Nutanix, Inc. (NTNX) June 2, 2026 Conference Transcript

Good afternoon, everyone. Thank you for joining us here on day one of Bank of America's Global Tech Conference. I'm Wamsi Mohan, I cover the IT hardware space here. I am delighted to welcome Nutanix again. Thank you so much for being here. We have CEO Rajiv Ramaswamy. We also have CFO Rukmini Sivaraman. Thank you both for joining us today over here.

Thank you for hosting us.

Thank you, Wamsi. Glad to be here.

Yeah, no, great to see you both again. So, you know, I guess to kick this off, Rajiv, when you think about the changes that are happening across the enterprise landscape, AI has obviously dominated the headlines. So for the investor base here, maybe it'll be helpful to contextualize, like, what is Nutanix's place within this domain of AI growth?

So customers need to run AI inferencing and AI agents. And as we've all seen, the market is transitioning from a focus on training these large models to inferencing and delegating with agents. So these applications, there's a whole host of new AI agentic applications that are being built. And these applications are going to run in multiple locations. You will have agents sitting in an enterprise desktop in your laptops that will be accessing inferencing running in different locations. Some of this inferencing will actually happen on GPU clusters, CPU-GPU clusters inside data centers. Some of them will happen in Neo Clouds, and some of them will happen in public clouds and in Frontier models. Nutanix is a platform. We provide a complete stack for customers to run these agentic applications, build and run these agentic applications. Those applications, for us, in our sweet spots tend to be when they're running them on-prem and when they're running them in NeoClouds. And also providing cost and governance and security for people accessing all of these models and inferencing. Because when you're sitting in an enterprise, you care a lot about managing your token costs. You care a lot about which model to use for what use cases. How much access, who and how much access is provided to these models. So as part of our stack, we provide this gateway capability to enable enterprises to consume all of these models and inferencing wherever they'd like to, with the appropriate visibility, security, governance, et cetera. And at the same time, we deliver the stack for inferencing.

So which inning would you say we're in in terms of adoption? What are you seeing in your customer conversation?

Yeah, the market is moving very rapidly. Today, what we see is simple inferencing use cases being deployed in enterprise. We see things like document search, summarization analysis, proprietary applications. For example, we had a bank build a custom application that used a simple open source model to, you know, they record all the conversations between their sellers and clients, and then the model looks for patterns of noncompliance and summarizes those conversations. That's proprietary data, regulatory reasons why it has to be kept on-prem, and so they run a dedicated cluster to do that. We have a large government agency using this for investigating financial fraud. Again, similar proprietary data running on-prem. Those are the initial use cases we're seeing. But now the use cases are starting to broaden out with these agentic use cases starting to emerge very early days. But again, I think for Nutanix as a company, we talked at our investor day as to how I think this whole AI-inferencing wave, we are going to be a beneficiary of that from providing a platform by providing a platform that can run and harness all of these AI inferencing applications.

Okay, that's helpful. Maybe just to talk a little bit about the competitive landscape that you see out there when it comes to your longer-term sort of outlook. Who are you seeing? What is your outlook around potential for share gains? Obviously, VMware, you kind of have an opportunity there, but more broadly speaking, where else are you seeing competitive, whether it be with IBM, whether it be with actual cloud players too?

Yeah, I think the interesting thing is I think the infrastructure providers, it's the same bunch of providers who are providing solutions today and are also moving to provide infrastructure for these AI applications we just talked about. So we have, on the other hand, we got Broadcom, who's very well established with VMware in these accounts, in these customers, but most customers are looking to migrate away from them over time. And, in fact, there's gotten data out there that says the majority, vast majority of customers will not have VMware long term. Now, it's going to be a long multi-year migration, but we are adding, you know, somewhere in the range of, you know, last quarter we added about 730 customers. We've been adding in that range or more for the last several quarters, and most of these customers are coming from VMware. Where do they go to? Well, we compete against IBM Red Hat, really, the Red Hat portion of IBM, largely. Public Cloud would be the other big set. And the thing that if you look at Gartner's magic quadrant, what they call distributed hybrid infrastructure, which is really hybrid cloud, we are in the leader quadrant along with some of these big players. We have the smallest player among all these big giants, and we've been able to compete pretty effectively and hold that leadership position for a long time, partly because our products are easy to use, very simple, provide very high degrees of customer satisfaction, customer NPS of 90. And so what we're doing as a platform company from a competitive perspective, again, is today, of course, the bulk of our market is on virtualized traditional applications, moving to modern containerized Kubernetes applications, and then to these agentic AI and inferencing applications. And we are evolving our platform to keep pace with that migration of what the customers want. And also these applications are now running not just on-prem, but in the public clouds, in NeoCloud, everywhere, right? So that's our philosophy. And we compete against these same folks now. There's, again, differences at the next level. I mean, the public cloud folks are mostly focused on running everything in the public cloud.

We are very hybrid.

Broadcom, of course, is mostly focused on private cloud and holding on to the customers they have. Red Hat is perhaps somewhat similar to us. Their virtualization platform, we believe we have a very strong virtualization platform that's geared for mission-critical applications. So we feel good about the opportunities and the competitive positioning that we have as a company.

Well, you know, I think, like, the VMware story in terms of potential share gains, you guys have been executing on that path. When you think about the, and you mentioned, I think, Rajiv, that this can be a long sort of tail here of customers over time. What are some of the things that, as customers are looking to migrate, like I'm sure there were some who were doing just virtualization, which could move more easily, but further up the stack becomes harder and harder to do it. Where are we in that complexity of migration? What are some of the steps that you've taken to ease that process? And what is VMware doing competitively that you think might change the trajectory?

Yeah, so to put this in perspective, today we have about 31,000 customers. There's over 200,000 customers or so on VMware. So a lot of migration is still to happen. And we, like I said, adding 700 to 1,000 customers perhaps every quarter. So with these customers, most of these customers today, 80% of the base, we talked about this at our Invest today, are running simple virtualization connected to external storage. And historically, what we were doing was to migrate them over from that use case, what they were deploying, to a complete HCI platform that we provide that includes compute and storage. Much simplified, lower cost of ownership in the long term. Now, we have evolved to become much more of a broader platform company today, especially in the light of what customers have today with the VMware situation, where we are now able to actually just replay the software on servers, the legacy hypervisors, with our stack, at the same time allowing them to keep their existing servers, keep their existing storage arrays, whether it be Dell, whether it be Pure, and whether it be NetApp. So that allows customers to do more in-place migrations without having to buy new hardware as well. And from our perspective, we give our customers choice. If you'd like to use the storage that you like, Use us for the computer platform, the networking capabilities we provide, operations and security capabilities. But from a storage perspective, either use us or use any of our partners.

Okay. And any competitive-like response that you've seen from VMware?

Yeah, of course. VMware is trying. Their focus is on their big customers, and they're doing everything they can to keep those big customers that have very complex deployments. And from that perspective, the complexity goes up as you deploy more and more of the VMware solutions. And once you deploy the networking solution, the vSAN solution, all of those, they get more embedded. But most of the migration is actually fully automated. We have automated tooling to migrate these customers over fully. It's more in the planning of the migration because once the planning is done, it's like a factory. You can keep migrating, automating these migrations. We showed at our recent conference how a lot of this can be done even without touching the data that they have. they can retain the data that they have and just replace software on servers to get the migration done very, very quickly and efficiently.

Okay, that's super interesting. Maybe, you know, to touch on the fact that you said, you know, you moved from just being sort of a core HCI player to much more of a platform. If we look out five years from now, how does that mix of ARR look across the broader portfolio?

Look, I think the, I mean, just in terms of the migration there, in terms of what we have done, We started out being the HCI leader, pioneer HCI leader in the market, still are the HCI leader in the market. We then expanded into a hybrid cloud approach where we now support the platform on AWS, Google, Azure, as well as a number of other service providers who can deploy our solution as well. We also then added support for external storage. So now we provide a platform that has choice. You can use our storage or external storage. You can run them on-prem or you can run them in the public cloud. And then two latest additions to our portfolio are a full Kubernetes stack to run modern containerized applications. Again, running them anywhere you'd like. And the last bit and the newest bit of our portfolio is the platform to run agentic applications and inferencing applications. So we've broadened our platform to address a wide range of critical use cases for our enterprise customers. Okay.

That's helpful. Maybe, I think maybe even Rukmini can chime in on this one. but just sort of can you talk a little bit about the visibility in the business as you look at the predictability and sort of the comfort that you have in looking at the revenue stream ahead? Maybe you can address some of that, Rukmini.

Yeah, so one of the things I would say, if you look back at the history of the company, I think we have a lot more visibility now than we did several years ago because now we have a term-based subscription business model renewals coming in, et cetera. And maybe what's been more uncertain more recently, Ramzi, as you know, and we've talked about these in our earnings calls and so on, is the fact that customers, when they are choosing to deploy Nutanix software, need servers, generally speaking, and we'll talk about when they don't need that, but generally they need servers to run our software. And that, as we all know, because of supply chain challenges in the industry, have been harder to come by, more expensive. And so those are now factors as we think about when customers are ready to not just buy and make a commitment to Nutanix, but when they can actually use our licenses. So what's that meant for what that's meant for this fiscal year, for example, is that we've had really strong underlying bookings growth. For example, in the most recent quarter, we talked about TCB bookings growth being 20 plus percent. But it's taking longer to show up in revenue because we can only recognize revenue when customers are deploying these licenses. So feeling good about the underlying demand and booking strength, renewal timing is getting shifted. Now, when you think about next fiscal year, so we are currently reported Q4, we're currently in Q3, we're in our Q4 right now. So when we start our new fiscal year on August 1st, as we think about planning for that, I would say there's probably three things, at least, that we think of as building blocks. The first one is when we finish our Q4, we'll know what our CRPO is, so current remaining performance obligations, which by definition gets recognized in 12 months. So that's coming through both from the balance sheet from deferred and from backlog. The second piece that we have a great degree of confidence in is our renewal stream. So we know how much is coming up for renewal and generally a good degree of confidence that those will come through. And then the remaining piece, which is actually quite meaningful, is everything incremental. So new customers on the platform are expanding with existing customers. And that's the piece that we have the sort of less visibility on because of some of the dynamics I talked about with regard to, well, what will customer behavior be in the light of server prices going up and in the fact that it's taking them longer from when they actually place an order for server to when they get it, regardless of the fact that our software can be deployed, you know, as soon as they have it. So those are sort of the building blocks. The other piece I would say is duration of contracts, which can also have an impact on our, you know, into our revenue visibility and what it'll do. ARR not so much because ARR is agnostic of duration. So those are all the pieces. Now, as Rajiv has alluded to, there are some things that we are doing to mitigate some of that. For example, external storage support, which we haven't had historically, but now we support Dell PowerFlex's storage platform. We support pure storage as of December, and we have more coming online. You know, for example, NetApp is coming online, Lenovo, Dell Power Store, etc. And so what that allows customers to do is they don't have to actually go purchase a server. They can just use existing hardware, which helps. We don't think it fully mitigates some of the headwinds we talked about, but it certainly helps because that is really small today and we expect it to grow nicely going into 27 and beyond. Same with the ability to run our software on public cloud as Rajiv talked about. So some puts and takes there, Wamsi, but I think the piece that we're spending a lot of time thinking about and planning for that we have less visibility into is this dynamic around land and expand and what does the supply chain dynamic mean for that piece?

Yeah, yeah I mean I've been trying for the last one month to say ever pure instead of pure storage well so maybe just on your point here on on On the server side, right, like we've had some of these large server OEMs report over the last, you know, couple of weeks and their industry standard server revenue numbers are through the roof. I mean, growing like 90 percent. A lot of that is ASP driven, not necessarily unit driven. But I guess just, you know, what we're hearing from the supply chain and from these companies reporting is that the unit, there is unit growth that's coming over here in the next several like quarters. And so I'm wondering, as you look at the business, if, let's say, that server availability got better in some way because customers are willing to, they feel like we need the compute capacity now and we just need to deploy this, how does that flow in for you relative to the way that you sort of described about some of the uncertainty associated with server pricing?

I'd say our land and expand business is fairly closely coupled to core count.

Okay.

We price on a unit core basis. And the more cores that get sold into the enterprise, the more likelihood our market expansion, right? So from that perspective, yes. I mean, clearly the hardware folks have been benefiting from the fact that they can pass on the higher cost on memory and even CPUs to their customers. And so the ASPs, as you said, have been going up quite a bit. We're not so sure that units have been going up that much, but if they do go up, that's great. And by the way, the other thing I would say is, even aside from the units, core count in processors is going up. So as long as the core count goes up, if you have the same number of units, you will likely have more cores as well going forward, so that also helps.

Okay. Okay. That's helpful. When you think about, you know, enterprises, is looking at, you know, there's finite budgets. There's worry that sort of, you know, with the spend that's going across on certain categories going up quite significantly. Are you seeing any change in the purchasing behavior as far as, you know, your conversations with your customers? And are you seeing, I mean, it sounds to me more like, you know, there's lack of availability of units that might be actually causing later start dates as opposed to not. But would you say that there is a sense of urgency also, on the other hand, to pull forward anything from an implementation standpoint or the urgency to bring forward things as opposed to pushing out?

So I'd say customers are acutely aware of the supply chain. So are our sellers. This was not a factor before at all, right? It was something that we never worried about. And now we worry about it. The customers worry about it a lot, too. So it's a factor in every deal. Now, what's changing? Well, the first thing is customers are now looking far and wide to see who's got the best prices and their lead times. In the past, they just used to have their regular vendors that they would go to. And now it's really changed. That part of it has changed quite a bit. In some cases, they're looking to see if they can defer purchases for some period of time. and we have seen some of that happen, in which case deals do get delayed in that scenario, right? So that's the second thing that we see. And the third thing they're also looking for is can they reuse their existing hardware while still modernizing and accomplishing their goals or migrating away from VMware, for example. So more acute focus on that for sure. All vehicles to do that, including moving to the public cloud. And we've seen, therefore, external storage picking up nicely, Public cloud also picking up nicely because they're not dependent on the server availability on-prem to make that happen. So those are all, I think, the factors that we see from the customer front, and it comes down to both pricing and lead times. Lead times typically will lead to more deferral of revenue for us. Now, in terms of the actual sort of behavior that we've seen, we certainly did see some pull-ins in Q2, our January quarter, where customers were afraid of prices going up and they didn't place orders ahead of time to try and catch the prices before they went up. And certainly that worked out very well for them because prices did go up a lot in Q3. And on hardware, I mean, just to be clear. And so now in Q3, we didn't see as much of that because I think prices had already been elevated, right? So we haven't seen a whole lot of people rush to get more orders in. So we'll have to see how this goes. I think as the pricing changes, I think so will customer behavior. Okay.

Okay. That's helpful context. Maybe just talking about like large deals, right? Like these deal sizes have gotten larger for you over time. Can you give us some sense of how that's like where we are with like, you know, deal sizes, maybe contract duration, you know, what are the trends that you're seeing versus maybe a year ago in terms of this and the outlook sort of going forward?

Yeah. So I think we gave you some of these at our investor day in April. So we'd give you a view on like million plus ARR customers, for example, and how that's grown over time. One other data point we provided was if you think about new customers coming onto our platform, the initial transaction size or average ACV has also grown for those folks. And that we said was about a 16% CAGR over the last couple of years. So yes, we have seen that sort of increase in our efforts to go up market and focus on areas and focus our reps on where we think the largest opportunities are. So that continues to be a focus. Now, to your point on contract duration, we did see in the April quarter that we reported that duration was higher. It was 3.4 years on average across land expand and renewal, which is the highest it's been in a while. And that was higher than our expectation as well and what I would say is that it's more of an instant for now than a pattern because it's the first quarter we've seen this high of a number and there were a few deals that were of larger size and had a longer duration and so that contributed to that being to that larger contract duration was both across renewals and land and expand is what we saw the higher duration so yeah I think it's something we're watching closely I think it's too early to declare that it's a trend but something we continue to watch so so that was something we saw and it does i think it's important to note that that does impact some of the other things i talked about earlier in terms of rpo revenue etc so that's something we're watching as we think about planning for 27 as well what would be a best guess as to why that is happening if you were to but we don't know if it's a trend or not yet but why do you think it's i'll give you some anecdotal maybe you know reasons why customers have shared with us so one is they are looking for certainty in terms of just pricing their own planning so they know that they have if they sign a five-year deal rather than a three or three-year deal then they know that that's they have certainty for five years instead of three yeah and just i think given what the competition has done in many cases where they've sort of been these unexpected surprises and so on customers are seeking more of that comfort around, I know I'm set for five instead of three in my example. So anecdotally, we've heard that, Wamsi, but again, I wouldn't call that a trend just yet.

Would you say that that's like the larger cohort of like customers coming over from VMware are committing to that, or wouldn't that be a trend that you would call that?

Well, I'd say, look, in general, we know that, you know, practically all of our new logos have VMware in some way, shape, or form, and that's been the case for a long time, right, even before their acquisition. So yes, is that a factor? I think yes, it is. The only other thing I would add is on the renewal side, for example, one of the things we talked about in our investor day where when we were talking about our payment options for customers, as you know, historically, our default option and even today, our default option is that we collect multiple years of cash up front from customers because many of them are paying for us out of their CapEx budgets. And so they have that outlay. However, in certain circumstances, we might choose to provide some flexibility for annual payments, for example. And so in some cases, that can lead to a customer agreeing to, you know, or willing to do sort of a longer duration because they have flexibility on paying for it on a normal basis.

How recently has that flexibility been instituted? Has it been pretty typical or is it atypical?

Typically, it's still a very small minority of what we do. And we've talked about, I think, over the last couple of years, and I think we're an investor to be sort of laid out sort of our view of how we expect to manage that. And that's one of the reasons, by the way, we sort of said that as you think about fiscal year 29, which is the sort of year we gave at Investor Day, if you look at free cash flow margins, those from a margin percent standpoint, we expect to remain more or less the same, you know, high 20s percent. Dollars will grow as revenue grows, of course. And we said leverage in the model can be more easily observed on the operating margin line. And the free cash flow margin staying at the same, more or less the same percent is partly because of this, where we might provide more flexibility over time, but want to manage it within that framework. work.

It seems like, you know, you clearly have been overachieving on your operating margin lines and it'd be, maybe you can share some perspective about, as you think about your planned revenue growth, like how should we be thinking about OPEX growth and incremental leverage? Because the incremental margins are quite strong. And I'm just wondering if like, you know, we're not giving you enough credit for incremental margin.

I'm always happy to take more credit. But I will say, I think that if you look at where we are today, so for the full year, obviously, we're at Q4, so we have one more quarter to go. For the full year, we guided to about 22.5% on operating margin. And we said, again, in April at our investor day, for fiscal year 29, we said mid to high 20s. And we also know that if you look at, generally, software companies at scale, many are even higher than that. So we know that we have really room to improve that margin over time. And we've also said, I think repeatedly, that growth is our number one priority. We've had a large market. Rajiv has talked about how we've expanded our offerings to go and address, to open up new markets and address those markets. So growth remains the number one priority. So if we can go and drive that extra point of growth, we want to make sure we're investing to go do that. So that's sort of the first thing I'll say. Then, in addition to that, we want to drive that growth in an efficient way. And so that's where I think this combination of how can we continue to drive all the growth that we can possibly go and capture, but do so efficiently. So then the question I think, Amzi, where you might ask is, well, okay, now you're about, you've guided to 20 and a half percent. This year, mid to high 20s and 20, what happens in the middle? And so that's the, I think that's, as you think about 27 planning, those are the discussions we're having internally. And I think the only other dynamic I'll point out in the near term is that as we've talked about, timing of revenue is a little more variable than we have seen historically and that we have to factor that in. As we think about the P&L, obviously, it starts with the revenue line. So look, our intent is to grow operating expenses slower than revenue to make sure that we're doing so in a thoughtful way. We laid out all the drivers at our investor day as well. And I think in the near term, it's this dynamic of, we've talked about how bookings growth have been strong. We want to make sure we're driving that and continue to invest thoughtfully where we can do so while continuing to improve margins during that time period.

I know you addressed this in different forums maybe, but I'll ask this. As you think about the way that you used to guide sort of your long term versus the way that you guided your long term, you've typically given a pathway in some ways. And this time we didn't have a pathway to fiscal 29. So, you know, might be helpful to just hear again, like, what is the rationale behind sort of guiding the way that you guided this time around?

Yes, I think it's a fair question. So in the past, we've given CAGRs, for example, and or dollar numbers as well. And we did neither of those this time. We gave you sort of a point in time, fiscal year 29, and we gave a growth rate in that year. Now, if you think about when we announced our investor day, it was in the fall of last year, before any of these supply chain challenges were upon us. And we were, you know, it had been more than two years since our last investor day. So we were certainly due to do one. But what's happened is in the near term, again, the timing of our revenue and ARR is being impacted by this, some of these supply chain dynamics while we continue to drive underlying demand. And so that was the main reason why we sort of said in fiscal year 29, we're assuming a normalized environment with regard to supply chain and just a more normal macro environment. We think that that's the underlying strength of the business, the mid to high teens growth that we put out, Wamsi, but it was harder for us to give something like a CAGR or a dollar amount because of this near term lack of visibility.

Is the, and sorry to push you a little bit, like, is fiscal 29, like, why is that the right time frame to think about normalization? So what do you truly believe? Or is that sort of, you know, how to be through you?

I think the point was, I mean, it was a point in time, right? But the point was to talk about what are our fundamental growth drivers? And we are excited as a company in terms of what we can offer, right? To be this platform of choice for all our enterprise customers who are migrating from VMware to going to be the platform for AI inferencing and agentic applications. So there's a rich set of growth opportunities in front of us. There's a growing and broad ecosystem forming around us with all the major players partnering with us. And the point was at Invest Today, we wanted to provide what would that look like in a normalized environment. And we just picked FAT19 because we thought that would be a normalized environment. If it were normalized today, we'd probably say, hey, we can do that now, right? The mid to high teens revenue and ARR growth on a sustainable basis with continuing leverage in the operating income line. That's what I would look at what we could do at scale in a normalized environment. And I think we are well positioned to do that. Now, in the near term, we couldn't give you much because of what's happening with the supply chain.

But the long-term prognosis is what we wanted to share with you all. Yeah. No, that makes a lot of sense. I know we're almost out of time. 30 minutes is just too less to really dig in by a lot. But maybe, Rajiv, just to close out, Like, you know, what should investors be most excited about over here, right? Like, I mean, barring sort of the supply chain uncertainty, looks like you've built a lot more capabilities. You have a lot more partnerships coming online. We'd love to hear from you what people should be excited about.

Nutanix has really expanded from being a HCI pioneer to a multi-cloud platform that can serve the needs for critical needs, I should say, for enterprise customers as they move from traditional legacy applications to a modern world of AI. and running everywhere, running on premises and public clouds and service providers and neoclouds, we can be that platform of choice for the enterprise. Our track record over the last several years has been delivering consistent growth, growing profitability, while at the same time delivering very high degrees of customer satisfaction. To this day, our customer net promoter score remains at 90, and that's very unique for a company in this industry. We want to keep it that way, and I think as long as we keep doing this, We will continue to acquire customers. We will continue to have happy customers, see a lot of expansion, and continue to grow our top line and bottom line.

Thank you so much, Rajiv. Really appreciate it. Thank you, Rukmini. Thanks for being here.

Thank you very much. Thank you, Bob.