With its stock down more than 20% this morning following a disappointing outlook issued during yesterday’s earnings call, Nutanix Inc. ad its Chief Executive Rajiv Ramaswami maintained the sales slowdown the company is seeing is temporary and several large contracts currently in negotiation will boost the Nutanix’s fortunes in the near term.

In a briefing with journalists following Nutanix’s third-quarter earnings announcement, Ramaswami (pictured) said Wall Street’s negative reaction overlooked the company’s positive news. That includes 24% annual recurring revenue growth and 17% growth in quarterly revenue to $524.6 million, which was well ahead of analyst consensus estimates. Annual contract value billings rose 20% to $288.9 million, also beating estimates.

Competitive pressure

Ramaswami acknowledged that closing cycles for new deals are elongating. “Our renewals business has been performing very well, but new business is tracking below expectations,” he said. Part of the reason is that Broadcom Inc., whose VMware subsidiary competes with Nutanix, has become more aggressive in attempting to retain VMware customers who are on edge about the virtualization giant’s future.

“The competitive environment is changing,” Ramaswami said. “Broadcom has made a lot of changes, and when they’re faced with losing large customers, they’re getting more aggressive. We’ve seen dynamic changes in the competitive environment.”

Nevertheless, the CEO said he expects VMware defectors to ultimately deliver a “multiyear tailwind” for Nutanix and that his company is aggressively pursuing them with free migration services, heavy investments in its channel network and expanded original equipment manufacturer partnerships. “We’re seeing a lot of inbounds; it takes time to close them,” he said.

Ramaswami cited recent partnerships with Cisco Systems Inc. and Dell Technologies Inc., which have those companies selling Nutanix’s hybrid cloud software on their infrastructure, as evidence of the company’s momentum. However, he said customers are being cautious about purchasing decisions. “We’re seeing signature and approval levels go up a notch to the CFO or CEO,” he said.

Hybrid trend

The CEO said long-term trends in cloud computing and artificial intelligence continue to favor Nutanix. In particular, companies are rapidly adopting software containers and the Kubernetes orchestrator for new applications and deploying across hybrid infrastructure. “A lot of initial deployment was in the public cloud, but now we see a lot of customers deploying Kubernetes on-prem,” he said.

AI adoption is also favoring a hybrid model. “AI workloads will go where the data is,” he said. “Some could be in the public cloud, but a lot of proprietary data won’t be there. For that, model training will be done on-prem.”

Inferencing, or deployment of trained models, “will be where the data is collected,” he said. Latency limitations in the public cloud will also drive local AI model deployments, favoring Nutanix’s hyperconverged infrastructure.

Photo: Nutanix/Twitter