Nutanix, Inc. Q3 FY2026 earnings call

- Overall Q3 Performance • Nutanix beat all guided metrics in Q3 FY26, with revenue coming in above the upper bound of the prior guidance range, strong bookings growth, and healthy free cash flow generation. • Added over 700 new customers in the quarter, with new logo wins well distributed across large enterprise, commercial, and small/medium business segments. • Net dollar retention rate (NRR) was 106%, and average contract duration came in at 3.4 years, slightly above expectations due to deal mix.

- Core Product and Strategic Initiatives • Launched Nutanix Agentech AI at NVIDIA GTC 2026, a full-stack software solution to reduce complexity, optimize security/performance, and lower predictable token costs for agentic AI applications; announced a new partnership to support AMD GPUs for this offering, and expanded AI capabilities for new AI cloud providers (NeoClouds) expected to launch in H2 2026. • Introduced NKP Metal, which brings Nutanix Cloud Platform automated lifecycle management and data services to bare metal Kubernetes. • Advanced the external storage support initiative, announcing new partnerships with NetApp and Lenovo to support their storage platforms, with availability expected in calendar 2026; already secured two large seven-figure new logo wins with existing supported external storage platforms (Pure FlashArray, Dell PowerFlex). • Grew adoption of Nutanix Cloud Clusters (NC2), the public cloud deployment option for the Nutanix platform, with quarter-over-quarter increases in customer wins and cores deployed, driven by extended server lead times and elevated on-prem hardware prices. • Reaffirmed medium-term targets of mid-to-high teens revenue and ARR growth through FY29, shared during the investor day held alongside the annual .NEXT conference, which drew over 5,000 attendees.

- Capital Allocation • The board increased the existing share repurchase authorization by $750 million in Q3; Nutanix repurchased $50 million of common stock and retired $32 million in shares to offset employee compensation-related dilution. • Ended Q3 with $2.018 billion in cash, cash equivalents, and short-term investments, up from $1.874 billion at the end of Q2.

Nutanix does not break out financial performance for separate product segments in this call. Aggregate company results for Q3 FY26 are: total quarterly revenue of $703 million, total ending annual recurring revenue (ARR) of $2.435 billion, 15% year-over-year ARR growth, non-GAAP gross margin of 87.8%, non-GAAP operating margin of 22.3%, non-GAAP net income of $136 million (fully diluted EPS of $0.47), GAAP net income of $72 million (fully diluted GAAP EPS of $0.25), and free cash flow of $197 million (28% free cash flow margin). Early-stage growth offerings (external storage support, NC2 public cloud deployment, Nutanix Agentech AI) represent a minority portion of total revenue currently, but are growing rapidly.

- Q4 FY26 guidance: Revenue expected between $725 million and $745 million, with a non-GAAP operating margin target of 21% to 23%. - Full year FY26 guidance was revised upward across all metrics: revenue is now guided to $2.82 billion to $2.84 billion (up at the midpoint from prior guidance), non-GAAP operating margin is expected to hit ~22.5% (up from prior guidance), and free cash flow is guided to $760 million to $780 million (an increase from prior guidance, with a 27% free cash flow margin at the midpoint). - Full year TCV bookings expectations are higher than management's outlook at the last earnings call, driven by better than expected Q3 bookings performance (over 20% year-over-year TCV growth in Q3) and stronger renewals traction. - Management notes ongoing supply chain constraints impacting the timing of bookings-to-revenue conversion, which is factored into the current guidance, and expects these impacts to continue into Q4 FY26 and full FY27.

- Ongoing global supply chain challenges have resulted in elevated server hardware prices and extended lead times from some partner vendors, pressuring customer budgets and delaying project timelines, which negatively impacts the timing of revenue conversion from booked deals. - Geopolitical instability in the Middle East, a region that generates mid single-digit percentage of Nutanix total revenue, has made conducting new business more challenging, and this uncertainty was factored into the prudent Q4 guidance. - GPU supply constraints are slowing early enterprise adoption of on-prem AI solutions, creating uncertainty around the near-term growth trajectory of the new AI product line. - Early-stage growth offerings (external storage support, NC2, AI) have not yet reached meaningful revenue scale, and there is no guarantee they will meet long-term growth expectations.

Q: With several quarters of ongoing supply chain constraints, are customers adapting to the environment, and can deal conversion remain steady even if supply does not materially improve over the next 3-6 months? / A: Customers are now more aware of the dynamic and are better navigating supply challenges, while Nutanix's customer choice model helps mitigate impacts. Lead times are normalizing at some vendors but remain extended at others, and hardware prices are expected to stay elevated into FY27. Nutanix offers customers flexibility: multiple server vendor options, the ability to migrate without new hardware purchases via external storage support, and the option to deploy on public cloud via NC2, all of which help offset delays. (339 characters)

Q: What explains the Q4 revenue guidance coming in slightly below market expectations, and what would need to go right to hit the high end of the range? / A: The guidance reflects a prudent approach factoring in ongoing dynamic supply chain conditions that impact quarterly revenue timing, as well as increased challenges to new business in the Middle East, which has historically been a growth driver. Reaching the high end of the range would require better than expected supply chain improvements, faster than anticipated traction for the new external storage and NC2 public cloud offerings, or an easing of operating conditions in the Middle East. (367 characters)

Q: What traction has the new external storage support offering gained to date, and what is the pricing strategy relative to competitor VMware? / A: The offering is still a small portion of current revenue, but it is growing rapidly, with multiple large new logo wins already closed. The vast majority of existing data center infrastructure uses external storage with legacy hypervisors, creating a large addressable market that will become more accessible as additional vendor partnerships go live this calendar year. Pricing is set close to Nutanix's full-stack HCI solution, to make migration attractive for customers reusing existing hardware, with a long-term goal of expanding Nutanix's customer base and moving customers to HCI over time. (421 characters)

Q: What is the current state of NC2 (public cloud deployment) growth, and is elevated server cost driving a permanent or temporary shift to public cloud deployments? / A: Extended lead times and higher on-prem server prices are clearly driving an acceleration in NC2 adoption, with multiple examples of customers starting with NC2 while waiting for on-prem hardware, or permanently moving partial workloads to public cloud via NC2. NC2 remains a minority portion of Nutanix's total business currently, but it is growing, and the flexibility to move workloads between on-prem and public cloud is a key competitive advantage for Nutanix. (354 characters)

Q: With the VCF9 deadline coming at the end of next year, what customer migration trends are you seeing, and how is Nutanix positioning to capture this opportunity? / A: The VCF9 deadline is forcing customer decision making, as most customers have not fully adopted VCF and a full upgrade to VCF9 would require a costly hardware refresh. Nutanix is positioned well to capture migrating VMware customers, with a unique value proposition: it allows customers to migrate while retaining existing external storage and hardware, provides automated migration tools and commercial incentives, and offers a simpler migration path than competing alternatives. Most new Nutanix logos are currently migrating from VMware. (375 characters)