Nutanix Eyes External Storage, AI Growth as Supply-Chain Pressures Persist

Key Points

• External storage is Nutanix’s key near-term growth driver, allowing customers to use its software with existing third-party servers instead of undertaking a costly shift to hyperconverged infrastructure. Public-cloud offerings, including NC2, are also expanding across migrations, disaster recovery and capacity needs.
• Supply-chain pressures are expected to weigh on fiscal 2027. Server prices have risen roughly four- to fivefold year over year, while longer delivery times may delay customer projects, increase future-start orders and slow renewal-cohort growth.
• Nutanix continues to pursue multi-year opportunities from VMware migrations, enterprise AI and cloud-native products. It is investing in internal AI infrastructure, expanding specialist sales resources and expects products such as Kubernetes, database automation, cloud management and AI to generate about one-third of land-and-expand bookings by fiscal 2029.

Nutanix NASDAQ: NTNX is positioning itself as a broader cloud-platform provider rather than solely a hyperconverged infrastructure, or HCI, company, as it pursues growth through external storage, public cloud, Kubernetes, database management and enterprise artificial intelligence offerings.

Chief Executive Officer Rajiv Ramaswami said the company’s platform now operates on-premises and across multiple public clouds, supports both built-in and third-party storage, and includes capabilities for Kubernetes, databases and AI inference. The broader portfolio allows Nutanix to address infrastructure modernization, hybrid-cloud deployments, modern application development and enterprise AI use cases, he said.

Fiscal 2027 Outlook Includes Supply-Chain Headwind

Chief Financial Officer Rukmini Sivaraman said Nutanix enters fiscal 2027 with growth drivers that include its core hybrid-cloud platform, external storage, cloud-native and AI capabilities, and its partner ecosystem. However, the company expects supply-chain conditions to remain a headwind throughout the fiscal year.

According to Sivaraman, customers that need to procure servers to run Nutanix software are facing higher prices and longer delivery times. Nutanix expects a higher percentage of orders with future start dates in fiscal 2027 than in fiscal 2026. The company also expects its renewals cohort to grow at a slower rate in fiscal 2027 than it did in fiscal 2026.

Ramaswami said server prices have risen to roughly four to five times their levels from a year earlier, pressuring customer budgets. Mission-critical workloads may still require customers to refresh infrastructure, while other projects can be delayed if budget is unavailable, particularly among public-sector customers.

Nutanix is seeking to mitigate those pressures through support for external storage and cloud offerings that can run on bare metal. Sivaraman said an easing in supply conditions or stronger-than-expected adoption of external storage could improve results relative to the company’s current expectations. Ramaswami also cited broader hybrid-cloud and public-cloud adoption as potential upside factors.

External Storage Seen as Near-Term Growth Driver

Ramaswami described external-storage support as Nutanix’s largest expected growth driver in fiscal 2027 and for the next several years. He said HCI represents about 20% of the installed base, while the remaining 80% consists of external storage connected to third-party servers.

External-storage capabilities allow customers to deploy Nutanix software without changing their existing hardware architecture, Ramaswami said. That approach can be particularly relevant while hardware costs remain elevated and customers seek to extend the use of existing server and storage investments.

He said HCI adoption has progressed gradually because it requires organizational and operational changes, including consolidating teams that separately manage servers and storage. Nutanix can now “meet” customers in their existing environments through external storage rather than requiring an architectural shift to HCI, he said.

The company also discussed growing use of its NC2 public-cloud offering. Ramaswami said customers are using NC2 for permanent cloud migrations, temporary capacity expansion, disaster recovery and global expansion without owning data centers. He said retention rates have been high once customers begin using the platform, though Nutanix did not provide specific figures.

VMware Migration Opportunity Remains Multi-Year

Ramaswami said customers continue to evaluate alternatives to VMware following Broadcom’s acquisition of VMware, though the migration opportunity will unfold over a number of years. Customers are expected to migrate in waves based on renewal timing, hardware refresh cycles and their broader priorities, he said.

Nutanix has focused on making migrations easier by enabling customers in some cases to migrate without replacing their existing hardware. Sivaraman said the company’s VMware-related pipeline remains healthy and that the opportunity should continue to be a core growth driver in coming years.

Beyond VMware, Ramaswami said customers are increasingly looking for platforms that can support AI, modern applications and hybrid cloud. He identified public-cloud providers as both partners and competitors, while also naming Red Hat and, less frequently, Microsoft as competitors in on-premises deployments. He said customer inertia remains Nutanix’s largest competitive obstacle.

AI, Cloud-Native Products and Sales Investment

Nutanix is also investing in AI infrastructure and specialist sales resources. Ramaswami said enterprise AI deployments involve running applications and agents near data, consuming intelligence from frontier or open-weight models, and using a gateway or model router to manage access, cost, governance and security.

He said Nutanix invested $20 million in internal clusters running open-weight AI models, expecting them to serve about 80% of the company’s AI needs over roughly five years while relying on frontier models for the remaining 20%. The company expects to recover some of that investment within a year, he said.

Sivaraman said Nutanix expects the share of land-and-expand bookings from products including Kubernetes, database automation, cloud management and AI to rise from the low 20% range two fiscal years ago to about one-third by fiscal 2029. The company is adding salespeople and technical specialists while targeting operating margins of 24% to 25% in the current fiscal year, compared with its longer-term goal of more than 30%.

Ramaswami said Nutanix is partnering with NVIDIA and AMD for AI infrastructure and is working with neocloud providers, including ChronoScale, to help enterprises access AI capacity and deploy Nutanix’s AI stack. He said the company expects to announce additional neocloud partnerships.

About Nutanix (NASDAQ:NTNX)

Nutanix, Inc is a cloud computing software company that provides infrastructure and management solutions for enterprise data centers, private clouds, public clouds and hybrid multicloud environments. Its platform is designed to simplify the deployment, operation and management of applications and workloads across on-premises infrastructure and multiple cloud providers.

The company's offerings include the Nutanix Cloud Infrastructure platform, which combines compute, storage and virtualization capabilities; the Nutanix Cloud Manager suite for monitoring, automation, governance and cost management; and Nutanix Unified Storage.

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