Rise in Nutanix revenue driven by subscription renewals

Driven largely by the growth of its subscription business, Nutanix Inc. reported a 15% jump in revenue to $433.6 million for its 2023 first fiscal quarter. The company also reported an increase in annual recurring revenue to $1.28 billion for the quarter.

The company experienced a 27% year-over-year rise in its annual contract value billings to $231.9 million, which is the total annualized value of a contract excluding revenues related to hardware and services. Also, Nutanix achieved positive quarterly non-generally accepted accounting principles income for the first time.

"Our growing base of renewable [subscriptions] has been our anchor, despite the uncertain macro environment we've been working in," said Rajiv Ramaswami, president and CEO of Nutanix, in an interview with TechTarget Editorial. "The renewal part of the business remains relatively robust because customers continue using our products for mission-critical applications."

Subscription renewals are important to Nutanix because it assures future growth ... So if Nutanix is looking to potentially get acquired, they want to assure the investment community that revenue stream is good for the long term.

Paul Nashawaty, a senior analyst at TechTarget's Enterprise Strategy Group, said, "Subscription renewals are important to Nutanix because it assures future growth and is better than a perpetual license where you are one and done. So if Nutanix is looking to potentially get acquired, they want to assure the investment community that revenue stream is good for the long term."

Another contributing factor to revenue growth is the deepening cloud partnerships Nutanix has formed the past couple of years, most notably with Microsoft and AWS. What continues to appeal to users, according to Ramaswami, is the ability to run workloads across Microsoft Azure and AWS cloud platforms using Nutanix services.

"They like the ability to shift workloads running on their private clouds and the public clouds of the largest cloud providers using a consistent set of governance and data services we provide," Ramaswami said. "And they can do it without the expense and time of refactoring their workloads."

Using its own tools to allow users to manage workloads across multiple clouds can reduce complexity as well as costs, Nashawaty said.

"This approach gives users a single interface to view their entire ecosystem," he said. "It also allows for skills within an organization to be minimized. You don't need a variety of experts to handle different platforms. Our recent research among 400 organizations shows 67% are looking to hire IT generalists, not specialists."

The company also recently added support for AWS' version of Kubernetes to go along with the support offered for other container platforms, including Red Hat's OpenShift and Google's Anthos.

Finally, a number of VMware users have reached out to Nutanix recently to inquire about products and services, driven by concerns surrounding the acquisition of VMware by Broadcom. The purchase is expected to be finalized in fall 2023.

Rajiv Ramaswami

"I've had conversations with [VMware users] running mission-critical applications on VMware, and they are concerned about things like future pricing, support and reduced innovation, and are looking at contingency plans," Ramaswami said. "This could open up opportunities for us, but it won't be something that happens in this fiscal year."

When asked about the rumors surfacing earlier this year about Nutanix considering going private via a deal with Bain Capital, the company's largest investor, or being acquired by a large cloud provider, Ramaswami declined to comment.

In other financial results, Nutanix reported that its annual recurring revenues were $1.28 billion, a 34% increase compared with a year ago. It ended the first fiscal quarter of 2023 with a free cash flow of $45.8 million. Nutanix posted a net loss of $99.1 million, although that figure represented an improvement over the $419.9 million loss it reported in its first fiscal quarter last year.

As Editor at Large with TechTarget's News Group, Ed Scannell is responsible for writing and reporting breaking news, news analysis and features focused on technology issues and trends affecting corporate IT professionals.