises, as it offers a differentiated and scalable platform that simplifies IT operations and enables cloud-native applications. The company has a loyal customer base of over 19,000 customers, including more than 900 Global 2000 enterprises. The company also has a strong partner ecosystem that includes leading cloud providers such as AWS, Microsoft Azure, Google Cloud Platform, IBM Cloud and Alibaba Cloud.
Nutanix faces competition from other cloud infrastructure providers such as VMware, Dell Technologies, Cisco Systems and Hewlett Packard Enterprise. However, Nutanix has a unique value proposition that combines software-defined storage, compute and networking with cloud management and orchestration capabilities. The company also has a competitive advantage in terms of innovation and customer satisfaction.
Nutanix is expected to continue its growth momentum in the coming quarters, as it expands its product portfolio, enters new markets and regions, and leverages its cross-selling and upselling opportunities. The company is also expected to improve its margins and cash flow as it benefits from its subscription transition and cost optimization initiatives.
Nutanix is a compelling investment opportunity for long-term investors who are looking for exposure to the fast-growing hybrid multicloud market.
