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Nutanix, Inc. (NTNX)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 revenue was $591.0M, up 16% YoY, with GAAP diluted EPS $0.10 and non-GAAP diluted EPS $0.42. Results exceeded company guidance on revenue ($565–$575M) and non-GAAP operating margin (20% actual vs 14.5%–15.5% guided) driven by strong renewals and lower expenses from nonrecurring payments/credits .
  • ARR reached $1.97B (+18% YoY), free cash flow was $151.9M (+$19.4M YoY), and average contract duration was 3.1 years, reflecting healthy subscription fundamentals despite elongated sales cycles and softer U.S. federal expansion in the quarter .
  • Management maintained FY25 revenue at $2.435–$2.465B but raised FY25 non-GAAP operating margin to 16%–17% (from 15.5%–17%) and free cash flow to $560–$610M (from $540–$600M), citing prudent caution amid macro uncertainty and longer deal cycles .
  • Strategic catalysts: expanded AWS partnership (migration credits and accelerator program to move VMware workloads to NC2 on AWS), AI platform advances (GPT‑in‑a‑Box 2.0 and Enterprise AI leveraging NVIDIA NIM), and early go-to-market leverage from Dell/Cisco partnerships; these themes underpinned confidence and pipeline growth for larger deals .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue and operating margin beat company guidance; CFO: “Non-GAAP operating margin in Q1 was 20%, higher than our guided range… largely due to higher revenue and… lower expenses including… nonrecurring payments and credits.”
    • ARR growth of 18% YoY and strong free cash flow generation; CEO: “We exceeded all our guided metrics… grew our ARR 18% year-over-year… and saw solid free cash flow generation.”
    • Strategic momentum: expanded AWS collaboration to accelerate migrations to NC2 on AWS; AI capabilities launched (GPT‑in‑a‑Box 2.0/Enterprise AI) enabling hybrid GenAI deployments on-prem and in public cloud .

  • What Went Wrong

    • Net dollar-based retention rate (NRR) was 110%; expansion was challenged mainly by U.S. federal softness versus a strong prior-year compare due to an elongated continuing resolution impacting spend .
    • Sales cycles modestly elongated; larger deals require C‑suite approvals and exhibit variability in timing/outcome and structure, tempering net-new ARR growth despite strong new logo land performance .
    • Management maintained FY revenue guide despite the Q1 beat, citing macro/political uncertainty and timing variability; this prudence implies back-half margin compression as OpEx ramps through FY25 .

Financial Results

MetricQ1 FY2024Q4 FY2024Q1 FY2025
Revenue ($USD Millions)$511.1 $548.0 $591.0
GAAP Diluted EPS ($)$(0.07) $(0.51) $0.10
Non-GAAP Diluted EPS ($)$0.29 $0.27 $0.42
GAAP Gross Margin %84.0% 85.2% 86.0%
Non-GAAP Gross Margin %85.9% 86.9% 87.5%
GAAP Operating Margin %(1.1)% (2.2)% 4.6%
Non-GAAP Operating Margin %15.6% 12.9% 20.0%
Net Cash from Operations ($USD Millions)$145.5 $244.7 $161.8
Free Cash Flow ($USD Millions)$132.5 $224.3 $151.9

Revenue mix (disaggregation):

Revenue MixQ1 FY2024Q4 FY2024Q1 FY2025
Subscription Revenue ($USD Millions)$479.478 $518.695 $560.696
Professional Services Revenue ($USD Millions)$22.835 $26.769 $27.285
Other Non-Subscription Product Revenue ($USD Millions)$8.741 $2.488 $2.975

Key KPIs:

KPIQ1 FY2024Q4 FY2024Q1 FY2025
Annual Recurring Revenue (ARR) ($USD Millions)$1,663.9 $1,908.0 $1,966.1
Average Contract Duration (years)2.9 3.1 3.1
Net Dollar-Based Retention Rate (NRR, %)—114% (FY24) 110%
Total Billings ($USD Millions)$561.1 $672.9 $591.4

Estimate comparison (S&P Global): Consensus EPS and revenue data were unavailable at time of writing due to S&P Global data access limits; company comparisons are made vs. guidance and actuals.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q2 FY25—$635–$645 New guide
Non-GAAP Operating Margin (%)Q2 FY25—20%–21% New guide
Diluted Wtd Avg Shares (Millions)Q2 FY25—~289 New guide
Revenue ($USD Billions)FY25$2.435–$2.465 $2.435–$2.465 Maintained
Non-GAAP Operating Margin (%)FY2515.5%–17.0% 16%–17% Raised
Free Cash Flow ($USD Millions)FY25$540–$600 $560–$610 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 FY24; Q-1: Q4 FY24)Current Period (Q1 FY25)Trend
AI/Technology InitiativesAnnounced GPT‑in‑a‑Box 2.0; NKP; NVIDIA partnerships; strong interest in enterprise AI use cases GA of GPT‑in‑a‑Box 2.0; Enterprise AI leveraging NVIDIA NIM; hybrid deployment across Kubernetes in cloud/on‑prem Expanding capabilities; early customer traction
AWS/Cloud PartnershipsAzure/AWS NC2 wins; Dell/Cisco partnerships broaden TAM Expanded AWS migration program; credits to migrate VMware workloads to NC2 on AWS Strengthening GTM, migration catalyst
Sales Cycle/Deal MixLarger deals growing; longer cycles; variability; pipeline up >30% in #, >50% $ Modestly elongated cycles persist; larger deals drive timing variability Persistent elongation, larger-deal mix sustained
VMware/Broadcom DisplacementMultiyear share gain opportunity; dynamics evolving; Broadcom aggressive retention Opportunity unchanged; migrations from VMC on AWS to NC2; AWS accelerator support Ongoing, with migration tooling support
Federal/MacroQ1 seasonally strong federal, but variability year to year Fed spend softer YoY due to elongated CR; expected normalization in Q2 Near-term headwind; improvement expected in Q2
AHV Stand-Alone/Third-Party StorageAnnounced Dell PowerFlex support plan (calendar 2025) PowerFlex timing reiterated; intention to expand selectively; aim to on‑ramp HCI Building to broaden insertion points
Renewals/NRRFY24 NRR 114%; renewals strong; ATR to grow Renewals strong in Q1; NRR 110% impacted by Fed; ATR growth expected to continue Renewals robust; NRR pressured near-term

Management Commentary

  • CEO: “We exceeded all our guided metrics. We delivered quarterly revenue of $591 million. We grew our ARR 18% year-over-year… and saw… solid free cash flow generation.”
  • CEO on AWS partnership: “Expanded strategic partnership with AWS… providing migration credits and accelerator program for VMware cloud workloads to NC2 on AWS.”
  • CFO: “Non-GAAP operating margin in Q1 was 20%, higher than our guided range… due to higher revenue and… lower expenses including… nonrecurring payments and credits.”
  • CFO on federal: “U.S. Fed business performance was lower year-over-year… due to impacts from the elongated continuing resolution… we expect… to return to more normal levels in the second quarter.”
  • CEO on AI positioning: “GPT‑in‑a‑Box 2.0… Enterprise AI can be deployed on any Kubernetes platform… enabling secure, hybrid GenAI inferencing.”

Q&A Highlights

  • VMware-to-Nutanix migrations: AWS migration accelerator and credits are catalyzing transitions from VMC on AWS to NC2 on AWS; migrations can be quick for smaller/cloud workloads but multi‑year for large estates with complex scripts/customizations .
  • Guidance philosophy: Despite Q1 beat, FY revenue held constant due to macro uncertainty and elongated cycles; operating margin ramps down in 2H as OpEx investments step up (S&M, R&D, product specialists, channel) .
  • NRR drivers: Divergence between strong land (new logos) and softer expand (existing customers), primarily due to U.S. federal weakness; NRR not guided and expected to be influenced by deal mix and cycle lengths .
  • AHV/third‑party storage: Dell PowerFlex support targeted for 1H CY25 with revenue contribution in FY26; broader expansion to other IP‑based arrays contemplated to increase insertion points without immediate hardware refresh .
  • Seasonality: Q2 and Q4 typically stronger due to calendar/fiscal year ends; management expects Q3 revenue to be sequentially lower vs Q2, similar to prior patterns .

Estimates Context

  • S&P Global consensus estimates (EPS, revenue) were unavailable at time of writing due to data access limits; comparisons are shown vs company guidance and actuals from the 8‑K/press release. As a result, we cannot formally assess beat/miss vs Wall Street consensus for Q1 FY25. Management’s Q1 outperformance was relative to its own guidance ranges, and FY25 operating margin and free cash flow guidance were raised in Q1 .

Key Takeaways for Investors

  • Execution remains solid: Q1 revenue/OM beat company guidance, ARR up 18% YoY, and FCF robust, despite elongated cycles and Fed softness; renewals are driving resilience while land/new logos improve with channel/OEM leverage .
  • Stock catalysts: AWS migration program and NC2 on AWS, AI platform differentiation (Enterprise AI/NIM), and Dell/Cisco GTM should support pipeline conversion and new logo momentum; watch for deal timing variability .
  • Near-term setup: Expect typical seasonality (Q2 strong, Q3 down sequentially) and OpEx ramp through FY25; margins likely lower in 2H vs 1H as investments step up .
  • Guidance prudence: FY25 revenue maintained amid macro/political uncertainty, but FY25 OM and FCF raised; this balances growth opportunity with disciplined profitability .
  • VMware displacement is a multi‑year tailwind: Migrations are accelerating in pockets (especially cloud workloads) with AWS credits; larger on‑prem transitions will take time and PS engagement .
  • Watch NRR and expand: NRR at 110% reflects expand softness tied to U.S. federal; management expects more normal federal levels in Q2—monitor NRR/expand recovery .
  • AI monetization: Early traction in AI inferencing (GPT‑in‑a‑Box 2.0/Enterprise AI) and hybrid GenAI deployments could improve mix/attach over time; validation via NVIDIA partnerships supports performance/security narrative .