Nutanix Inc. closed out its fiscal year with stronger-than-expected fourth-quarter revenue and profit as annual recurring revenue grew 16% and customers adopted more of the company’s external storage, public-cloud and portfolio offerings.

Revenue for the quarter ended July 31 rose 16% from a year earlier, to $757.1 million, beating the $738.3 million consensus estimate. Adjusted earnings increased to 60 cents a share from 37 cents a year ago, beating the 49-cent analyst estimate.

Annual recurring revenue reached $2.55 billion, also up 16%. Operating income jumped to $198 million from $119.5 million, lifting the adjusted operating margin to 26.2% from 18.3%. Free cash flow rose to $277.6 million from $207.8 million.

Shares climbed more than 6% in initial after-hours trading.

“It was a strong Q4 overall,” Chief Executive Rajiv Ramaswami (pictured) said in a briefing with journalists. “I thought we exited with good momentum.” He cited broad-based performance, including strength in external storage, the NC2 public-cloud offering, Kubernetes and database management.

For the full year, Nutanix added more than 3,000 customers, although the CEO cautioned against reading too much into quarterly customer additions because the number can vary depending on the balance between a smaller number of large deals and a larger number of smaller transactions.

Storage lift

A major contributor in the quarter was Nutanix’s expanding support for external storage arrays. That gives customers the option to adopt the Nutanix software stack while continuing to use servers and storage they already own, reducing migration cost and complexity..

“It makes it very easy for customers to migrate to us,” Ramaswami said. “They can preserve their existing storage and existing servers and just replace their software with Nutanix software.”

The company now supports multiple storage platforms from Dell Technologies Inc., Everpure Inc. and NetApp Inc. Although NetApp support is in limited availability, Nutanix said it contributed to several seven-figure annual contract value deals in the quarter. External storage represents a small share of deployments, but Ramaswami said it is growing rapidly and should accelerate in fiscal 2027.

That flexibility has become more important as higher server prices and extended delivery times strain customer budgets. Nutanix sells software, but the new hardware customers need to run it has grown more expensive throughout the year. “We don’t see any near-term letup” in hardware price increases, Ramaswami said. “We are assuming that this continues through the rest of this fiscal year we just started.”

External storage support and NC2, which runs Nutanix software in public clouds, give them ways to proceed without replacing as much infrastructure.

Hardware costs rise

Hardware inflation hasn’t changed Nutanix’s software prices, he added, but it can affect the timing and size of customer projects. The company expects to use more future start dates in fiscal 2027, aligning software licenses and revenue recognition with delayed server deliveries.

Nutanix also continues to benefit from customers seeking alternatives to VMware following Broadcom Inc.’s acquisition of the virtualization software maker. Ramaswami described the pace of Broadcom defections as “steady and climbing,” adding that migration activity could continue for about five years. The main obstacle is customer inertia rather than technology, he said.

For its fiscal first quarter, Nutanix forecast revenue of $755 million to $765 million and an operating margin of 26% to 28%. Analysts were projecting revenue of about $756 million. For fiscal 2027, the company expects revenue of $3.18 billion to $3.23 billion, compared with the $3.20 billion consensus, an adjusted operating margin of 24% to 25% and free cash flow of $850 million to $950 million.

Nutanix recently cut about 5% of its workforce and plans to reinvest most of the savings in artificial intelligence, cloud-native products, sales capacity and digital sovereignty. Ramaswami called the move “a retooling of investment from some areas that we think we can do less of to areas that we need to focus on going forward.” Earlier today, the company announced new capabilities that help enterprises run agentic artificial intelligence applications alongside existing workloads without major disruption.

AI remains an early-stage business for Nutanix, but the company is using itself as a test case. Ramaswami said it has spent $20 million on its own GPU clusters to run open-weight models and expects them eventually to handle as much as 80% of its internal AI needs, reducing the need to pay for frontier models. Ramaswami said the investment should generate positive returns in about a year while reducing the company’s reliance on per-token pricing.

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