Nutanix NASDAQ: NTNX reported fiscal third-quarter results above its guidance ranges, with management pointing to healthy demand for hybrid cloud, application modernization and AI-related offerings, while also warning that server hardware supply constraints and higher prices continue to affect customer timelines.
President and CEO Rajiv Ramaswami said the company delivered quarterly revenue of $703 million, above its guidance range, and annual recurring revenue, or ARR, grew 15% year over year to $2.43 billion. The company also added more than 700 new customers during the quarter.
“In our third quarter, we continued to see healthy demand for our solutions, as reflected in our strong bookings and outperformance versus our guided metrics,” Ramaswami said. He attributed demand to businesses seeking to modernize IT footprints, adopt hybrid cloud operating models and deploy cloud-native applications, including AI.
Third-Quarter Results Top Guidance
CFO Rukmini Sivaraman said Nutanix reported results “above the high end of the range for all guided metrics.” Revenue of $703 million exceeded the company’s prior guidance of $680 million to $690 million.
ARR ended the quarter at $2.435 billion, up 15% from a year earlier, while net dollar-based retention rate was 106%. Average contract duration was 3.4 years, slightly higher than the company expected. Sivaraman said non-GAAP gross margin was 87.8%, and non-GAAP operating margin was 22.3%, above the guided range of 16% to 17%.
Non-GAAP net income was $136 million, or $0.47 per diluted share, based on approximately 287 million diluted weighted average shares outstanding. GAAP net income was $72 million, or $0.25 per diluted share.
Free cash flow was $197 million, representing a 28% free cash flow margin. Sivaraman said cash, cash equivalents and short-term investments totaled $2.018 billion at quarter-end, up from $1.874 billion at the end of the second quarter.
The company’s board increased its existing share repurchase authorization by $750 million during the quarter. Nutanix repurchased $50 million of common stock and used about $32 million of cash to retire shares related to employee tax liabilities from quarterly restricted stock unit vesting.
Supply Chain Pressures Remain a Key Issue
Management repeatedly highlighted supply chain constraints as a continuing factor in the business. Ramaswami said supply chain challenges are driving higher prices and generally longer lead times for server hardware from partners, pressuring customer budgets and deployment schedules.
Ramaswami said customers have become more aware of the hardware environment and are adapting, including by seeking more flexible software licensing terms. He said hardware prices from several vendors have continued to rise, while lead times are normalizing at some vendors but remain extended at others. Nutanix expects hardware prices to remain elevated into fiscal 2027.
Sivaraman said the constraints continue to affect the timing of converting bookings into revenue and are reflected in the company’s updated guidance. She said Nutanix expects the dynamic to continue in fiscal Q4 and into fiscal 2027.
In response to an analyst question, Ramaswami said lead times can range widely depending on vendor and configuration, from roughly three to four weeks to as long as six months.
External Storage and Public Cloud Options Gain Traction
Ramaswami emphasized Nutanix’s focus on customer choice as a way to mitigate supply chain issues. He pointed to the company’s support for multiple server vendors, deployment in public clouds through Nutanix Cloud Clusters, or NC2, and growing support for external storage options.
He said most current data center infrastructure relies on external storage and legacy hypervisors on servers, and Nutanix’s support for external storage platforms is simplifying migrations without requiring significant hardware changes.
Two of the company’s largest new-logo wins in the quarter involved external storage. Ramaswami cited a seven-figure win with a North American healthcare services provider that chose Nutanix Cloud Platform while retaining Pure Storage FlashArray external storage. Another win involved a financial services provider using Nutanix for Microsoft SQL databases while retaining Dell PowerFlex arrays.
Ramaswami said external storage remains a small portion of the business but is growing rapidly. He said Nutanix aims to price external storage deployments close to its full-stack solution, while also seeking over time to move customers toward its hyperconverged infrastructure offering.
The company also reported increased uptake of NC2 during the quarter, including higher customer wins and cores deployed compared with the prior quarter. Ramaswami said server constraints are causing some customers to look more closely at public cloud deployments. In one example, a Fortune 500 financial services provider chose to deploy NC2 on AWS while migrating away from an existing on-premises provider. Another new customer in EMEA chose to deploy Nutanix on NC2 in OVHcloud while awaiting server hardware, with plans to later move production workloads back on premises while maintaining disaster recovery in the public cloud.
AI and Cloud-Native Offerings Remain Early but Strategic
Ramaswami said Nutanix continued to see uptake of cloud-native and AI offerings in the quarter. One large win involved an aerospace and defense supplier in the APJ region that plans to use Nutanix Kubernetes Platform, Nutanix Database Service and Nutanix Unified Storage alongside its existing Nutanix cloud platform deployment.
The company also saw AI-related wins in financial services, healthcare and higher education. Ramaswami said Nutanix AI is sold as an additional SKU on top of the company’s full-stack solution, allowing Nutanix to capture incremental value.
During the quarter, Nutanix announced Nutanix Agentic AI at NVIDIA’s GTC 2026. Ramaswami said the full-stack software solution is designed to reduce complexity, optimize performance and security, and enable lower and more predictable token costs for agentic AI applications. The solution currently works on platforms using NVIDIA GPUs, and Nutanix plans to support AMD GPU solutions through a recently announced partnership.
Ramaswami said AI adoption remains in early stages, with many customers still experimenting and working to obtain GPU clusters on premises. He described AI as a significant long-term opportunity and said the company sees encouraging signs across several vertical markets.
Nutanix Raises Full-Year Outlook
For fiscal Q4, Nutanix guided for revenue of $725 million to $745 million, non-GAAP operating margin of 21% to 23%, and approximately 292 million diluted weighted average shares outstanding.
For fiscal 2026, the company raised its outlook to revenue of $2.82 billion to $2.84 billion, non-GAAP operating margin of approximately 22.5%, and free cash flow of $760 million to $780 million, representing a free cash flow margin of 27% at the midpoint.
Sivaraman said full-year total contract value bookings expectations are higher than at the company’s prior earnings call. She later said Q3 bookings grew more than 20% on a TCV basis, though Nutanix does not report bookings as a formal metric.
Asked about the Q4 outlook, Sivaraman said the company is taking a prudent approach because of the ongoing supply chain environment and challenges conducting new business in the Middle East. She said the Middle East has been a good growth driver for Nutanix and represents a mid-single-digit percentage of revenue.
Ramaswami said most new-logo wins are coming from VMware Broadcom customers. He described Nutanix as one of the primary destinations for customers looking to migrate away from VMware, alongside Red Hat, Microsoft and public cloud providers.
“Our opportunities with AI, modern applications, hybrid multicloud, and support for external storage provide us with a strong foundation for multiyear growth,” Ramaswami said.
About Nutanix NASDAQ: NTNX
Nutanix, Inc is an enterprise cloud computing company that develops software to simplify the deployment and management of datacenter infrastructure. Founded in 2009 and headquartered in San Jose, California, Nutanix is best known for pioneering hyperconverged infrastructure (HCI), an approach that integrates compute, storage and virtualization into a single software-defined platform aimed at reducing complexity and operational overhead in private and hybrid cloud environments.
The company's product portfolio centers on the Nutanix Cloud Platform, which includes its core AOS software for HCI, Prism for infrastructure management and automation, and a suite of additional services such as Calm for application automation, Files and Volumes for file and block services, Karbon for Kubernetes orchestration, and Era for database management.
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