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Nutanix, Inc. (NTNX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered broad beats vs company guidance: revenue $654.7M (+16% YoY), non-GAAP operating margin 24.6%, ARR $2.06B (+19% YoY), and free cash flow $187.1M .
  • Management raised FY25 outlook across revenue ($2.495–$2.515B), non-GAAP operating margin (17.5–18.5%), and free cash flow ($650–$700M), citing strong new-logo momentum and disciplined renewals/expansion .
  • The company emphasized partner-driven share gains (Cisco, Dell, AWS), Kubernetes/Enterprise AI (NAI) adoption, and early interest in external storage integrations (Dell PowerFlex) as catalysts .
  • S&P Global consensus estimates were unavailable at time of retrieval; relative to company guidance, Q2 revenue and margins were above the high-end ranges, and FY25 guidance was raised across all metrics .

What Went Well and What Went Wrong

What Went Well

  • “We once again exceeded all of our guided metrics. We grew our ARR 19% year-over-year to $2.06 billion and delivered strong free cash flow” — CEO Rajiv Ramaswami .
  • Non-GAAP operating margin 24.6% exceeded the guided 20–21% on higher revenue and slightly lower opex; free cash flow was $187M (29% margin) .
  • New-logo growth exceeded 50% YoY for the second consecutive quarter, aided by partner leverage (OEM/channel), alternative-vendor demand post-industry M&A, and targeted incentives .

What Went Wrong

  • Sales cycles remain modestly elongated vs historical levels; variability in timing/outcomes and deal structures for larger transactions persists, though more closed in Q2 .
  • Net dollar-based retention rate stabilized at 110%; mathematically harder to keep NRR flat as ARR base expands, and elongated cycles/large-deal variability can affect current-period NRR .
  • Federal (US) pipeline improved, but management noted ongoing uncertainty tied to the new administration; seasonality and policy direction could affect outcomes .

Financial Results

Core P&L, EPS, Margins, Cash Flow (chronological: Q4 FY24 → Q1 FY25 → Q2 FY25)

MetricQ4 FY24Q1 FY25Q2 FY25
Revenue ($USD Millions)$547.952 $590.956 $654.721
GAAP Diluted EPS ($)-$0.51 $0.10 $0.19
Non-GAAP Diluted EPS ($)$0.27 $0.42 $0.56
GAAP Gross Margin (%)85.2% 86.0% 87.0%
Non-GAAP Gross Margin (%)86.9% 87.5% 88.3%
GAAP Operating Margin (%)-2.2% 4.6% 10.0%
Non-GAAP Operating Margin (%)12.9% 20.0% 24.6%
Net Cash Provided by Operating Activities ($USD Millions)$244.697 $161.751 $221.670
Free Cash Flow ($USD Millions)$224.258 $151.920 $187.063

Company Guidance vs Actual (Q2 FY25)

MetricPrior Guidance (from Q1 FY25)Actual (Q2 FY25)Result
Revenue ($USD Millions)$635–$645 $654.7 Beat high end
Non-GAAP Operating Margin (%)20–21 24.6 Beat high end

Revenue Disaggregation (by type)

Type ($USD Millions)Q4 FY24Q1 FY25Q2 FY25
Subscription Revenue$518.695 $560.696 $624.418
Professional Services Revenue$26.769 $27.285 $28.030
Other Non-Subscription Product Revenue$2.488 $2.975 $2.273
Total Revenue$547.952 $590.956 $654.721

KPIs

KPIQ4 FY24Q1 FY25Q2 FY25
Annual Recurring Revenue (ARR) ($USD Billions)$1.908 $1.966 $2.060
Average Contract Duration (years)3.1 3.1 3.0
Net Dollar-Based Retention Rate (NRR, %)——110%
New-Logo Growth YoY—>50% >50%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY25$2.435–$2.465 $2.495–$2.515 Raised
Non-GAAP Operating Margin (%)FY2516–17 17.5–18.5 Raised
Free Cash Flow ($USD Millions)FY25$560–$610 $650–$700 Raised
Revenue ($USD Millions)Q3 FY25—$620–$630 New
Non-GAAP Operating Margin (%)Q3 FY25—17–18 New
Diluted Shares (Millions)Q3 FY25~289 ~296 Higher (mix & converts)

Management noted S&M and R&D investments will ramp in H2 (Q3/Q4), consistent with the raised FY margin still embedding higher spend levels .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24)Previous Mentions (Q1 FY25)Current Period (Q2 FY25)Trend
AI/Technology initiatives (Kubernetes, NAI, GPT-in-a-Box)Partnerships with NVIDIA; innovation toward “run apps/data anywhere” Extended Enterprise AI to public cloud (EKS/AKS/GKE) NAI deployments in production use cases; GPT-in-a-Box momentum; ECI report on GenAI adoption Expanding deployment and customer interest
Partner ecosystem (Cisco, Dell, AWS)Signed/enhanced agreements in FY24 AWS migration incentives; credits for NC2 Early traction from AWS migrations; Cisco contributive to new logos; Dell selling Nutanix + upcoming PowerFlex integration Increasing partner leverage
External storage support——PowerFlex solutions expected in 2nd calendar quarter; market expansion opportunity Near-term product expansion
Macro/sales cycles——Sales cycles modestly elongated; variability in larger deals persists Persistent headwind
Federal (US)——Improved performance in Q2; ongoing admin-driven uncertainty embedded in guidance Recovering with caution
Regional/customer case studies——EMEA financial services NAI deployment; APJ G2000 expansion; EMEA national health ministry (NC2 on AWS, NKP) Diversified wins across regions
R&D/S&M investment cadence——Ramp in Q3/Q4 for TAM capture (core platform, modern apps, AI, external storage) Accelerating investments

Management Commentary

  • CEO: “We once again exceeded all of our guided metrics… grew our ARR 19% year-over-year to $2.06 billion and delivered strong free cash flow” .
  • CFO: “Non-GAAP operating margin in Q2 was 24.6%… Non-GAAP net income $165M or $0.56 diluted EPS… Free cash flow $187M (29% margin)” .
  • Strategic message: Nutanix Cloud Platform, NKP (Kubernetes), and NAI positioned to help enterprises deploy/run GenAI where the data resides; cited production deployments and partner-led migrations (e.g., AWS NC2) .
  • Balance sheet & flexibility: $862.5M 0.50% converts due 2029; $500M revolver established; proceeds used for 2027 notes retirement, $200M buyback, and general corporate purposes .

Q&A Highlights

  • VMware displacement and share gains: Customers re-examining stacks under competitive pressure; Nutanix offers migration tooling and paths (on-prem/public cloud) including NC2; expect mixed HCI/3-tier insertions, with Dell PowerFlex broadening TAM .
  • NRR and renewals: NRR stabilized at 110%; larger ARR base makes maintaining % harder; variability in large deals and elongated cycles affect period NRR; continued focus on retention/expansion vectors and specialist ramp .
  • Federal: Q2 improved; seasonality and new administration introduce uncertainty, reflected in FY25 guidance .
  • Deal structures/billings: Thoughtful one-time incentives for migrations; standard practice remains multi-year cash upfront, with exceptions as needed; guidance embeds effects .
  • AI adoption: NAI positioned for inferencing; open models lower resource barriers, potentially broadening deployments; cited EMEA financial services and telemedicine examples .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY25 and Q3 FY25 was unavailable at time of retrieval due to data access limits.
  • Relative to company guidance, Q2 revenue ($654.7M) and non-GAAP operating margin (24.6%) exceeded high-end ranges, and FY25 outlooks for revenue, margin, and free cash flow were raised, suggesting positive estimate-revision risk on FY25 revenue/FCF and potentially modest Q3 revisions around the $620–$630M revenue and 17–18% margin guide .

Key Takeaways for Investors

  • Momentum is broad-based: ARR +19% YoY to $2.06B, >50% YoY new-logo growth for the second straight quarter, and FCF strength; these underpin raised FY25 revenue/FCF guidance .
  • Margin outperformance (Q2 non-GAAP OM 24.6%) came from revenue upside and opex discipline; expect lower margins in H2 as S&M/R&D investments ramp to capture TAM (Kubernetes/AI/external storage), already reflected in FY guide .
  • Partner leverage is a durable tailwind: Cisco, Dell, and AWS are enabling faster insertions/migrations (NC2) and opening 3-tier opportunities (PowerFlex), supporting sustained new-logo adds and expansion .
  • Execution watch items: elongated sales cycles and large-deal variability, NRR at 110% amid expanding ARR base, and federal uncertainty; monitor cohort renewals and enterprise deal timing in Q3/Q4 .
  • Trading implications: Raised FY25 guidance across the board and beats vs guidance are positive sentiment drivers; near-term watch is Q3 seasonality and H2 spend ramp vs revenue trajectory .
  • Strategic narrative: Nutanix is positioned as a hybrid multicloud platform spanning VMs/containers with NAI inferencing and Kubernetes orchestration—targeting real-world GenAI deployments and modernization across public/private clouds .
  • Balance sheet strength (converts + revolver) increases flexibility for tuck-in M&A and go-to-market investment while supporting share repurchase capacity .
Note: All figures above are sourced from Nutanix’s Q2 FY25 earnings 8-K/press release and earnings call transcript, plus prior-quarter filings/press releases as cited. S&P Global consensus estimates were unavailable at time of retrieval.