Nutanix revenue increases, driven by hybrid cloud adoption

For the first time in three years, Nutanix generated positive free cash flow, largely thanks to growing adoption of hybrid, multi-cloud models and digital transformation projects.

Nutanix, Inc. reported a 19% increase in revenue for its second fiscal quarter to $413.1 million compared to $346.4 million in the year-ago quarter, thanks to substantial gains of 37% and 55% in its Annual Contract Value (ACV) billings and Annual Recurring Revenue (ARR) respectively.

The company closed the quarter with cash and short-term investments totaling $1.29 billion.

At its quarterly meeting with financial analysts on Wednesday, Nutanix attributed the increase in revenue largely to the growing industry adoption of hybrid multi-cloud models, the launch of its own hybrid multi-cloud portfolio and the greater-than-expected subscription renewals among existing users.

Rajiv Ramaswami

"The performance in the quarter was primarily due to stronger-than-expected renewables," said Rajiv Ramaswami, president and CEO of Nutanix, in an interview with TechTarget. "Most of the business results came in as expected, but the variables came in much higher than we had anticipated. That's where we outperformed by quite a bit."

Another driver of growth, Ramaswami added, is the increasing investments in digital transformation projects. This, in turn, further encouraged users to renew their existing contracts.

"Digital transformation projects are very much alive and doing well," Ramaswami said. "This is largely helping us upsell existing customers and attract new ones. We added 700 new [companies] in this past quarter alone."

Another contributor to revenue growth in the quarter is Nutanix's partnership with Red Hat, Ramaswami said. Working together, the two companies have attracted a number of new user organizations, including a large European-based energy service provider and a shipping container company, both using OpenShift, and a large North American retailer running Red Hat Enterprise Linux on the Nutanix Cloud Platform.

"Right now, we have a lot of upward momentum with Red Hat as is evidenced by some of the customer wins across different categories," Ramaswami said.

One analyst said the expansion of Nutanix's partner network, including Red Hat, Citrix and OEM vendors such as HPE and Dell Technologies, Inc., has proved to be strategically beneficial to Nutanix. It has better positioned the company to capitalize on new market segments.

"The Red Hat partnership allows for migration from CentOS and consolidating workloads on a modernized HCI platform while leveraging OpenShift," said Paul Nashawaty, senior analyst with Enterprise Strategy Group. "These new areas expand orchestration for AHV [hypervisor] and the overall Nutanix portfolio."

The newly streamlined version of Nutanix Cloud Platform, released in February, offers users a more consistent operating model across public, private and hybrid clouds. The new version has simpler packaging, metering and pricing models to reduce the complexity involved with implementing a range of hybrid cloud services across different environments.

Enterprise Strategy Group is a division of TechTarget.

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.