Storage infrastructure giant Nutanix Inc. reported solid second-quarter financial results today, and its stock was trading higher in after-hours trading as its revenue forecast for fiscal 2024 topped Wall Street’s expectations.

The company reported an encouraging second-quarter profit of $32.8 million, improving on the loss of $70.8 million it delivered in the same period one year earlier. Earnings before certain costs such as stock compensation came to 46 cents per share, easily beating the analyst consensus estimate of 29 cents per share. Meanwhile, its revenue rose 16% from a year earlier to $565.2 million, beating the Street’s forecast of $551.8 million by some distance.

Nutanix President and Chief Executive Rajiv Ramaswami (pictured) put the strong performance down to the company’s disciplined execution amid a macroeconomic backdrop that remains uncertain, if somewhat more stable than before. “We continue to remain focused on being a long-term strategic and innovative partner to our customers as they look to operate in a hybrid multicloud world,” he said.

The company is a pioneer of so-called software-defined hyperconverged infrastructure or HCI, offering full-stack hardware that integrates compute, storage and networking components into a single appliance or cloud service. Although it made its name selling physical hardware, these days it has reinvented itself as a cloud infrastructure provider, while putting more focus on its hyperconvergence software that can run on third-party servers and systems.

Annual contract value, or the total annualized value of a contract outside of professional services and hardware, rose 23% from a year earlier to $329.5 million, while annual recurring revenue, defined as the sum of ACV for all non-life-of-device contracts currently in effect, was $1.74 billion, up 26%.

Steve McDowell of NAND Research hailed the company’s “great quarter,” saying that it’s benefiting from the disruption at its rival VMware Inc., while also generating a lot of organic growth of its own. The uncertainly that has followed VMware’s multi-billion dollar acquisition by Broadcom Inc. has resulted in dozens of customers jumping ship to look for alternatives, and Nutanix is its primary competitor, the analyst explained. However, he pointed out that if you zoom in on Nutanix’s customer growth, you don’t see any sharp spikes over the last year, which suggests that its growth is not all VMware-related.

“Nutanix has seen consistent growth for the past dozen quarters,” McDowell explained. “It’s enjoying success after a successful transition to a subscription-based business, with its ARR up more than 30% year-over-year, and that’s exactly what you want to see.”

Looking to the third quarter, Nutanix said it anticipates revenue in the region of $510 million to $520 million, the midpoint of which is well ahead of Wall Street’s target of $510 million.

The full-year picture also looks good, with Nutanix forecasting sales of between $2.12 billion and $2.15 billion, ahead of the $2.12 billion analyst estimate.

McDowell said Nutanix’s guidance is likely somewhat cautious, as the real uptick stemming from Broadcom’s decision to alter VMware’s pricing and product bundling is yet to come. “As VMware licenses expire, I expect many customers will be taking a closer look at where they’re spending those dollars,” the analyst said. “That’s going to stretch out for the next three years, as VMware licenses tend to be three- to five year commitments.”

In any case, even if Nutanix’s guidance was somewhat cautious, it was more than enough to satisfy investors, as its stock rose more than 3% in the extended trading session, adding to a gain of just over 1% earlier in the day.

Photo: SiliconANGLE