UPDATED 20:39 EDT / NOVEMBER 27 2018

INFRA

Nutanix posts strong subscription revenue growth and investors cheer

Data center infrastructure company Nutanix Inc. delighted investors Tuesday evening as it turned in strong fiscal first-quarter results that show how its shift towards a subscription business model is gathering speed.

Nutanix posted a first-quarter loss before certain costs such as stock compensation of 13 cents a share on revenue of $313.3 million. That easily bested Wall Street’s forecast of a 27-cent loss on revenue of $305.26 million.

Even more encouraging was the company’s subscription revenue, which now accounts for more than a third of its total sales. Officials said this was up 104 percent in the quarter compared to the same period one year ago, topping $127 million. That’s a positive sign for the company, which like many Silicon Valley information technology firms has been grappling with an ongoing transition away from its traditional software license business model.

Investors in Nutanix have been concerned about the slow pace of that transition in recent quarters, but today’s results seem to have ushered in a lot more optimism, with the company’s stock rising more than 8 percent in after-hours trading.

“When a company’s most relevant revenue stream grows by more than 50 percent, that’s a sign of a growing business and both customers and investors take note,” said Holger Mueller, principal analyst and vice president at Constellation Research Inc. “Transitioning to a recurring subscription revenue model is a positive sign and that’s the journey Nutanix is on. Now it needs to keep going in that direction and maybe even show it can pick up more speed.”

And picking up speed is indeed the aim for Nutanix, if its Chief Executive Officer Dheeraj Pandey’s comments are to be believed.

“Our results this quarter prove that our core business continues to grow strongly and put us on a solid path to meet our goal of at least $3 billion in software and support billings by 2021,” the CEO said in a statement.

Nutanix, which primarily sells hyperconverged infrastructure software for data centers that’s used to manage networks, storage and servers, said its software and support revenue topped $280 million, up 44 percent year-over-year. Software and support billings came in at $383.6 million.

NutanixEarnings-19Q1

The company made a number of product announcements in the quarter just gone, notably making its Beam multicloud governance and management software available for on-premises data centers. It also announced the general availability of a new disaster recovery service called Xi Leap, plus new Xi Cloud services that are said to create a “more unified fabric” across different cloud environments. The idea is to make it easier for its customers to integrate different cloud services into multicloud deployments.

The early signs for Nutanix’s second quarter were encouraging, too. Officials said they’re expecting a loss before certain costs such as stock compensation of 25 cents per share on revenue of $325 million to $335 million. Wall Street analysts had forecast a loss of 26 cents per share on revenue of $326 million.

Photo: Nutanix

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