Good day, and thank you for standing by. Welcome to Nutanix Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Rich Farr, Nutanix's Vice President of Investor Relations. Please go ahead. Good afternoon.

Welcome to today's conference call to discuss Nutanix's Fourth Quarter and fiscal year 2025 financial results. Joining me today are Rajeev Ramaswamy, Nutanix's President and CEO, and Rukmini Sivaraman, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing fourth quarter and fiscal year 2025 financial results. If you'd like to read the release, please visit the press releases section of our IR website. During today's call, management will make forward-looking statements, including financial guidance. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements. For a more detailed description of these and other risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q, as well as our earnings press release issued today. These forward-looking statements apply as of today, and we undertake no obligation to revise these statements after this call. As a result, you should not rely on them as predictions of future events. Please note unless otherwise specifically referenced, all financial measures we use on today's call, except for revenue, are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided to the extent available reconciliations of these non-GAAP financial measures to GAAP financial measures on our IR website and in our earnings press release. Nutanix will be participating in the Goldman Sachs Communicopia and Tech Conference in San Francisco on September 8 and the Piper Sandler Growth Frontiers Conference in Nashville on September 10. We hope to see you at these events. We're also happy to announce that Nutanix will be holding an Investor Day on April 7, 2026, in Chicago in conjunction with our annual .NEXT customer event. So please mark your calendars if you're interested in attending. Finally, our first quarter fiscal 2026 quiet period will begin on Monday, October 20. And with that, I'll turn the call over to Rajiv. Rajiv?

Thank you, Rich. And good afternoon, everyone. Our fourth quarter was a solid finish to our 2025 fiscal year. In the fourth quarter, we are happy to have exceeded all of our guided metrics. We delivered quarterly revenue of $653 million, up 19% year over year, and saw another quarter of strong free cash flow generation. Our full year fiscal 2025 results demonstrated good progress on a number of fronts. Financially, we delivered solid top-line performance, including revenue of $2.54 billion, up 18% year over year, and ARR of $2.22 billion, which increased 17% year over year. We also saw strong new logo performance across all of our customer tiers, including the Global 2000, adding over 2,700 new customers, our highest in four years. And finally, we generated free cash flow of $750 million, an increase of 26% year over year, yielding a free cash flow margin of 30%. This drove a rule of 40 score of 48 for the fiscal year, our second year in a row above 40. In FY '25, we also saw tangible progress on the product and partnership fronts. We enhanced the Gen AI capabilities of our platform with the release of GPT in a Box 2.0 and delivered an enhanced version of Nutanix Enterprise AI that includes a deeper integration with NVIDIA AI Enterprise. We also extended the hybrid multi-cloud capabilities of our platform by adding support for Google Cloud, which is now in public preview. Finally, we made progress on a strategic decision to enable customers to utilize their existing external storage hardware. The Nutanix Store platform now supports both HCI and external storage, and we delivered our first version of this new capability supporting Dell PowerFlex. We also announced a new partnership with Pure Storage to support their flash array. This offering recently entered early access and remains on track to be generally available by the end of this calendar year. We achieved important industry recognition in the last year, including being named a leader in the 2024 Gartner Magic Quadrant for distributed hybrid infrastructure. Last month, we were recognized as a challenger in the 2025 Gartner Magic Quadrant for container management and as a leader in the Forrester Wave multi-cloud container platforms Q3 2025. Our most significant wins in the quarter demonstrated the appeal of the Nutanix cloud platform to organizations that are looking for a trusted long-term partner in the wake of industry M&A and to those looking for a platform to seamlessly run both traditional and modern applications. We also saw some initial successes with our cloud platform that supports Dell PowerFlex. One of our significant wins in Q4 was with Finance Informatic, or FI, the digitalization partner and central IT service provider for Germany's Savings Bank Financial Group, serving around 50 million customers in Germany. This is a great example of a win that was motivated by a customer's desire for a trusted long-term partner. As part of our strategic collaboration, FI plans to migrate their Windows and Linux workloads to the Nutanix platform over the next two years. In our joint press release, FI noted that their decision-making criteria for choosing Nutanix included the security, availability, and cost-effectiveness of the solution, as well as a partnership based on trust, intensive exchange, and active participation on their part. We are grateful for FI's trust in us and look forward to a long and productive partnership. Another one of our most significant deals in the quarter was a full-stack expansion with a global provider of financial services. This customer was looking to make their private cloud more secure and cost-effective with increased automation, standardization, and simplification, and wanted a platform to run their modern application. They significantly increased their commitment to Nutanix, both expanding their footprint and adopting additional elements of our cloud platform, including Nutanix Cloud Manager, Nutanix Kubernetes platform to run their modern applications, Nutanix unified storage for their unstructured data management needs, and our data lens security offer. This quarter, we also saw our first wins for our cloud platform supporting Dell PowerFlex. This included deals with two North American-based global 2000 companies, one a financial services provider, and one a medical equipment provider. In both cases, the customers were looking to modernize their private cloud infrastructure while managing potential risks associated with industry M&A but wanted to preserve their existing investments in external storage. They both adopted the Nutanix cloud platform with support for Dell PowerFlex, enabling them to achieve these objectives. While it's still early days with this new offering, we are encouraged by these initial wins and the broader level of customer interest. In closing, I am pleased with our solid Q4 and fiscal 2025 results and the progress we continue to make on multiple fronts, including our financial model, our partnerships, and our ongoing innovation across our cloud platform, including modern applications and AI. We also remain focused on capitalizing on a multi-year opportunity to gain share in the face of recent industry disruption and are encouraged by our early success, including some of the wins I just highlighted. Finally, I would like to express my sincere gratitude to our investors, customers, and partners for their trust in us and to our employees for their hard work that led to these results. And with that, I'll hand it over to Rukmini Sivaraman. Rukmini?

Thank you, Rajiv, and thank you everyone for joining us today. I will first discuss our Q4 2025 results followed by full fiscal year 2025 results, Q1 2026 guidance, and finally, our initial fiscal year 2026 guidance. Results in Q4 2025 were above the high end of our guidance range across all guided metrics. In Q4, we reported quarterly revenue of $653 million, higher than the guided range of $635 to $645 million, representing a year-over-year growth rate of 19%. ARR at the end of Q4 was $2.223 billion, representing year-over-year growth of 17%. NRR, or net dollar-based retention rate, at the end of Q4 was 108%. In Q4, average contract duration was 3.2 years, slightly higher than our expectations and up slightly quarter over quarter due to a few transactions of longer than average duration. Non-GAAP gross margin in Q4 was 88.3%. Non-GAAP operating margin in Q4 was 18%, higher than our guided range of 15.5 to 16.5% due to higher gross margins and lower operating expenses than expected. Non-GAAP net income in Q4 was $109 million or fully diluted EPS of $0.37 per share based on fully diluted weighted average shares outstanding of approximately 297 million shares. GAAP net income and fully diluted GAAP EPS in Q4 were $39 million and $0.13 per share, respectively. Free cash flow in Q4 was $208 million, representing a free cash flow margin of 32%. Moving to the balance sheet, we ended Q4 with cash equivalents and short-term investments of $1.993 billion, up from $1.882 billion at the end of Q3. In Q4, we repurchased $50 million worth of common stock under our existing share repurchase authorization and used about $44 million of cash to retire shares related to our employees' tax liability for their quarterly RSU vesting. Both of these help to manage share dilution. Moving to a summary of our results for the full fiscal year 2025. Fiscal year 2025 revenue was $2.538 billion, higher than the most recent guidance of $2.52 to $2.53 billion and representing a year-over-year growth rate of 18%. Fiscal year 2025 ending ARR, as mentioned earlier, was $2.223 billion, representing year-over-year growth of 17%. We continue to see strength in landing new customers and we are grateful for the over 2,700 customers who joined our platform this year. This included organizations of various sizes and across several industries and included over 50 Global 2,000 accounts, a meaningful increase year over year. In fiscal year 2025, we saw a nice increase in the number of million-dollar-plus land and expand ACV transactions, more than a 60% increase in fiscal year 2025, relative to fiscal year 2024, while still remaining a minority of our overall land and expand ACV. For the full year, average contract duration was 3.1 years, higher than last year's average contract duration of 3 years, and higher than our expectations. Non-GAAP gross margin in fiscal year 2025 was 88.1%, a year-over-year increase of 140 basis points and which is among industry-leading software gross margins. As mentioned in prior calls, gross margins could move around slightly depending on the mix of professional services revenue in a given period. Non-GAAP operating margin in fiscal year 2025 was 21.1%, higher than our most recent guidance of approximately 20.5% and a year-over-year increase of five percentage points. Non-GAAP net income in fiscal year 2025 was $476 million or fully diluted EPS of $1.62 per share based on fully diluted weighted average shares outstanding of approximately 294 million shares. GAAP net income and fully diluted GAAP EPS in fiscal year 2025 were $188 million and $0.65 per share, respectively, representing our first full year of positive GAAP net income. Free cash flow in fiscal year 2025 was $750 million, representing a free cash flow margin of 30%. In fiscal year 2025, our rule of 40 score, defined as revenue growth rate plus free cash flow margin, was a healthy 48%, reflecting our continued focus on sustainable, profitable growth driving durable top-line growth with improving bottom-line margins. In fiscal year 2025, we strengthened our balance sheet with the net proceeds from the issuance of $862.5 million in convertible debt and enhanced our financial flexibility with our inaugural $500 million revolving credit facility. Moving to guidance. Our Q1 2026 guidance is as follows. Revenue of $676 to $680 million, non-GAAP operating margin of 19.5 to 20.5%, fully diluted weighted average shares outstanding of approximately 296 million shares. Moving to the full year, our initial fiscal year 2026 guidance is as follows. Revenue of $2.9 to $2.94 billion, representing a year-over-year growth rate of 15% at the midpoint of the range, non-GAAP operating margin of 21 to 22%, increase from fiscal year 2025 at the midpoint, free cash flow of $790 million to $830 million, representing a free cash flow margin of 27.7% at the midpoint. I will now provide several points of commentary regarding our fiscal year 2026 guidance. One, we expect to continue landing new customers onto our platform at a rate of approximately mid to high three digits of new logos a quarter in fiscal year 2026. We also expect some continued uncertainty in the overall macro environment, including in areas such as US federal government spending, and with regard to currency fluctuations. Two, we expect the renewals ACV cohort or the available to renew pool in fiscal year 2026 to grow year over year but at a slower pace than in fiscal year 2025 as the overall renewal base gets larger over time. Three, the guidance assumes a slight year-over-year decline in aggregate average contract duration because we saw some larger contracts with longer than average duration in fiscal year 2025 that may not recur in fiscal year 2026. Four, as we have discussed previously, the vast majority of our customers have licenses provisioned upfront and also pay us multiple years of cash upfront upon purchase. In certain cases, typically larger transactions, we may provision licenses over a period of time rather than all upfront and/or collect cash over time rather than all upfront. Such situations may impact timing of revenue and cash collection, which is factored into the guidance we provided. Five, as Rajeev mentioned, in Q4, we saw our first customer transactions for our cloud platform supporting Dell PowerFlex. We expect this solution to have a small but growing contribution to fiscal year 2026 revenue. We also expect the land and expand ACV contributions from our partners such as Cisco and Dell to grow year over year into fiscal year 2026. Six, with regard to operating expenses, in addition to the annualized run rate of employees we hired during the course of fiscal year 2025 that we have discussed in prior calls, we have some delayed hiring in fiscal year 2025, which we expect to be approximately $25 million in expenses in fiscal year 2026. Additionally, in prior earnings calls, we have also referenced some nonrecurring partner payments which are accounted for as contra expense in the R&D line. These payments are expected to start to taper off in fiscal year 2026. And we expect this to cause an approximately $10 million to $15 million headwind to operating expenses in fiscal year 2026. A couple of other notes as we start a new fiscal year. Starting next quarter, that is Q1 2026, we are proactively updating our methodology for calculating ARR on a prospective basis to align it more closely with the timing of when licenses are made available to customers. NRR will also align with this updated methodology going forward. While this change will take effect next quarter, we have provided an illustrative historical table in the appendix of our earnings presentation that shows what ARR and NRR would have been under the new methodology for the relevant historical periods for comparison purposes. The table shows that ARR in any given period would have differed by no more than 2% under the new methodology. We believe it was important to make this change at the start of a new fiscal year and as it is possible, we see more large customers looking for deferred license provisioning over time. And finally, from a capital allocation perspective, we announced today that our board of directors has approved a $300 million increase to our existing share repurchase authorization, which is in addition to the $111 million remaining under the prior authorization, as of July 31, 2025. There is no expiration date for these authorizations and we intend to continue repurchasing shares over time to manage share count dilution. In closing, we are pleased with our performance in fiscal year 2025, exceeding the high end of the guidance across all guided metrics. We look forward to continued progress in fiscal year 2026. With that, operator, please open the line for questions.

Thank you. A question, please press 11 on your telephone. You'll hear the automated message advising your hand is raised. We also ask that due to time restraints, please limit yourself to one question and one follow-up. As well as wait for your name and company to be announced before proceeding with your question. And the first question today is coming from the line of Jason Adler of William Blair. Your line is open.

Yeah. Thank you. Can you talk about the FI win and just the size of the deal? And, I don't know, any other kind of opportunities like that out there? Is this kind of a one-off? Or do you feel like there are others that you have in the hopper that you'll be able to talk about over the next year or so?

Yeah. Hi, Jason. So if you look at the dynamics in Germany, the German population is about 83 million and FI has about 15 million customers who bank with the German savings banks. FI provides the IT infrastructure for all those banks in a central manner. And so for us, this was quite a significant win. A very large size win as they're looking to migrate from their existing infrastructure onto Nutanix, and it's a very long-term partnership. It's an example of a significant deal. We haven't quantified the size of the deal, but you can imagine that it's a significant multiyear deal. Now at any point in time, I mean, Rukmini talked about the fact that over the last year, we added 15 new Global 2,000 customers. So those are the larger end of the customer base. And at any point in time, we have these types of opportunities in the pipeline. But larger deals tend to be a bit more unpredictable in terms of when and how they're gonna turn out. So, certainly, I mean, we have interest from all ends of the spectrum, and there are other customers with other deals. But, again, it's hard to predict how and when these will come out. But FI was a very good example of what we would consider to be a very marquee win for us in Germany.

Great. And then one quick one for Rukmini. NRR was down a couple of points sequentially, and just maybe you can give us some explanation for that.

Sure. Hi, Jason. So on the NRR question, we remain focused on driving our expansion business with incremental investments and customer success. Help drive retention and expansion in addition to the continued focus that we've had on our expansion vectors, namely portfolio attach and workload expansion. One other point to make on this is that our NRR and net new ARR, actually I know your question was on NRR, Jason. But both NRR and net new ARR in any given quarter can be affected by the net impact of ARR contributions from deals that are booked in prior quarters and are credited in the current quarter and ARR that's booked in the current quarter but deferred to future periods. And so there's a net effect there. And in Q4, this dynamic was a net headwind to both our NRR and to net new ARR. And so we expect that such variations could continue going forward. Two other points I'll make. One is that we've seen the average deal size of our new logos increasing over the last few years, which can also potentially be a headwind for the growth rate of expansion within those customers because their initial deal size has been larger than it has been historically for us. And then the last point is around more of a numerical kind of law of large numbers point, which is that as ARR has grown every quarter for us, the ACV dollars required to offset a point of churn increases even at the same churn percentage. This could make it increasingly challenging to achieve the same NRR over time. So a few different dynamics there, and because of those, NRR could still move around somewhat from quarter to quarter, Jason.

Thank you. Good luck.

Thank you. Thank you.

And our next question will be coming from the line of Meta Marshall of Morgan Stanley. Your line is open.

Great. Thanks, and congrats on the quarter. Guess just as you have started seeing some of these Dell PowerFlex deals, if you could just give a sense of how we should think of those customers kind of in relation to the more traditional Nutanix customers. And, just as we could kind of get any visibility into what the customer is looking at Pure Storage's early access are like versus maybe the Dell PowerFlex customers. And maybe just as a second question, understanding you were kind of talking about more conservatism on the public sector within the guide, but just any kind of more updated commentary on what you were seeing with the federal government? Thanks.

Yeah. Maybe I'll give you some color on this, Meta. Dell PowerFlex is what I would consider to be a solution for the top end of the pyramid. Their customers tend to be a relatively small customer base, but at the very top of the pyramid in terms of big companies. And you saw that the first two wins that we had were both global 2000 customers, very large customers. And so the customer base tends to be concentrated. These tend to be large customers. And they have significant deployments in their estate. And so for us, let's say, an opportunity for us to land in these accounts and then expand over time. And I was quite happy that we were able to land in two of these. Fairly quickly after we actually got the product out in the last quarter. So I do expect that the PowerFlex business will continue. We will get more wins over the year. With Pure, of course, their footprint is a bit broader than PowerFlex out there. It's still early days for us because the solution is not out there. We are in early access now. What that means is that there'll be a handful of customers who will have access and they'll be testing our beta code. And we expect the solution to be available at the end of the calendar year. So we, you know, we could potentially see some small amount of revenue from that over the next, you know, back half of the year. And so both solutions, I think, will be relatively small this year but having a growing contribution over time to our 2670 and beyond.

And I take the question on the US Fed. So, Meta, with respect to the US Fed business, while we had a good fourth quarter for US Fed, some of the personnel changes and the additional reviews that we have seen in the US Fed seem to continue and have resulted in longer deal cycles. And some increased variability overall. In that particular vertical for us. However, as we've said before, you know, we remain optimistic on the opportunity for that business to benefit from our platform's focus on modernization and lowering TCO overall. And as a reminder, we don't report US Federal as a percent of our business, but we've said previously that over the last few fiscal years, Fed has been the US Fed's specifically has been 10% or less of our annual revenue. With seasonal strength in fiscal Q1, which, of course, is the Fed's fiscal year end. And we have factored in all of this and some of the overall uncertainty into our Q1 and overall fiscal year 2026 guidance.

Guidance. Great. Thank you.

Thanks, Anita. Thank you. One moment, please. Our next question will be coming from the line of Matt Martino of Goldman Sachs. Your line is open.

Two for me, if I could. Rajiv, for you, GPT in a Box has been in the market for about two years now. You introduced some new capabilities at Next 25. I'm curious where you think we are in terms of enterprise AI maturity and whether we're getting closer to an inflection point that can start to benefit Nutanix. And then, Rukmini, for you, it sounds like there are some revenue timing dynamics associated with some of these larger deals that Nutanix is landing. Thanks. Can you help us understand how you may be de-risking the multiyear deal activation piece and how much visibility you have into this dynamic heading into 2026?

Yeah. And, Matt, welcome to a conference call here. I believe this is your first one with us. And on GPT in a Box 2.0, so the 2.0 version became generally available this year. And it also included a component called Nutanix Enterprise AI, NAI, which can be deployed with GPT in a Box or just stand-alone as well. On top of cloud, native cloud substrates. I would say enterprise maturity is still pretty early. A lot of people, I think, are trying it now, but I think we have a few initial set of customers going into production and with good use cases. So it's still early days, you know, having this notion of a turnkey inference endpoint is what's driving the interest now. But then that over time will move to more agentic use cases. So we've seen some good use cases in the market. People are looking at this for fraud detection, for money laundering, patent detection, for the classic use cases of support summarization of documents and content. Those types of use cases are what we see. Wherever private data is needed, where they want to run on data that's that needs to be secured in a private way. So I would say we are in the early innings of AI inferencing adoption in the enterprise. And so I think a lot more to come now. Are we at an inflection point? I think it's moving pretty quickly, I would say, but I would say at this point, it's still early days.

And, Matt, to your question on revenue timing and visibility, I think was part of your question. Max. So I'd say we do see customers who want us to give them licenses over a period of time versus all upfront. These tend to be larger transactions because the customer has made a large commitment and looking to deploy it over time. And we're, of course, very happy to make that available to them in that fashion. And I think to your question, so we, of course, going into any fiscal year so going into fiscal year 2026 now, we have visibility into the transactions that we've done that are scheduled to go out or where we believe the customer is going to be looking for those licenses in 2026. And we've made some assumptions, Matt, about the bookings that we will commit the customers will commit in 2026 but may have future deployment dates. So we have some assumptions built into that. And we feel comfortable that all of that is embedded into the guidance that we provided you today.

Thanks, guys. Appreciate the warm welcome.

Thank you, Matt. Thank you.

And our next question will be coming from the line of Jim Fish of Piper Sandler. Your line is open. Hey, guys. I'm on the guide with me. It seems to imply an acceleration beyond the quarter, beyond fiscal Q1 here. Can you just give us some of the puts and takes on the fiscal 2026 guide as we think more about new ACV growth versus that available to renew with the installed base up or essentially how you're thinking about net retention rate? And, you know, obviously, we've always talked about ARR as kind of the metric you guys want to point us to. As we think about the annual year, is there a way is how should we think about the sort of ARR exiting this year?

Thank you, Jim. So a few things there I'll try to address. So first on the renewals cohort, as we, as I said in the prepared remarks, it is growing year over year. But at a slower pace relative to what we saw in fiscal year 2025. For example. Right? So it is growing year over year. The reason we called it out was because it is at a slower pace, it does impact revenue. And as you know, Jim, you know, ARR is more of a stock metric, whereas revenue is slow. Right? So while that impacts revenue, ARR only gets credit when that ARR actually grows. Right? There's renewal is almost sort of in the base of the ARR. So ARR can only grow either when we have more land and expand or price increases on renewals and things like that. Right? So there's sort of a flow versus a stock metric difference there between revenue and ARR. We don't guide to ARR, Jim, so I'm not going to be able to give you sort of a specific answer on how to think about ARR expectations for the year other than kind of the things we've alluded to here where some of these timing of deals and so on can move ARR around from period to period. As we go through the year. And then similarly for NRR. Right? Similar dynamics there in terms of timing, but also the new logo point I made where we have seen that we're landing the new logos at a larger deal size than before, which could mean that potential future expansion for those particular customers can be lower. So, yeah, so few puts and takes there, Jim, and I'll leave it there because, you know, we are not quantifying a particular ARR expectation for the full year.

Yeah. So maybe then on the larger transactions, because it seems like we're all trying to figure this out, you know, you're commenting about larger transactions looking for deferrals. You've told us that you'd consider the strategy of more annual billings, let's say, as opposed to multiyear billings. Is it that you're seeing large 8 figure type deals like you did last year now in the pipeline more and more? Or is it going to be more of the kind of strength of the 7 figure type deals and the onset you're getting from sort of that competitive disruption?

Thank you, Jim. I think we'll we would just leave it as large deals, Jim. Are there deals in both of those categories that you mentioned? You know, yes. And our intention is to continue to do more of those over time. What I would not want to do is get too granular on it to 7 figure or 8 figure. Right? I think we're referring to look they've been we've continued to close more of these large deals over time. I gave one statistic around the million-plus dollar land and expand ACV deals that has increased nicely in the number of those that we closed in 2025 relative to 2024. And so our intention is to continue to do more of those and the pipeline there continues to be good as we enter fiscal year 2026.

Thank you.

And the next question will be coming from the line of Matt Hedberg of RBC.

Hey, guys. This is Simran on for Matt Hedberg. Just thinking more on a macro level for a second. Could you dig a bit deeper into the demand trends that you're seeing and what you're incorporating into guidance?

Yeah. I'll give you a high-level view, Rukmini can talk about the guidance here, Simran. So the overall macro is fairly still dynamic. It's evolving. I mean, there's also recent and, you know, potential actions with the new administration. And then another part of the macro is the commentary that Rukmini gave on the federal US federal business. Right? So we had a good fourth quarter there. But still, you know, lots of changes there and some additional reviews, of course, means longer lead cycles and some variability. But, again, I think I would say we feel optimistic about the longer-term view of, like, the fact that we have a platform that can be very helpful for modernization of the IT infrastructure and a lot of these government organizations. Now in terms of the macro itself, I mean, we have factored in some macro uncertainty into our beta outlook, but we are seeing pretty solid demand for our solutions as well. Rukmini, do you wanna talk about our guide?

Think you covered it, Rajiv. We factored all of that into the guidance we provided.

Okay. Okay. Great. And then just one more. So realizing the VMware of replacing opportunity continues to be a multiyear journey, can you walk us through how much of the opportunity remains since what you're assuming for share shift? Throughout fiscal year 2026?

Yeah. So, Simran, I think the vast majority of the opportunity is still in front of us. If you were to characterize this as a baseball game, you know, I'd probably say we're in the second inning. So this point. And there's still a lot of customers out there with VMware, and it's gonna take time in terms of these migrations. We are seeing I mean, the fact that we've added, you know, 2,700 customers over the last year is a good sign that there are people moving. But there's 200,000 customers out there for VMware. So there's still a lot to go through here, and it's gonna take time. And for the bigger customers, it's gonna take even longer. So we've done a fair number of migrations and completed them for customers ranging anywhere if you were to look at the sizing of their environment at say 20,000 cores to maybe even 60, 70,000 cores, you know, those types of customers, I would call you know, they can be medium to large enterprises. Those types of migrations, we've actually done some. Now the real big ones out there, I think, will take a long time to migrate. And so the smaller you are, the faster it is to migrate. The longer you are the bigger you are, the longer it's gonna take. So I would still say we've got a lot of runway still in front of us and it's gonna be a gradual multiyear journey.

Great. Thanks, guys. Thank you.

Thank you. The next question will be coming from the line of Mike Chikos of Needham. Please go ahead.

Hey, guys. Thanks for taking the questions here. And I know PowerFlex is getting a decent amount of attention. So I'll tap into that for a second. But great to hear on these two initial wins. With these large global 2,000 customers. Quite frankly, it's earlier than I had expected on my side, but I wanted to temperature check it. What were you guys anticipating as far as wins with PowerFlex? And can you give us some more granularity as far as how these deals came together? Were they led by Nutanix? Were they led by Dell? Was it a co-marketing effort? Anything on that front would be incremental. And then I have a follow-up.

Yeah. I would say, Mike, we were actually pleasantly surprised at how quickly we were able to land these customers. You should also deem that these customers also were interested early on. They participated in our early access program. So they've been kicking the tires on this for a bit. But it is usually, you know, these types of customers are also fairly conservative, and they typically tend to wait. They don't go all in on the first release. They wait for the next release, and a couple of releases done before they go. So we were very happy to have secured these deals in Q4. So to your point, I think it came in a bit earlier than we had anticipated. And then there's a PowerFlex basis of, like I said, is at the top of the pyramid. These are large customers. With all of these, I think there's a very collaborative relationship with Dell. We are very directly engaged in these accounts with these customers. You know? They need, you know, solid support that we provide directly. And Dell has been a very collaborative partner in these accounts, and I expect that to continue as we look at these other big customers.

Thank you for that. And I guess my follow-up for Rukmini, I know that there's a couple of different moving pieces here on the average contract duration in addition to and thank you for all the assumptions on guide. But if I look at the average contract duration specifically, Q4 was slightly higher than what you guys had anticipated. We're talking about this upcoming year where average contract duration is expected to see a slight decline. Is there any way you can help us conceptualize what that impact to revenue is as a result of these movements around the average contract duration?

Yeah. Hi, Mike. So on contract duration, in the short term, our average contract duration can vary based on the mix of business in a given quarter and, for example, could be elevated by a few larger and longer than average duration contracts. And so you're seeing some of that, Mike. And the reason we called it out is because, you know, it does what's assumed going forward for fiscal year 2026 is that we expect the duration year on year to be down slightly, which, as you know, does impact our revenue. Because the license portion of revenue we do take upfront, and that is impacted by or affected by the contract duration. We're not quantifying that because there's a lot of moving things in here, Mike. But it's, you know, that's one of the things we did want to call out in terms of thinking about 2026 revenue versus 2025. The one other dynamic that we've also discussed in prior calls is that over time, we could see compression of duration as renewals continue to increase as a percentage of billings. Because renewals tend to have lower average contract duration relative to land and expand. So, you know, a couple of moving pieces there. One on these sort of maybe we have a few larger contracts that are longer than average versus this impact of renewals. We, you know, given we put all that and factored all of that in and kind of conveying that for 2026, we expect the total average contract duration to be down slightly, which does have somewhat of an impact on that revenue line.

Understood. Thank you, guys.

Thank you, Mike. Thank you. One moment for the next question. And the next question will be coming from the line of Samik Shiji of JPMorgan. Your line is open.

Maybe just on a couple of fronts, I believe you expanded your platform on Google Cloud in the summer. So if you can just give us an update on how the customer engagement has been on that front and on the Pure Storage partnership, I think the last sort of update you gave was, we would see something available by the end of the year. Anything more specific that you can share in terms of timing on that front? And then I have a quick follow-up for Rukmini, please. Thank you.

Yeah. Hey, Samik. Also, welcome. I know this is your first call as well. And let me start with Pure and then Google Cloud. So Pure, again, I think we are an early access customer starting to kick the tires on a beta version. And then I think we are on track. We set in the calendar year for the GA release. Generally available release, and we are on track to deliver that. And for Pure, there is a broad base of customers that Pure has, and many of them, I think, are interested over time in terms of exploring alternative platforms, which our offering provides. So I expect that, you know, again, as we get into the second half of this fiscal year, when we will be able to tell you more about how that offering is coming along. On Google Cloud, we had a fair amount of initial interest from customers who had chosen Google as their cloud provider. I mean, typically, these larger ones tend to take one or two main cloud providers, and certainly Google has been on that list after AWS and Azure for us for a while. So now that we are in what we call public preview, what that means is that early customers can have access to this offering. And we do have people fixing the tires. And, again, I think once it's generally available, again, we hope that towards the end of the year, and it's also dependent on Google's bare metal being available in the regions that we need to be offering our software on top of. Then I think we should be able to give you some more color in terms of the actual adoption and how things are going.

Got it. Got it. Thank you for that. And, Rukmini, just a quick follow-up on the cash flow. Maybe if you could dive into seems like a cash flow for the year came in a bit better than you initially thought. And what I'm trying to sort of square to your cash flow guide for fiscal 2026, my math indicates operating income going up by about $90 million or so, and it looks like that would generally put cash flow at the higher end of your guide, if not for other offsetting factors. If you can just walk through what the moving pieces there. Thank you.

Yes. Hi, Samik. Welcome from me as well. So on the free cash flow, we're happy with the performance in Q4 and in fiscal year 2025, you know, $750 million of free cash flow. And so really happy with that performance. And, you know, I think there's when you think about next year and you think about fiscal year 2026, and the guide there, I think the dynamic around contract duration does also impact free cash flow because our standard practice is to collect multiple years of cash upfront. Customers will often use CapEx budgets to purchase our software because we are infrastructure software and often they may be purchasing hardware as well. And so duration does have can have an impact on free cash flow as well. As I said earlier, in answer to, you know, response to another question that we expect duration in the aggregate to go down year over year into fiscal year 2026.

Got it. Okay. Thank you. Thanks for taking my questions.

Thank you, Samik.

Thank you. And the next question will come from the line of Ruplu Bhattacharya of Bank of America. Your line is open.

Hi. Thanks for taking my questions. It's Ruplu filling in for Wamsi. I have two questions. First one for Rukmini on margins. If you look at the midpoint of fiscal 2026 guidance, 21.5%, that implies only 40 bps of improvement year on year, which would be the lowest in any year so far. Can you help us segment that into how much of that is from tariffs? How much is because you have more employees now, more SG&A? And the other factors that you mentioned, I think you said $30 million or so of other issues. So can you help us segment that? And is there any conservatism factored into this?

Hi, Ruplu. Thanks for that question. So you're correct that at the midpoint of the guide in 2026 is slightly above what we reported for fiscal year 2025. One thing I called out in my prepared remarks was some delayed hiring that we have and that we intend to catch up in fiscal year 2026. And I said that's about $25 million in fiscal year 2026. It, you know, could have been depending on when those folks might have been hired in 2025. Right? Those numbers can move around. But to give you an order of magnitude or a sense of what that amount is like in terms of delayed hiring that we have going into next year. The other headwind I called out were these nonrecurring partner payments, which we do expect to taper off in fiscal year 2026, and that could potentially be a headwind of another $10 to $15 million, as I said in the prepared remarks. And then there are, of course, all of the folks that we've hired in fiscal year 2025, Ruplu, and we've talked about the investments and where we're making them. And I'm, you know, happy to summarize that in sales and marketing, for example. We wanted to hire a few more reps to get to our target rep headcount and associate people to support that rep, and we came very close on that. Actually to meeting our target. By the end of fiscal year 2025. So those folks will all be annualized in fiscal year 2026, as you know. Right? Because they won't be able to full year in 2025, but they will be in 2026. So those are all some of the things that I call out when you think about margin going into next year relative to fiscal year 2025. And then in terms of is there conservatism baked in there? I would say, look. Our guidance philosophy in general hasn't changed, Ruplu, in that we try to give you our best and reasonable estimate of how the year would play out at this point in time. And so that's a similar approach we've taken this year as well.

Okay. Thanks for that, Rukmini. For my follow-up, I'd like to ask a question on ARR, and I know you don't guide specific ARR but just as you mentioned, there are different factors that impact that. And one is, of course, land, which is new logos and Nutanix is gonna face a tough year on year compare because fiscal 2025 was so strong on that front. Then there's expand, which, you know, we can kind of infer from NRR. And then you said pricing also. So maybe I'd like to ask how is the pricing environment? Do you see maybe pricing as a lever you can use that you can raise prices on and maybe, Rajiv, you can use this to gain some share from VMware? And then on NRR, like, how should we think about how high NRR can go, and how should we think about expansion? So I guess what I'm trying to ask is of these three factors, where do you have the most confidence and how should we think about, you know, this expansion versus pricing versus the new logo expansion? Thank you.

Thank you, Ruplu. There was a lot in there. Let me try to unpack that. And, Rajiv, you're welcome to add as well. So you're right, Ruplu, that, you know, if you think of the main components of an increase in ARR it's those three things. Right? So one is, of course, we need to make sure we're attaining the ARR base that we do have and doing as much of that as we can. And if you set that aside, then you have expansion with existing customers, landing new customers onto the platform, and potential price increases with the existing customers as well. Right? So I would say, look. I think we're happy with the land performance. We've talked about the 2,700 plus new logos that joined our platform in fiscal year 2025. And I gave you a sense of roughly what we expect that to be in fiscal year 2026. I think we touched on expansion, one of the earlier questions around NRR. Which is that there's some mechanical ins and outs there, including the fact that new logos coming in at a higher initial deal size could impact that percentage of expansion in the future because the initial purchase has been larger than it has been historically for us. And then on pricing, our approach has been that on a renewal, look. We want to make sure that our customers love the platform and want to renew with us. And so, historically, we've had more inflation type pricing increases on renewal. And, of course, it depends on what else that customer is doing with us. Now they also expanding? Right? Like, what is overall picture of that particular account? And then I will say in terms of competitive pricing, which I think was part of your question, that remains quite dynamic. And, Rajiv, I don't know if you wanna comment on that as we think about pricing relative to the competition.

Yeah. I mean, I think it kind of I think very much depends on the kind of customer, the volume course, we have volume-based pricing for very large deals with lots of volume. The pricing is lower. We, you know, as a matter of fact, we did also, even for this year, take up our list pricing. As Rukmini pointed out, only on inflation kind of in line with inflation. Type of basis. So we also think, for example, having our external storage offering can give us some pricing advantage aside because we don't have to necessarily try and, yeah. We can potentially see somewhat of a lower price point, but get in the door without compromising and upsell into the rest of our portfolio. So there are levers here that we will, of course, and then there's portfolio attach, which, of course, the more portfolio we attach, the more our ASPs go up. We have seen an increase in ASPs of our deals in terms of total size of the deals. The individual pricing elements vary very much depending on the situation.

Okay. Thank you for all the details. Appreciate it.

Thank you. And the next question will be coming from the line of Victor Chu of Raymond James. Your line is open.

Hey, guys. This is Victor in for Simon Simon. I just wanted to follow-up on the PURE partnership. Can you remind us which elements Nutanix provides? Is it primarily the hypervisor for compute and, you know, I guess, you know, also, what competitive opportunities does the combined solution target strategically, I guess?

Yeah. Hi, Victor. So it's so, yeah, if you look at the Nutanix cloud platform today, it has a hypervisor. It has networking. It has operations and cost management. It has some security built in. It also does unified storage. And when we look at the platform with Pure, the part that's not there is HCI storage. Right? Everything else about the platform is still very much there. We have the hypervisor. We have the networking. We have the security. We have the operations management. All of that is sold together with Pure. Right? Except the storage is now Pure Storage as opposed to us. And so that is the portfolio. Now, again, for a lot of these customers, they're connecting Pure Storage to servers running VMware. And so these customers are looking to replace that VMware option with a Nutanix option. Right? That's our opportunity there. In terms of getting into those accounts. And they wanna preserve their pure hardware. Right? They've invested in the pure RTX the pure storage. They wanna keep that, at least for some period of time. And therefore, we can then essentially do a software change on their servers to be able to allow them to use Nutanix instead of VMware on those. In those deployments.

Okay. Got it. Great. That makes a lot of sense. And then just along those lines, Broadcom issued a cease and desist. Then they issued cease and desist letters in May, I think, to customers, you know, that were using VMware without, you know, paying for support because, you know, that specifically, you know, open up any incremental opportunities, or is that just kind of consistent, you know, part of the course with their overall kind of, you know, recent competitive posture?

I mean, again, I think most customers running mission-critical applications will wanna make sure that their deployments are supported. Right? So they, you know, they don't typically most customers don't run unsupported in these types of mission-critical deployment. So I don't think that's changing the picture that much.

Thank you.

Thank you. And the next question will be coming from the line of Brandon Nesbold of KBCM. Your line is open.

Great. Thank you for taking the questions. You know, I guess my question is for Rukmini and mainly just to follow-up on margins. I mean, just doing math, it seems to imply operating expenses are $1.9 billion. You called out a couple of, you know, one-timers in terms of accelerating headcount and partner contribution. But OpEx, excluding that, up quite a bit. And it looks like your contribution margins from an operating income perspective are it looks like implied is just 24%, which is much lower than it's been. So what are you spending sort of the rest of the money on? Are you guys maybe changing some channel payments or, you know, top four employee base? Just trying to understand why OpEx would be up so materially and contribution margins would be down so materially. Implied by the guidance. Thanks.

Yeah. Hi. Hi, Brandon. So a few, I think, thoughts on fiscal year 2026. OpEx. So one, like I said, the one-time item that I called out in my prepared remarks, won't repeat because I feel like we've covered that in enough detail already. In terms of other things, there is the run rate of the folks that we've hired for this year in fiscal year 2025, carrying over to 2026. Is a meaningful chunk of that because a lot of that hiring did happen later in the year, and so in the second half of the year. Those folks are all being annualized going into fiscal year 2026. We have, of course, raises that we give for employees that are also factored in there. Then in terms of incremental investments, there's some that we've baked in there, Brandon. It's not a ton in the grand scheme of things or even an incremental amount. It's still a minority. It's more around areas around R&D and innovation that said we'd continue to innovate, you know, in areas like support of external storage, in areas like our Kubernetes platform, NKP, where we're seeing a lot of interest, and we think it's important that we continue to invest incrementally in those areas. And then some in sales and marketing as well. Around areas where we think there is more opportunity for us to get that return. Like I said, we came very close to hitting our target rep headcount. At the end of fiscal year 2025. And so there's gonna be a little more we have to do there, but that's not a huge amount. And then investments in areas like IAEs, where we're gonna add a few more inside folks. Some adjustments to our portfolio, things like that. So, incrementally, it's still a small amount that is being added over and about with the delayed hiring that we had in fiscal year 2025 going into 2026.

Thank you for taking the question.

Thank you, Brandon.

Thank you. And this does conclude today's conference call. Thank you so much for joining. You may all disconnect. Have a great evening.