Good day and thank you for standing by. Welcome to the Nutanix Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rich Valera, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to today's conference call to discuss second quarter fiscal year 2026 financial results. Joining me today are Rajiv Ramaswamy, Nutanix's CEO, and Rakhine Sivaraman, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing second quarter fiscal year 2026 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 differ materially and adversely from those anticipated by these statements for more detailed description of these and other risks and uncertainties, please refer to our FCC filings, including our most recent annual report on Form 10-K and our subsequent quarterly reports in 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 ARN Express release. Nutanix will be participating in the Morgan Stanley TMT Conference on Monday, March 2nd in San Francisco, and we will be holding our Investor Day in conjunction with our DOTNEXT User Conference on Tuesday, April 7 in Chicago. We hope to see you at these events. Finally, our third quarter fiscal 2026 quiet period will begin on Friday, April 17. And with that, I'll turn the call over to Rajiv. Rajiv?

Thank you, Rich, and good afternoon, everyone. In our second quarter, we continue to see healthy demand for our solutions, as reflected in our strong bookings and out-performance versus our guided metrics. We see this demand driven by businesses looking to modernize their IT footprints, adopt hybrid cloud operating models, and deploy cloud-native applications, including AI. I'm excited to announce our strategic partnership with AMD, which focuses on the growth opportunity in agentic AI. This multi-year collaboration is focused on development and marketing of a Nutanix-powered agentic AI platform for enterprises and service providers built on AMD accelerated compute infrastructure. As part of the agreement, AMD will make a strategic investment of $150 million in Nutanix common stock and fund up to $100 million for R&D and go-to-market for the combined solutions. We look forward to delivering the first jointly developed platform from this partnership to our customers in late 2026. More broadly, we see AI as driving a whole new set of new enterprise inferencing and agentic applications for which we are in the early innings. Nutanix provides the ideal platform to run them efficiently and securely on the hardware of their choice across any location, enterprise data centers, edges, or cloud service providers. We see this as a significant long-term growth opportunity for us. Moving to ourselves, In our second quarter, we delivered quarterly revenue of $723 million, evolved our guidance range, grew our ARR 16% year-over-year to $2.36 billion, and saw solid pre-cash-pro generation. We also added over 1,000 new customers, representing our strongest quarterly new logo additions in eight years. Looking ahead, we continue to operate in a dynamic environment. And supply chain challenges, which were not a meaningful factor in our first fiscal quarter, became much more acute subsequent to our last earnings call. Specifically, there have been well-documented shortages of memory and resulting increases in memory prices as well as shortages of CPUs this is driving higher prices and lengthening lead times for servers thus far longer lead times largely driven by lack of CPU availability have been a significantly bigger challenge for us than pricing Nutanix's focus on customer choice across multiple vectors should help to mitigate the impact of supply chain challenges on our business. These options include choice of server platform from multiple providers, choice of running in multiple public clouds with our Nutanix Cloud Clusters or NC2, our support for selected external storage platforms where there is typically no hardware change required, and And finally, support for software slats on existing hyper-converged hardware. We have been working with our customers on these auctions to help them better manage the current supply chain dynamics in the server market and maintain their deployment timelines. However, we expect that the longer lead times our customers are seeing for servers will will have some impact on the timing of our near-term revenue and free cash flow generated from our land and expand business. We have factored this anticipated impact into our updated outlook. Brooklyn will provide more details on these changes in our comments. But there are a couple of key points I'd like to make. First, we believe the fundamentals of our business are strong. second bookings growth expectations for the full fiscal year are higher than prior expectations but the timing of the conversion of some of these bookings to revenue and free cash flow is expected to be delayed by availability of third party servers and finally we see this solely as a timing issue and the amount of revenue and free cash flow we expect to recognize over time from business booked in FY26 remains unchanged. In Q2, we continue to see success in the marketplace with our cloud platform. Our most notable wins, a few of which I'll highlight, demonstrate the appeal of our solution to businesses that are looking to modernize their IT footprints, deploy modern apps and AI, and adopt hybrid multi-cloud operating One of our largest new logo wins in the quarter was with a North American headquartered Global 2000 financial services provider that is one of the largest asset managers in the world. This new customer was looking for an alternative to their incumbent infrastructure provider for a portion of their estate following a substantial price increase. They chose the Nutanix Cloud Platform, including Nutanix Cloud Manager, to run some of their mission-critical applications, appreciating its common management interface, superior ease of use simple one-click upgrades and the public cloud optionality provided by our NC2 capability another significant new logo went was with a North American based provider of health care services this new customer approached Nutanix initially looking for an on-prem alternative to their existing infrastructure environment however they ultimately also decided to leverage our NC2 on AWS to expedite the migration of a portion of their estate into the public cloud before their upcoming renewal with their incumbent provider we see this win as demonstrating the flexibility of our cloud platform in enabling customers to quickly migrate and operate in the environment of their choice including public cloud finally a A large full-stack expansion win with an EMEA-based IT services provider reflected ongoing progress with our customers adopting the Nutanix Cloud Platform to deploy cloud-native and AI applications. This customer is using Nutanix Enterprise AI and Nutanix Kubernetes platform, or NKP, running on our cloud platform to deploy additional AI use cases in the areas of automation and optimization. They are also expanding their use of Nutanix database service for database automation and Nutanix unified storage for managing their unstructured data. During the second quarter, we continued to make progress on our initiative to support external storage with our platform, including multiple meaningful wins with our solutions supporting Dell PowerFix. We also delivered general availability of our solutions supporting EverPure, formerly Pure Storage, and saw our first wins for this new offering. In Q2, we also introduced several enhancements to the Nutanix Cloud Platform, designed to strengthen security and drive operational resilience across increasingly distributed environments. These updates are a response to the growing demand we see from organizations that require the flexibility to run their entire state, including traditional cloud-native and AI workloads, on a single, consistent platform. This is particularly relevant for customers operating in highly regulated sectors, including those looking to deploy sovereign clouds and fully disconnected sites. In closing, we believe our business performed solidly in the second quarter, including strong bookings, strong new logo additions, and solid free cash flow performance. While we have updated our outlook to reflect the expected near-term impact of supply chain challenges on our business, these changes relate solely to timing of revenue and free cash flow. I believe our partnership with AMD meaningfully expands our opportunity in the enterprise AI market. Our opportunities with AI, modern applications, hybrid multi-cloud, and support for external storage provide us with a strong foundation for multi-year growth. And with that, I'll hand it over to Rukmini Sivaraman. Rukmini.

Thank you, Rajeev, and thank you everyone for joining us today. I will first discuss our Q2 26 results, followed by an update on Q3 26 and full fiscal year 2026. In Q2, we reported results that were above the high end of the range for all guided metrics. In Q2, we reported quarterly revenue of $723 million, higher than the guided range of $705 to $715 million. ARR at the end of Q2 was $2.356 billion, representing year-over-year growth of 16%. NRR, or Net Dollar-Based Retention Rate at the end of Q2, was 107%. Land and expand bookings in Q2 were higher than our expectations, which we believe is partially due to customers anticipating supply-related shortages and price increases for server hardware from our partners. As we move through the latter half of Q2, we began to see that the challenging supply environment for CPUs, memory, storage, and other components is delaying our customers ability to procure servers from our hardware partners in order to run our software. We did not see this as a meaningful driver of our results in our fiscal Q1, as mentioned in our last earnings call. But later in Q2, we did start to see it become more pronounced to a greater extent than anticipated and expect it to continue through the rest of the fiscal year. Thus far, longer lead times, largely driven by lack of CPU availability, have been a significantly bigger challenge for us than pricing revenue in q2 saw a headwind from these factors but was more than offset by higher than expected tcv bookings that grew in the mid teens percent and lower than expected percentage of land and expand bookings with future start dates in q2 average contract duration was 3.1 years, largely consistent with our expectations. Non-GAAP gross margin in Q2 was 88.6%. Non-GAAP operating margin in Q2 was 26.2%, higher than our guided range of 20.5% to 21.5%, due to lower operating expenses related to timing of hiring, among other factors, and higher revenue than expected. Non-GAAP net income in Q2 was $164 million of fully diluted EPS of 56 cents per share based on fully diluted weighted average shares outstanding of approximately 292 million shares. The fully diluted weighted average share count incorporates the impact of the $300 million accelerated share repurchase transaction that was completed in Q2. GAP net income and fully diluted GAP EPS in Q2 were 103 million dollars and 36 cents per share respectively. Free cash flow in Q2 was 191 million dollars representing a free cash flow margin of 26%. Moving to the balance sheet, we ended Q2 with cash, cash equivalents, and short-term investments of $1.874 billion, down from $2.062 billion at the end of Q1. Moving to capital allocation, in Q2, we repurchased $333 million worth of common stock under our existing share repurchase authorization. We completed a $300 million accelerated share repurchase transaction, and the remaining approximately $33 million worth of stock was repurchased through our ongoing share repurchase We also used about $48 million of cash to retire shares related to our employees' tax liability for their quarterly RSU vesting. All of these help to manage share dilution. Q3 guidance. Our guidance for Q3 fiscal 26 is as follows. Revenue of $680 to $690 million, non-GAAP operating margin of 16 to 17%, fully diluted weighted average shares outstanding of approximately 288 million shares. To the full year, our updated guidance for FY26 is as follows. Revenue of $2.8 to $2.84 billion, non-GAAP operating margin of 21 to 22%, same as our prior guide despite the lower revenue guide, and free cash flow of $745 to $775 million, dollars representing a free cash flow margin of 27 percent at the midpoint i will now provide some additional context regarding our fiscal year 26 guidance first as rajeev mentioned while we continue to operate in a dynamic environment our bookings expectations for the full year are higher relative to our last earnings call indicating continued strong and growing demand for our solutions. Second, the challenging supply environment I described earlier is, however, delaying our customers ability to procure servers from our hardware partners in order to run our software. For our orders that are linked to the shipment of server hardware, which are a minority of our bookings, we can only recognize software revenue and collect cash alongside the shipment these include bookings that are sold through our OEM partners such as Cisco Dell or Lenovo and our integrated offering partnered with Supermicro as a result of this we expect some revenue and free cash flow to be shifted out from this fiscal year both the Q3 and updated full year guidance are impacted by these dynamics. This is solely timing-related and does not change the overall revenue and cash flow expected to be recognized over time from bookings in fiscal year 26. Absent this worsening supply chain dynamic, we would have been in a position to raise all guided metrics for fiscal year 26 following our good Q2 bookings performance. We expect TCV bookings growth to exceed revenue growth for fiscal year 26 third we are doing several things to actively manage through these dynamics a as rajeev said we provide customers with options including choice of server platform choice of running in public clouds with our nc2 solution our support for selected external storage platforms where there is typically no hardware change required and finally support for software swaps on existing hyper-converged hardware b we are providing selected tools and promotions for our customers who are ready to make a decision to partner with Nutanix and lock in their server prices while facing uncertainty about server lead time these include options around licensing start dates and increased flexibility to purchase the software separately from the server we expect a higher percent of bookings in the second half of the year with future start dates than previously assumed. Fourth, we are maintaining our full-year operating margin guidance as we invest for continued growth while maintaining our focus on efficiencies and expanding margins over time. Fifth, and finally, a note on seasonality of free cash flow. We expect that free cash flow in the second half to be more weighted towards Q4 rather than Q3 based on our current visibility into the supply chain dynamic outlined previously in closing we believe the underlying fundamental drivers of our business remain strong bookings expectations for the year are higher than before revenue and free cash flow realized from these bookings are coming in later with that operator please open the line for questions certainly as it reminder to ask a question you will need to press star one one on your telephone

and wait for your name to be announced to withdraw your question please press star one one again in the interest of time please limit yourself to one question and one follow-up please stand by while we compile our Q&A roster one moment for our first question our first question will be coming from Saudi Sultan of UBS your light is open Roddy awesome thank you very much guys Starting with Rajiv, just on the VMware replacements, like, could you just take a step back for And, you know, like Broadcom isn't making a lot of changes, like reworking the hyperscaler agreements, you know, for VMware on cloud, ramping up audits, things like that.

Like, just taking a step back, like, how do you think about the magnitude of the VMware replacement opportunity versus 12 months ago? And maybe what have been the biggest drivers of that change?

Yeah. Hello, Radhi and Radhibia.

I don't think anything has really changed from an opportunity perspective. You can see that we're still continuing to add new customers at a healthy clip.

We added 1,000-plus customers this last quarter. Our AHV percentage, which is our hypervisor adoption, has hit an all-time high. To your point around the cloud partners, you've seen that we've extended our partnership with AWS post this Broadcom acquisition, and we've seen some good traction. We talked about some examples on NC2 and how that's being used in the public cloud. And then we continue to add more external storage support. And you see, you know, the Everpeer solutions now in the market, PowerFlex has been in the market, and more public cloud options now with Google coming on. So all of these make migrations easier, right, from VMware. So we don't think anything has changed from an opportunity perspective. I've always said that this is a multi-year journey and it will continue to be a multi-year journey for us.

Got it, crystal clear. And then just a follow-up for Rukmini, just as you think about like in light of these supply chain constraints, like the implied Q4 guide does imply, you know, pretty steep axel. So just like what gives you confidence in that and if you could just speak to your level of visibility, like what leading indicators should we be looking at to kind of give us confidence in underwriting that Q4 axel?

Yes, hi, Radhi. So, I would say, you know, a few things. One is that Q4 is traditionally a very strong quarter for us. It's the end of the fiscal year, of course. So, our sellers are all incentivized to maximize what they can do in Q4. And we also are guiding to Q3 and by implication to Q4 based on what we're seeing today in terms of supply in the market and when we can expect those to be reflected in our revenue So those are sort of the two things I'd point to and I'll also say look our RPO had a nice growth in Q2 at the end of Q2, RPO grew 24% so that's one other metric you can look at in terms of how much is remaining right in terms of our performance obligations and CRPO as well. So those are some of the two or three things I'll point to in terms of Q3 to Q4 seasonality.

Thank you very much guys.

Thanks Rodney.

And our next question will be coming from the line of James Fish of Piper Sandler. Your line is open, James.

Hey, guys. I mean, Rufmini, you probably were teeing that up for me with the RPO comments there, but did want to touch on that. You know, help me with this dynamic where you guys have mid-teens TCV bookings, but RPO bookings growing four against that really tough 34% comp last year. I mean, that implies about 10 points coming from sort of off-balance sheet bookings that is a materially higher amount than what you guys have historically suggested. Or what am I missing here that you're starting to see more off-balance sheet bookings?

Hi, Jim. Yeah, so as I said, we saw strong year-over-year RPO bookings worth of 24%, and I believe what you're referring to, Jim, is the calculated bookings, which for everyone's reference is calculated as Q2 revenue plus quarter-over-quarter change in RPO. So similar to last quarter, Jim, the exclusion of cancelable backlog from our reported RPO has a meaningful impact on the RPO bookings calculation and year-over-year growth rate, despite the fact that that cancelable backlog remains a very small portion relative to our total RPO number. It's in the low single-digit percent as a percent of the total RPO. Now, including that cancelable backlog number, which historically has very rarely been canceled in the RPO bookings calculation, that results in a mid-teens percent year-over-year growth rate aligned with the overall TCV bookings growth rate that I alluded to in that prepared remarks.

And Rajiv, for you, I guess you're talking about a really good pipeline of conversion opportunity, but how are customers balancing the outlook of having to renew again with that incumbent and delaying their hardware purchasing versus the savings they get by deploying the hardware now and purchasing Nutanix?

Yeah, it's a good question, Jim.

And so, and we see kind of a combination of different things here, right, for all these customers. So, there are customers who have gone out there and ordered hardware, and they, you know, they realize that prices are going to go up, and they've ordered that ahead of time, and they are going ahead with the migrations. There are also customers who are looking and seeing, okay, well, I've got my external storage now, and you guys can actually help me on that front without having to have me replace hardware. and and that's a good you know that works very well for us actually and so the migration if you look at a custom migrating from VMware it's obviously already tied to hardware refresh cycles and if a hardware refresh is needed you know we we do very well from a TCO benefit compatible competition which is why people are moving over now if a customer decides to select their hardware in this environment given your pricing of new hardware we can still enable software migration right because of the fact that now we're supporting a larger number of third-party uh storage uh and also so being able to work on existing hci hardware that runs vmware today so we are offering our customers all of these options and and on top of that they can also migrate to the public cloud by the way if they choose to and there are some customers who are doing that in fact we talked about one of them here on the call so we have all these choices and And that helps offset some of these hardware migration concerns, hardware cost constraints, I should say.

Thanks. Thanks, Jen.

And our next question will be coming from Sanjit Singh of Morgan Stanley. Your line is open.

Thank you for taking the questions. Just some follow-ups on the, on some of the, the, the, the headwinds in terms of, in terms of revenue. In the last quarter we talked about deferred start dates and that higher mix of deferred start dates. That doesn't seem to be the sort of near-term concern. It seems like that maybe came in line with your expectations, and it's more of the supply constraints around CPU. I wanted to make sure that I understand the dynamics happening right now. And then it seems like the longer-term or the mid-term strategy here is to keep the bookings momentum alive by or keeping the bookings momentum strong by giving customers more flexibility when it comes to licensing and start dates. Is that how I should be thinking about it in terms of how you plan to navigate kind of the near-term turbulence around on long road and revenue timing?

Yeah, hi Sanjeev. Let me perhaps first lay out sort of how we take our software to market and then I'll address your question on future start dates and flexibility and so on. So we have two types of orders for our software, right? So one go-to-market motion, which typically accounts for the majority of our ACV booking involves software not linked to any hardware delivery which we often refer to as software only now for these software only deals we typically will build a customer and recognize revenue so sorry we'll build customer at the time the purchase order is made and revenue is recognized at the time of the license start date as we've talked about before and that's what you're alluding to. Now the other type of order involves software that is tied to the delivery of the associated server. Now this includes business that's sold through our OEM partners as well as integrated offerings such as we offer with Supermicro and in that case is where this software is tied to hardware delivery. Revenue recognition is also tied to that delivery of the of the hardware. So now to your question on future start dates. You are correct that the percent of orders in future start dates in Q2 was lower than we'd expected and was lower than what we saw in Q1. And that percent or that mix depends on a variety of factors. It includes customer migration timelines. It includes a timeline to procure hardware, as we're talking about now, and our approval processes around that. And that number can move around from quarter to quarter. And given the recent supply chain dynamics and ongoing migrations, we have factored in a higher percent of orders than we had previously to come in with future start dates going into the second half of the forecast.

That's very clear. I'd appreciate appreciate the color there. Let me talk a little bit about the partnership with AMD. So maybe in terms of a timeline of having a solution out to the market, maybe get your viewpoint on that. Sounds like it's going to be later this year. And then in terms of which customer segments within the within the Nutanis or the MB customer base will be most interested in the joint solution? Is it, you know, sort of particular industries, you know, higher segments, you know, like large enterprise, But I just want to get a profile of who's going to be most viable as potential joint customers of the partnership.

Yeah, first of all, the target, just to be very clear, is we are building a platform together that supports essentially inferencing and agentic applications, right? So this would be a full stack platform on top of which people could use, you know, run models and build these multi-agent applications or even simply inferencing applications. The target customer base, to your question, really are enterprise customers. Okay, enterprise customers, and if you were to say within that enterprise customer base, it would be typically customers in more regulated industries, customers who care about sovereignty, wanting to run their AI close to where their data is located. So it could also mean people are running AI applications at the edge. So if you want to look at this set of customer base, what it translates into is people who care about protecting their data, running it locally, running it inside their data centers for the most part, running it in edges. But also, some subset of these customers are going to consume them from service providers. We have a lot of service providers these days who are also offering GPU as a service. So that would be the second way of serving the same end customer being the enterprise. So, in short, targeting enterprise use cases for these agency AI applications, mostly regulated industries to start with, but also people who are interested in being service providers delivering to these enterprises. And as you said, the first solution out of this will be delivered by the end of this calendar year, and we are excited about the long-term potential for this partnership.

Thank you. Thank you.

And our next question will be coming from the line of Wamsi Mohan of Bank of America. Your line is open, Wamsi.

Hi, thanks. It's Ruklu filling in for Wamsi. I've got two questions, I think, today both for Ruklu. Just looking at the margin dynamics, I mean, the fiscal quarter you reported was very strong, is it stronger than expected. You're guiding fiscal CQ operating margins to 16 to 17 percent, and then the full year unchanged at 21% to 22%. Can you just help us understand the dynamics impacting fiscal 3Q margins and what are the factors that will help, you know, get to the full year, 21% to 22%? And the same question on free cash flow. It looks like revenues are down $20 million for the full year, but you're taking down free cash flow, down $60 million. But there's also potentially some $100 million from AMD, and they're also buying back shares or buying your shares. So can you just give us your thoughts on the cadence of free cash flow, the investments you're making, and how we should model out free cash flow? And I will follow.

Thank you, Ruflo. So on operating margin, I'll start there. So historically, our seasonality around operating margin is that it's higher in Q2 Q2 and Q4 and lower in Q1 and Q2 on a relative, Q1 and Q3 on a relative basis. And that's because the revenue roughly follows that pattern as well. And of course, we're investing, you know, typically through the year. So that also flows in, but it's more unusual for us to have operating margin be higher in Q2 and Q4 relative to Q3, which I think is a dynamic that you're pointing out. And I will say that in terms of overall, our overall view on investment, look, we still continue to believe there's a large growth opportunity ahead of us. And so we're investing for that growth, but doing so in a thoughtful way, in a prudent way, while also working on efficiencies and productivity within the business. So that's on the margin point. And then on free cash flow and your point about revenue versus free cash flow. So one thing I'll say is that, you know, when you think about the orders that I, you know, server hardware and we said that those are a minority of our bookings we can only recognize software revenue and collect cash alongside the shipment and as a reminder we typically recognize about half of an orders TCV booking upfront as revenue while we typically collect all of the cash upfront so you would impact the cash in backcountry cash flow to be higher than on revenue and that is, in fact, what we're expecting. So the change to our free cash flow guidance was largely due to these longer server lead times, which is delaying the timing of when we can bill and collect from customers. And that's why the free cash flow guidance change is higher than the revenue change, Rupaloo. So those are some of the dynamics around free cash flow and on operating margin.

So Rupaloo, you also asked about the AMD piece, right? You want to cover the accounting?

Yeah, so AMD is choosing to invest 150 million dollars in our common stock and that really has no impact on free cash flow because it's not going to be in the operating cash flow section right and and but they're also investing a hundred million is that all right correct so that's where i will say look i think we aren't getting into the specifics of that for flu but we did say it was a multi-year strategic partnership with AMD, and it's up to $100 million over that period, over the month.

Got it. If I can ask a quick follow-up. So you mentioned two delays. One is the delay because of availability of servers, and then you also, in the commentary, said that there's a higher – there's orders with delayed start dates. I mean, that is also growing versus your talk 90 days ago. Which is – can you help us quantify this? I think last quarter you had said it was about 80 million of revenue that was being pushed out because of future start dates. Can you help us quantify how much is the impact from delayed availability of servers versus orders with later start dates? How are each of these impacting revenue recognition?

Yeah, so for this quarter's updated guide, I would say the more meaningful change is in the supply chain environment. It is worse than what we had expected three months ago. And so that is a meaningful portion of the change in guidance. And as we said on the call, we're also assuming that the second half orders with future start dates, the mix of those orders is also expected to be higher than we had thought. So that is also factored in there. But we're not breaking out the quantification review. But the more significant change was what we saw in the supply chain environment.

Got it. Thank you for all the details. Thank you.

And as a friendly reminder, in the interest of time, please limit yourself to one question and one follow-up. Our next question will come from Matthew Martino of Goldman Sachs. Your line is open.

Yeah. Hey, thanks for the question, guys. Maybe to start with Ruckmini, you mentioned in the prepared remarks extended lead times have been the bigger headwind and less so server prices. Can you provide us with some color on kind of what you've contemplated around guidance in the back half of the year, whether it's largely extended lead times or potentially lower initial deal sizes on higher server costs, just given the fluctuations out there in memory prices today?

Yeah, hi, Matt. So, in terms of the forecast for the second half, we have factored in delays in availability of servers. So, that is, we factored in based on the visibility we have right now and what we see. But I will say, I think we've said this before, that we are, you know, indirectly impacted by this given that we, you know, it's our server partners that we rely on, our customers rely on to procure their hardware. But yes, we factored in some of the delays around server lead times and when we expect those to become available. Now, the second point about potentially impact of pricing on our software, as we've said, we continue to see solid demand for our solutions in Q2. We've talked about the bookings growth. And so, so far, I would say the impact of this higher server price and longer lead times can be mixed, Matt. And what I mean by that, in some cases, it is accelerating projects, while in other cases, it's requiring more approvals and lengthening procurement timelines. And as we said, we're also working with our customers to offer them many options, including choice of server vendor, external storage support, public cloud with NC2 solution, and swapping software and existing hardware. So, so far, we have not seen a meaningful impact to our software deal sizes or pricing in the market, although customers are in fact experiencing higher server prices and looking for ways to mitigate that. So we, you know, will continue to emphasize our software value proposition and provide a range of options to customers, as we have described. So that's the way we're approaching this map.

Yeah, very clear. Thanks for coming. And then for you, Rajiv, you know, you guys are offering multiple workarounds where Camini you just flagged it with NC2, expanded server platform choices, external storage. I'm curious, Rajiv, from your perspective, you know, what's proving most effective for those deals that are staying on track in terms of providing that wider array of options? And then in context of that, the new logo velocity was really strong this quarter. So wondering if Pure Storage was a large contributor to that dynamic?

Yeah, I think Pure Storage is still very early. We did close our first wins this quarter, Matt, but I wouldn't say that was a big contributor to logos yet. Most of the logos came from our, you know, typical VMware migrations onto the HCI platform. External storage is growing, but it's still a small portion. Now as we look at, sorry, which of these is moving the needle in a significant way, it's really a combination of all of these factors. The fact that we're able to run our HCI platform, you know, I mean, now support a broader set of configurations and provide more choice to customers. There was a lot of arbitrage in the quarter about, you know, people looking at different server vendors to say who can get me the best price and best lead time. And the fact that we could support all of them, I think that's clearly a value proposition and a factor that our customers took advantage of, NC2 had a pretty good quarter, right? So, people are starting to use the public cloud more and more as in terms of these, you know, getting around the fact that they can't get servers on-prem. They can also potentially use NC2 to do a migration to the cloud, and if they want to move it later on-prem and they have servers available, they can do that too. So, we're starting to see some of that come through as well. The external storage, like I said, is a third component, which is still early days. We're starting to see the traction very clearly, though. And I do expect that as customers, if they start looking at spreading their existing hardware more, given the supply constraints that they're seeing, then it's going to start to become even more important. So I think it's not that there's one thing that's driving all, you know, helping us in a big way compared to the other. It's a combination of all of these things that's helping us mitigate the supply situation. Great, thanks for all the color.

Thank you, Matt. And our next question will be coming from the line of Tameek Chatterjee of J.P. Morgan. In your line is open.

Hi, thank you for taking my question. This is MP on behalf of Sommet Chatterjee. So firstly, I just wanted to double click on your AMD deal. What is the best way to size up your revenue opportunity here and the go-to market strategy? Will it be just the attached rate with AMD's influencing platforms or you will be able to do independent software sales as well? And then what is the likelihood of similar future deals and how does the market look like?

Good question, MP, let me take that. So first, in terms of the revenue itself, right, obviously, so the solution is the Nutanix software stack running on servers that include AMD's accelerated compute platform, right? So we take, you know, by the way, we already have solutions to market today with NVIDIA on this front, right? In fact, all our AI solutions today run on NVIDIA, and now we're adding AMD to the mix to provide more choice for customers. So the go-to-market model is that we sell our software, the full stack, which is, you know, our Nutanix start platform, our Kubernetes platform, and then our NAI, the Nutanix AI piece that runs on top of all of that. All of that is now, the R&D effort is to take all of that, get it to work very nicely and optimally on AMD hardware, right, that's inside the servers, AMD's GPU hardware and actually computer hardware. And so we sell our software just like we sell today and more of that software will land on platforms that have AMD hardware inside so that is the go-to-market collaboration right so AMD brings together their hardware solution their ecosystem and we then put our software stack on top and we take that to market take it into our enterprise customer base and and that is the go-to-market portion of this now revenue wise of course the solution is going to be in the market at the end of this year we expect to start seeing small amounts of revenue next calendar year or the second half of FY27 or fiscal FY27.

Thank you. And my second one would be around supply constraints. Between CPUs and memory, which are bigger supply constraints, in your opinion, currently for server deliveries? And then when do you expect the supply constraints to ease?

Do you expect it to ease within this fiscal year or go beyond this fiscal year as well thank you both good questions again so currently i mean look i think the real answer is actually both right now the critical item in the path is the cpus but very quickly you know if you start if the cpu supply situation starts getting better in fact intel has talked about this right during their last earnings call they talked about how they were way behind in terms of meeting their demand and certainly we're seeing some of that right so that's in the critical part right now we also are bringing in more and more AMD skews to market right so that we can actually offer both AMD and Intel to immediately the situation a bit but then very soon right after that you run into memory so the answer is actually both and with respect to timing on when this could get better frankly I think it's unclear at this point I don't think it is very short term I think it's going to be there for a period of time because obviously this is being driven by the massive uptick in AI spending across some of these bigger hyperscaler providers that's causing this big supply issue overall in the industry. And so I do expect it's going to take some time to play out for the supply situation to normalize. And it's hard for me to tell you exactly when that's going to happen. And keep in mind that we are, you know, a step removed from all of this, right? We are indirectly impacted. So it's very hard to predict exactly how quickly, but I do expect that, I mean, obviously the suppliers there, both the CPU for folks as well as the memory folks are working hard to go get more supply online, and this is an industry-wide phenomenon. So I, you know, again, it's hard for me to give you an exact prediction on when this is going to get normalized, but it will get normalized over some period of time here over the next couple of years.

And our next question will be coming from Ben Boland of Cleveland Research Company. Your line is open, Ben.

Thank you. Good afternoon, everyone. I appreciate you taking my questions. Rajiv, I'm curious your thoughts, how you think about the mix of revenue or ARR orders that you're getting from AI inference to genetic opportunities today.

Essentially, how big is it and what type of growth rate do you think you're seeing from that opportunity and then I had a follow-on for Rukmini yeah so Ben first of all it was zero year and a half ago and so clearly you're you're going from very small base and it is still fairly small for us in the scheme of things because we are in the very early innings of enterprise AI adoption really early right our customers today we talked about one of these customers in the MEI region who's you know who's now created the shared GPU platform that they are providing to various departments so we are the use cases today tend to be fairly simple applications simple and such thing applications not multi-agent use cases yet so we are in the very early stages of enterprises building these more sophisticated AI applications that they will consume so for us I mean I look at this and say over the next five ten years there's going to be a whole bunch of new applications that are going to be built in the enterprise existing applications will all start incorporating AI. Workflows are going to change. So there's going to be a whole new set of workloads from our perspective that are, you know, including Gen AI as part of these applications. And so for us, the opportunity is to become the underlying platform to run those applications, manage all the data associated with it. So we are pretty early in the cycle at this point. And enterprise adoption, like I said, is just starting, really. I mean, because most enterprises at this point are still, you know, grappling with AI. They're starting to use it more and more, but they haven't really built a lot of their own custom applications and custom workflows, but they're all starting to do it, and when that happens, I think this will grow. So short answer to your question, it was zero two years ago. It is small right now but growing and growing very nicely, and we have, again, the fact that we now have a broad ecosystem that cuts across NVIDIA and AMD along with, you know, more third-party people coming to the mix here we're very focused in this please come to our April conferencing event where we will talk more about our AI strategy and roadmap but we do expect this to be a good long-term driver for us that's helpful thanks Rajiv Rukmini I'm also interested in your thoughts when when we look at the RPO and booking strength you know obviously the appliance pricing is going higher from these vendors and it's changing by the

week or the month or the whatever how much of what you're seeing right now would you attribute to customers getting in line because they'd rather you know put the PO in today try and get current prices versus assuming the price may be higher at some point in the future how do you how do you think about that yeah Look, we do think that some of our bookings performance, outperformance in Q2, Ben, was tied to that.

It's hard to be very precise and try to quantify that, but we do believe that our bookings in Q2 benefited from some orders being placed, as you say, earlier than originally expected as customers look to get ahead of server price increases or try to ensure access to servers. but it is difficult to quantify.

Thanks for both.

Yeah, thank you, Ben.

And our next question will be coming from Brandon Nispel of KeyBank Capital Markets. Your line is open, Brandon.

Thanks for taking the question. I think just for me, NLR decelerated this quarter, I think we're seeing you called out 107. Could you give us some color in terms of why NLR decelerated, that would be helpful.

Yes.

So the first thing I say is it's important to note that the factors that we outlined last quarter and are talking about this quarter as shifting out the recognition of revenue also impacts ARR and NRR because the dynamics are similar in terms of how we recognize revenue versus when something would show up in ARR and therefore will be also reflected in NRR. So, just important to keep that in mind, Brian, right, because, you know, those dynamics are very similar. Now, in addition, I would say that our NRR in Q2 specifically was also impacted by timing delays. We saw on some renewals in our – with regard in our U.S. Fed business specifically. That was created to some backlog related to the recent government shutdown, and we expect to receive those in Q3. So, that was the timing delay from Q2 into Q3. And so those are sort of the things I'll call other than things we've talked about before, right, in terms of look, our ASP of new logos have become steadily increased over time. And we've also talked about as ARR growth every quarter, the ACV dollars required to offset a point of churn increases even at the same churn percentage. And so that can make it challenging to achieve the same NRR over time.

So the last two I mentioned are ones we've talked about before, but I will call out the first two as being just things to keep in mind as you look at nr great thank you thanks brandon we'll be coming from nahal shakshi of northland capital markets your line is open yeah thank you uh congratulations on the good bookings quarter there uh talking about bookings um based on the color you've provided so far rognini it sounds like cancelable bookings uh While it's still in a single digit of the overall RPO, it is materially more than the total in terms of the year-over-year growth rate. So can you discuss what is behind cancel bookings year-over-year growth being much higher than non-cancelable bookings?

Yeah, hi, Nahal. So cancel bookings, like you said, I think this is again referring to everybody's benefit, But a bookings number that I think folks can calculate based on looking at our revenue in Q2 and adding that to the quarter over quarter change in RPO. And the way RPO is defined for us, like it is for most companies, is only includes orders that are non-cancelable. Now, as I said earlier, we have a small portion, it's in the low single digit percent of our total RPO that is cancelable. It remains in the low single digit percent, but it can move around somewhat, which is why sometimes this starts these year-over-year growth rates because you're looking at a quarter over quarter change in RPO and then we're trying to do a year-over-year calculation in terms of growth rates for bookings. So I would say it moves around a little bit. And why do we even have these cancelable orders? Like I said, internally, you know, we look at them all as bookings because historically these cancelable orders even though they're officially cancelable have very rarely been cancelable and so so yeah there's really nothing else there other than we've had some you know old or partners that have some of those clauses and we're actually working to make sure that those are no longer the case frankly going forward so over time we would expect that cancel the number to go down but it can move around from quarter to quarter because we have some of these from before.

Okay so just to be clear it's basically just quarter a quarter variability in these non in these cancelable bookings but it is two quarters in a row where we are seeing cancelable bookings have a greater growth rate than non-cancelable bookings.

Yeah as I said when you calculate the bookings number by using RPO that is taking the entire bookings and that's taking all of the RPO into account, the TCD bookings growth rate is in the mid-team, which is also what we said in the in the prepared remarks, and there's some variation because what we report out externally to you all, we only include the non-cancellable orders in the RPO.

My other question, which I think is probably more for Rajiv, can you explain, I mean, clearly Nutanix does not need the cash from AMD. Why accept an investment at $36 a share when arguably that's, you know, a very attractive price for AMD and not so attractive for existing Nutanix shareholders?

Yeah, no, that's a good question for sure, right? So our belief is that the equity investment from AMD aligns their interest with Nutanix And they are a very important ecosystem partner for us, you know, if you look at the AI ecosystem, system out there it's built around Nvidia to start with an AMD all right so for us it's really important to to make sure that we are well aligned and both sides want us to succeed and the equity investment from AMD you know makes it very much their interest to see Nutanix succeed the dilution from this clearly we understand there is dilution it is quite small overall if you look at it it's somewhere slightly over 1% I believe but the fact is that this partnership enables Nutanix to become a leader, right, in providing an agent-to-care platform for enterprises and service providers. And together with NVIDIA, I think now we have a complete solution that we can take to market across both of the major players in AI.

That makes sense. Thank you.

Thank you, Nihal. And our next question will be coming from Matt Hedberg of RBC. Your line's open, Matt.

Hey, it's Dan Bergster for Matt Hedberg. Thanks for squeezing us in here but to follow on with another bookings question sounds like you three bookings expectations are higher than previous which is great now with the supply chain challenges can you just help us think through your available to renew second half pipeline on a year-over-year basis and then maybe how that's changed versus assumptions coming into the year yeah so look I think the available to the new pool is largely land and expand it's driven by land and expand bookings that we've made in prior years and so and then the other thing to note on Reynolds is that typically those are not as tied to

hardware requirements as land and expand would be right so a lot of the dynamics we're talking about here with regard to supply chain are really more tied to land and expand rather than to renewals and so yeah I think the available to the new pool again doesn't change based on these as I usually set largely based on land and expand the things that we did in the past and are coming up for renewal in the second half and so that's still the case for the second half in terms of just how that's factored into our forecast thank you thank you and our next question will be coming from Mike Seacost of Needham your

Your line is open, Mike.

Great. Thank you for taking the questions here, guys. I just wanted to come back to this AMD partnership announcement real quickly. And I think it's probably for you, Rajiv, but if I think about how Nutanix has developed or evolved over the past couple of years, the entire product roadmap really ties to providing customer choice, right?

And I know that you're highlighting the expanded AI opportunity here, but is that the number one takeaway we should be thinking about with this this Nutanix powered agentic AI platform and in concert with AMD I guess is what else should we be thinking about in light of this this platform offering yeah I think I covered some of this a bit earlier Mike but there's a couple of points that I want to make right one is there's an AI ecosystem being built and it's really being built around two players right now right Nvidia is the lead by far right and of course, therefore, you know, for you to be successful, you've got to work with the NVIDIA ecosystem on the one side, which we're already doing. The other big player is AMD, right? And so it's very important for us to be able to go work with that AMD ecosystem as well. And at the end of the day, customers, like you said, we're all about offering customers choice, right? A choice of, you know, at every layer in the stack. And AMD is going to be an important player here, and they already are an important player here in this accelerated compute market. And so it's very important from a Nutanix perspective to be able to offer both choices to customers in a consistent way, right? So we provide an AI platform for agentic applications that underlying that could be a customer using NVIDIA-based servers or AMD-based servers, right? And they get similar capabilities at the top level using our software.

So that was the motivation for us to be able to provide the complete ecosystem. and again it impacts sort of the whole picture right there's people who are certified if you look at third-party software the ISP ecosystem there's people who work with Nvidia and there's people who work with AMD right and we want to be benefiting from both sides of that for the follow-up for Rukmini appreciate the shortages out there great to see the margin preservation can you just walk us through how I guess the key investment initiatives this year and how you're actually managing against that just given the reduced revenue profile and it would just be great to see how you're operating against that. And thank you so much.

Yeah, thanks, Mike. So in terms of investments, look, it's consistent with what we've laid out, I think, at the beginning of this fiscal year. We think of this as a huge opportunity out of us. How do we make sure we're investing in a way where we're directing investments to where we see a clear return? So on the go-to-market side, it's around making sure we have the appropriate coverage around the world where we see the opportunity. It might be in areas like portfolio specialists, for example, where we think there's an opportunity to sell more of our portfolio across our customer base. So it's areas like that that we're investing in, Mike, in the go-to-market front. And then there's also some investments in R&D as we continue to innovate across all the things we've talked about here, right, in terms of Kubernetes platform, our AI platform, supporting external storage, et cetera. So a lot of important innovation initiatives as well in R&D that we want to make sure we are continuing to fund. So if you look at the overall operating margin guidance that we've maintained here, we are getting a little more contract expense from partners than we expected at the beginning of the year and some lower commissions as well, given the revenues are getting shifted out of the year. So we haven't really made any changes to our investment plans for fiscal year 26. some ins and outs, and that makes us feel comfortable with our overall full year off margin guide of 21 to 22 percent.

Thank you again. Good luck, guys.

Thank you, Mike.

And this concludes today's program. Thank you for participating. You may now disconnect.

Thank you all.