Nutanix (NASDAQ:NTNX) held its third-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/.
Access the full call at https://edge.media-server.com/mmc/p/uaeijsa5/
Summary
Nutanix reported Q3 2026 revenue of $703 million, exceeding guidance, with ARR growing 15% year-over-year to $2.43 billion and strong free cash flow of $197 million.
The company added over 700 new customers, with significant wins in healthcare and financial services sectors, highlighting the appeal of its hybrid multi-cloud solutions and external storage support.
Nutanix raised its full-year revenue guidance to $2.82-$2.84 billion, citing strong bookings and increased demand for its AI, cloud-native, and hybrid cloud offerings.
Supply chain challenges persist, affecting server hardware availability and pricing, but Nutanix's flexible deployment options help mitigate these impacts.
Management expressed confidence in continued growth driven by strategic initiatives like AI, external storage support, and partnerships, despite dynamic market conditions.
Full Transcript
OPERATOR
Hello and welcome to Nutanix third quarter 2026 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press Star one one on your telephone. You will then hear an automated message advising. Your hand is raised to withdraw your question. Please press Star one one. Again, we ask that you limit yourself to one question and one follow up. I would now like to hand the conference over to Rich Valera, Vice President of Investor Relations. You may begin.
Rich Valera (Vice President of Investor Relations)
Good afternoon and welcome to today's conference call to discuss third quarter fiscal year 2026 financial results. Joining me today are Rajiv Ramaswamy, Nutanix's CEO and Rukmini Sivaraman, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing third quarter fiscal year 2026 financial results. If you'd like to read the release, please visit the press releases section of our IR website. During today's call, management will make forward looking statements, including financial guidance. These forward looking statements involve risks and uncertainties, some of which are beyond our control which could cause actual results to differ materially and adversely from those anticipated by these statements. For a more detailed description of these and other risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10K and our subsequent quarterly reports on Form 10Q, as well as our earnings press release issued today. These forward looking statements apply as of today and we undertake no obligation to revise these statements after this call. As a result, you should not rely on them as predictions of future events. Please note, unless otherwise specifically referenced, all financial measures we use on today's call, except for revenue, are expressed on a non GAAP basis and have been adjusted to exclude certain charges. We have provided, to the extent available, reconciliations of these non GAAP financial measures to GAAP financial measures on our IR website and in our earnings press release. Nutanix will be participating in the bank of America Global Technology conference on Tuesday, June 2nd in San Francisco. We hope to see you there. Finally, our fourth quarter fiscal 2026 quiet period will begin on Saturday, July 18th and with that I'll turn the call over to Rajiv.
Rajeev Ramaswamy
Thank you Rich and good afternoon everyone. In our third quarter we continue to see healthy demand for our solutions as reflected in our strong bookings and outperformance versus our guided metrics. We see this demand driven by businesses looking to modernize their IT footprints adopt hybrid cloud operating models and deploy cloud native applications, including AI. In our third quarter we delivered quarterly revenue of $703 million above our guidance range, grew our ARR 15% year over year to $2.43 billion and saw solid free cash flow generation. We also saw another healthy quarter of new logo additions, adding over 700 new customers in Q3. Looking ahead, the environment remains dynamic. Supply chain challenges continue to drive higher prices and generally longer lead times for server hardware from our partners which are pressuring customer budgets and timelines. However, Nutanix's focus on customer choice helps mitigate some of this impact and enables customers to better manage their deployment timelines and budgets. These include choice of server vendors, choice of running in the public cloud on Nutanix Cloud Clusters or NC2, and in particular choice of adopting our cloud platform with a growing number of external storage options. Note that the majority of current data center infrastructure is based on external storage and legacy hypervisors on servers. Our support of external storage platforms is simplifying migrations to Nutanix from these environments without requiring significant hardware changes. In Q3, we continue to see success in the marketplace with our cloud platform. Our most notable wins, a few of which I'll highlight, demonstrate the appeal of our solution to businesses that are looking to adopt hybrid multi cloud operating models, deploy modern apps and AI, and in some cases deploy our cloud platform while retaining their existing hardware including external storage. Two of our largest new logo wins in the quarter reflect success with our initiative to support external storage. One was a seven figure win with a North American based healthcare services provider who chose the Nutanix cloud platform to replace their incumbent infrastructure software while retaining their EverPure flash array external storage. Another significant win was with the financial services provider who chose our cloud platform for running their Microsoft SQL databases while retaining their existing Dell PowerFlex arrays. We're pleased with the progress we've seen to date with our offerings supporting external storage and expect continued growth as additional solutions become available over the course of the year. We also continue to see good uptake of our cloud native and AI offerings in Q3. An example is one of our largest wins in the quarter with an aerospace and defense supplier in the APJ region. With this full stack expansion, the customer now plans to use nutanix Kubernetes platform or NKP to deploy and manage their container based applications while continuing to run their VM based applications on our cloud platform. They also plan to use Nutanix database service for database automation and Nutanix Unified storage for managing their unstructured data and we continue to see traction with our AI solution in Q3 with wins in areas including financial services, healthcare and higher education. Finally in Q3 we saw increased uptake of the public cloud deployment option for our platform NC2. This included a notable quarter over quarter increase in both customer wins and cores deployed. NC2 wins included a Fortune 500 financial services provider that was looking to expand its use of our cloud platform as they migrated away from their existing on premises provider. Facing longer lead times and higher prices for servers, this customer chose to deploy NC2 on AWS. We also landed a new logo with an EMEA based provider of outsourcing services. This customer was looking to replace their existing data center infrastructure provider and chose to deploy our cloud platform on NC2 in OVH public cloud pending availability of server hardware over time, they plan to migrate their production workloads back on premises while maintaining disaster Recovery Services on NC2 in OVH. They also plan on migrating their Omnisa workloads to the nutanix cloud platform. During the third quarter we made a number of important product and partnership announcements, many in conjunction with our annual Next Customer and Partner conference in Chicago, which drew over 5,000 attendees. We announced Nutanix Agnostic AI in March at Nvidia's GTC 2026. This full stack software solution is designed to reduce complexity, optimize performance and security, and enable lower and more predictable token costs for agentic AI applications. Today our Agentic AI solution works on platforms using Nvidia GPUs. With our recently announced AMD partnership, we will also be supporting AMD's GPU solutions going forward. Then in April at Dart Next, we announced new capabilities for our Agentic AI solution to support a new generation of AI cloud providers or NEO clouds. This solution is anticipated to become available in the second half of 2026. We also introduced NKP Metal, which brings the automated lifecycle management and data services of the Nutanix cloud platform to bare Metal Kubernetes. Finally at next, we continue to demonstrate progress on our initiative to support external storage, announcing new partnerships with NetApp and Lenovo to support their storage platforms. Availability for both of these new solutions is expected within this calendar year. We also held our Investor Day in conjunction with next and it was a pleasure seeing many of you in person at this event. We were happy to be able to share how our platform has evolved to a unified platform for running AI and both modern and traditional applications. To provide an update on our large and growing market opportunity and to provide an update on our medium term target model including mid to high teens revenue and ARR growth in FY29. We look forward to continuing to drive towards the vision and targets we shared. In closing, we believe our business performed solidly in the third quarter including strong bookings, healthy new logo additions and solid free cash flow performance. Our opportunities with AI, modern applications, hybrid multi cloud and support for external storage provide us with a strong foundation for multi year growth. And with that I'll hand it over to Rukmini Sevaraman Rukmini thank you Rajeev
Rukmini Sivaraman (Chief Financial Officer)
and thank you everyone for joining us today. It was great to see many of you at our Investor Day last month. I will first review our Q3 26 results followed by our guidance for Q4 26 and the updated full year 26 guidance. In Q3 we reported results that were above the high end of the range for all guided metrics in Q3 we reported quarterly revenue of $703 million higher than the guided range of 680 to $690 million. ARR at the end of Q3 was $2.435 billion representing year over year growth of 15%. NRR or net dollar based retention rate at the end of Q3 was 106% in Q3. Average contract duration was 3.4 years, slightly higher than our expectations. Non GAAP Gross margin in Q3 was 87.8%. Non GAAP operating margin in Q3 was 22.3% higher than our guided range of 16% to 17% due to lower operating expenses related to timing of hiring among other factors and higher revenue than expected. Non GAAP net income in Q3 was $136 million or fully diluted EPS of $0.47 per share based on fully diluted weighted average shares outstanding of approximately 287 million shares. GAAP net income and fully diluted GAAP EPS in Q3 were $72 million and $0.25 per share respectively. Free cash flow in Q3 was strong at $197 million representing a free cash flow margin of 28% benefiting from good bookings linearity in the quarter. Moving to the balance sheet, we ended Q3 with cash cash equivalents and short term investments of $2.018 billion, up from $1.874 billion at the end of Q2. Moving to capital allocation in Q3 our board increased our existing share repurchase authorization by $750 million and we repurchased $50 million worth of common stock under our authorization, we also used about $32 million of cash to retire shares related to our employees tax liability for their quarterly RSU. Vesting together, these actions help manage share dilution moving to Q4 guidance Our guidance for Q4 fiscal 26 is as follows. Revenue of 725 to $745 million Non GAAP operating margin of 21 to 23% Fully diluted weighted average shares outstanding of approximately 292 million shares moving to the full year Our updated guidance for fiscal year 26 is as follows. Revenue of 2.82 to $2.84 billion an increase at the midpoint from our prior guidance. Non GAAP operating margin of approximately 22.5% an increase from our prior guidance. Free cash flow of 760 to $780 million, representing a free cash flow margin of 27% at the midpoint. Also an increase from our prior guidance. I will now provide a few points to note on our guidance. First, while we continue to operate in a dynamic environment, our total contract value bookings expectations for the full year are higher relative to our last earnings call. Second, our customers continue to experience supply related shortages and price increases for server hardware from our partners which to run our software. This continues to impact the timing of conversion of our bookings into revenue and is factored into the updated guidance. We expect this to continue in fiscal Q4 and into fiscal year 27. Third, we continue to invest for continued growth against our large market opportunity while finding ways to do so effectively and efficiently resulting in the increased operating margin guidance for fiscal year 26. In closing, Q3 was a strong quarter in which we beat all guided metrics and we are pleased to raise our full year guidance. We would like to thank our employees, customers, partners, investors and stakeholders for their continued trust in us with that operator. Please open the line for questions.
OPERATOR
Thank you ladies and gentlemen. As a reminder to ask the question, please press Star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star 11. Again, please limit yourself to one question and one follow up. Please stand by while we compile the Q and A roster. Our first question comes from the line of Matt Martino with Goldman Sachs. Your line is open.
Matt Martino (Equity Analyst)
Hey, Good evening. Thank you for taking the questions. Rajeev, maybe to start with you, we're now several quarters into this supply chain dynamic. Are you starting to see indicators that customers are getting better equipped to manage through it? Whether it's building hardware lead times into procurement cycles or leaning more on that software hardware decoupling option. And does ultimately that translate into smoother deal conversion for Nutanix even if the supply backdrop doesn't improve materially over the next three to six months?
Rajeev Ramaswamy
Yes, Matt, and for sure customers are much more aware of the situation and are better navigating the situation and we are also helping them with that. If you look at the last couple of months, we have seen hardware prices from server vendors out there continue to increase, but lead times are normalizing at some of the vendors but remaining extended at others. We do expect hardware prices to remain elevated going into FY27. Now customers, how are they adapting? Well, they're looking for more flexibility on software licensing terms. There are some instances of customers delaying projects, but those are not very common. But that does happen once in a while. Now to your point earlier, I mean we have a number of tools to help them offset these issues and they're actually also making use of this. They have choice of server vendors. We have external storage platforms now available where they can do migrations without requiring new hardware purchases. They can use our solutions in the public cloud. And we've seen some customers do that directly where servers are more easily available and sometimes cheaper than buying enterprise servers. So our customers are certainly getting used to this and we are also providing them the options to help them adapt to this supply chain environment.
Matt Martino (Equity Analyst)
Yeah, very clear. And then Rukmini for you. Good to see the full year guide come up a touch. I think the 4Q guide though is a touch shy of kind of what you guys were guiding towards coming out of last quarter. Can you just unpack for us? What's in that number? Is it the supply visibility you have today or is there conservatism baked in? And what would you need to go right for guidance to land at the high end of that range that you put out this evening?
Rukmini Sivaraman (Chief Financial Officer)
Thank you Matt for that question. So a couple of points to note. One, as you pointed out and as Rajiv just covered is the supply chain environment continues to be dynamic and as we've talked about in the past, some of those dynamics can impact revenue timing from quarter to quarter. So that's the first piece. The second piece, I will say that the Middle east region has been a good growth driver for us in the past and represents a mid single digit percent of our revenue and we saw good performance from that region in Q3. But as we all know, given the situation there, conducting new business in the region is more challenging. And so we factored those in and are taking a prudent approach with regard to our Q4 outlook. And so to your point, Matt, in terms of what it will take for us to get to the higher end, it's really, I think if the supply environment continues to progress as it is, then, you know, we factor that in. But if it's better or we find that customers are able to navigate it better than we have assumed, then, you know, we should be able to get to the high end of that range. Or if things improve in the Middle east or some combination thereof, those should help as well.
Rajeev Ramaswamy
Yeah, maybe a lot. Yeah. I'll add a couple more things there. Just clarifying there, Rukmini, also, I think it also depends on how much traction we get quickly with our external storage solution, for example, and public cloud solutions. So we do have new products coming to market. We've got the Pure Storage array and the Far Flex already in the market. So that could also help.
Rukmini Sivaraman (Chief Financial Officer)
Agree. Thank you, Rajiv. Thanks, Matt.
OPERATOR
Thank you. Our next question comes from Ilana Param Singh with Opticom and company. Your line is open.
Ilana Param Singh
Hi. Thank you for taking my question. So for my first one, wanted to understand how much incremental ARR is coming from selling to attach on the external storage vendors and how are you priced compared to your closest competitor VMware and trying to get a sense of what the ARR traction could look like once incremental vendors come online with Powerstore this summer and then NetApp and related to this calendar.
Rajeev Ramaswamy
Thank you. Yeah, Param, let me take that. Good question. Of course, and as we said during the call here earlier was the vast majority of data center infrastructure today is still external storage connected to legacy hypervisors on servers. With the solutions that we have in the market, with the tools that we already have, we already started seeing traction. So you saw, for example, we had two significant deals that we talked about just on the call here, one with PowerFlex, one with Everpure and then PowerStore coming on fairly soon here is going to also accelerate that and then later in the year we should get NetApp. So as we talked about at an investor day, over time we intend to get to a big chunk of this addressable market and we do expect good continued growth. Now, obviously it's slow. I mean it's a small portion of our business at this point in time, but it's rapidly growing and we expect it to be a more and more significant chunk of our business, especially since it makes it much easier to adopt our solution without having to change our hardware in a supply chain constrained environment. So that's a piece there Was a second part of your question that I didn't address. Param. Yeah, I wanted to understand how are you priced compared to your pricing. Sorry. Yeah, got it. So on the pricing, our goal is to try and price the solution as close to our full stack as possible. So we have today, if you look at our stack, we have virtual compute, we have virtual networking, we have of course storage and then we have the operations and management capabilities. And on top of that we have kubernetes and AI. Let's set aside the kubernetes and AI and look at the core platform. So in the core platform customers have an option, right? They can either use our own storage or they can use external storage. And we try and price this as close to the full stack solution as possible. The idea being we want to make it attractive for customers to go deploy this, especially when they have hardware that's not fully depreciated that they want to reuse. Right. We want to make it easy for them and at the same time we're always looking to over time bring them on as a HCI customer because we do believe that is the single best way for running these cloud environments from a TCO perspective, from an operational simplicity perspective, et cetera. So our pricing strategy is to try and capture as much of the value as we can that we would capture normally with the full stack, but with customers using external storage. Thank you so much Rajiv. And as my follow up really quickly on the AI product that you introduced and you talked about any early feedback from customers there, enterprise AI adoption is
Ilana Param Singh
still in early stages and kind of in flux, but I wanted to understand how the customers feel about your product portfolio as it stands today.
Rajeev Ramaswamy
And would you price that as an add on or kind of like part of your full stack? Thank you. First of all, we do get capture incremental value for that. The Nutanix AI is an additional SKU that is on top of the rest of the full stack solution. So we are able to capture some extra value. Now, if you look at it, there's two parts to the solution. There is the solution that we can sell directly to enterprises where they build their own GPU clusters and build and run and operate it. The second part of our solution that we announced at our next conference was targeted towards new clouds and service providers. I would say we are in the early stages on both. We continue to see wins every quarter here. We have seen wins this quarter as well across the verticals that we talked about. Financial services, for example, healthcare education, some of these more regulated Verticals tend to focus on having clusters on prem, but it's still early days and the field is evolving very rapidly. We will continue to make advances very rapidly, but we do think this is a significant long term opportunity for us and a tailwind to our overall business over time. All right, thank you so much for those answers. Really appreciate it.
OPERATOR
Thank you. Our next question comes from the line of Jim Fish with Piper Sandler. Your line is open.
Jim Fish (Equity Analyst)
Hey guys, thanks for the question here. Maybe circling back on the first one and kind of trying to get it more certainty here in light of the comments that you made. Also, Rajeev, you talked about an increase in public cloud deployment. First, any sense to the size of NC2 at this point or public cloud within the portfolio today and secondly, how much that increased server cost is actually causing the shift towards cloud, essentially at least temporarily, that it seems like you're seeing a pickup in NC2 because of rising server costs. Is that kind of the message you're trying to convey here is hey look, use us, we can help you kind of go between it and as a result your NC2 offering is seeing incremental growth?
Rajeev Ramaswamy
Yes, and for sure. By the way, Jim, on the second part of your question, there's no doubt that server constraints, enterprise server constraints are causing customers to look more at the public cloud with NC2. We had a couple of examples that I can talk about here just to give you some color of this. We were doing at a financial services company, we had a win just last quarter where their plan was originally to do an on prem to on prem migration migration from their legacy vendor onto Nutanix. And what they discovered as they went along given the server pricing, was that they could get actually servers on AWS and use our software on it and those are more easily available and faster to get going. And so they're doing that right. They're probably going to do some mix of on prem migration but also use a portion of this to migrate to Nutanix on aws. In other cases we've seen customers saying, well it's going to take me some time to get servers. Let me start with NC2 on the public cloud and then I can bring that back on prem as and when my servers get ready. So we have certainly seen this to be a contributing factor in terms of acceleration of our NC2 bookings. To your first question, I mean what we said was we are seeing an uptick, we have seen more customers and we are also seeing more consumption of NC2. We haven't really quite given you Any more specifics at this point yet? And it is still, I would say it's still a minority portion of our business for sure, but it's a growing portion of our business.
Jim Fish (Equity Analyst)
Then Rukmini, on the metric side of things, decent spike up of duration here, which is a little bit atypical of this quarter to begin with as you guys didn't really call out any major massive kind of wind that would have influenced that. So can you walk us through what, what's causing that little bit of a pickup here and if that's kind of the rate we should be thinking about heading into Q4 and if we're going to see a bottom in net retention right now here at 106 or if this is again kind of the rate to think about. Thanks guys.
Rukmini Sivaraman (Chief Financial Officer)
Thank you Jim. So the first question I think was on duration. So correct. As I said in my prepared remarks, we did see average contract duration come in a little bit higher than we had expected for the quarter. No specific deal to call out Jim. It can vary from quarter to quarter based on the deal mix. So what we saw in Q3 was generally just a higher mix of larger and longer duration transaction across both land and expand and renewals. And of course as we know duration can also help on the revenue performance. So that's on duration. Nothing specific to note and I wouldn't necessarily assume that that continues. We just saw a mix in Q3 that contributed to that. And then to your question on nrr, I will say it's important to note that the factors that we've outlined over the last couple of quarters as to the delaying the recognition of revenue relative to bookings also impacts ARR and nrr. So that's what we're continuing to see here. And then the other piece that I've noted before is that the average ACV or the ASPS of our new logo transactions have been steadily increasing over the past few years and we give a bit of a quantification of that at our investor day. And so that does create a bit of a headwind on expansion growth rate which is reflected in nrr. Now all that said, we are continue to focus on driving adoption and expansion of our solutions within the customer base and that continues to remain a focus going forward.
OPERATOR
Thank you. Our next question comes from the line of Wham C Mohan with bank of America. Your line is open.
Wham C Mohan
Yes, thank you so much. You said full year TCB bookings are higher than at last earnings call but customers are still facing these server related issues. So any quantification on how much revenue and maybe free cash flow is being deferred because of these constraints? Maybe best guess or qualitatively, any color that you can share there.
Rukmini Sivaraman (Chief Financial Officer)
Yeah, I can take that Vamsi, thanks for the question. Look, I would say I think the reason we sort of gave you the color on bookings, which historically we haven't done, as you know, but we've been doing it over the last few quarters because we think it's important for you to know what's happening in terms of bookings. And of course, some of you I know calculated based on RPO as well. So that was strong in Q3. Now, we haven't quantified specifically how much revenue is being deferred because of this Wamsey. But what I will say that is, look, I think we have seen, I think we've abundantly made clear on this call that some of the challenges around supply chain are continuing. We had made a comment last quarter, you might remember, where we felt like we would have been able to raise all the numbers for our full year if not for the supply chain challenges. And of course this quarter we're happy to be able to raise our full year number coming off of our Q3 and going into Q4. So I will say it continues to be a factor here, Wamzi, in terms of our revenue impact, but we haven't really quantified to fight it in terms of specifics.
Wham C Mohan
And then maybe just to follow up, you mentioned something in your prepared remarks around the margins, right. Just basically better top line and timing of hires. You have been obviously outperforming on this metric. How much of this upside would you say is just timing? Maybe whether it's hiring or maybe other things around revenue mix or delayed investments. How should we think about sustainability here given what we know from internally, what you know from your plans here?
Rukmini Sivaraman (Chief Financial Officer)
Yeah, so on operating margin, I'd say look, we were happy to take our full year guide up relative to what we said three months ago. And the point I was making is that look where obviously we've taken our revenue guidance up for the full year as well. And we do believe that there's a large market opportunity that we have to go and tackle. And we do believe in continuing to invest for that Wamsi, but at the same time doing so in a way that is efficient. So there are a couple of things I would say that's sort of the headline message now. In addition, like I said in my remarks, we have some fluctuations quarter to quarter in terms of timing of hiring, which we do expect to get caught up here over the next coming period of time and then I think we'll continue to be thoughtful about how we invest going forward. We gave you our intent to continue to grow operating margins over time and that continues to be our intent in terms of going into next year and beyond.
Wham C Mohan
Okay, thank you so much.
OPERATOR
Thank you. Our next question comes from Ilana Sumit Chatterjee with JP Morgan. Your line is open.
Ilana Sumit Chatterjee
Hi, thank you for taking my question. This is MP on Fosomiq strategy. For my first question, just wanted to ask like, how did the sales via the OEM partners track relative to your own expectations heading into the quarter and any color on expectations for that to track through rest of the calendar year?
Rajeev Ramaswamy
Thank you. And I have a follow up. So you're talking about sell through our OEM partners. Right. And if you look at those, we have Cisco, we have Dell and we have Lenovo largely those are the OEM part of the researcher. We do a small amount through HPE as well. And I would say they're largely tracked as we expected. We've had Cisco continuing to grow and Lenovo has been a good steady state partner for us for several years now. I would say with Dell and Dell the business is growing, but it's growing from a small base. And we do expect that to potentially do more once we have the Powerstore solution in the market because they are much more aligned towards external storage than they are to selling hci, which is what we have today in the market with them.
Ilana Sumit Chatterjee
Thank you, Rajiv. And for my follow up, I just wanted to ask on the new logo addition, can you please discuss your performance relative to different cohorts of customers, maybe large enterprises versus small and medium enterprises. Do you see any meaningful difference across those cohorts?
Rajeev Ramaswamy
Thank you. Those new logos, I mean we got 700 this quarter. They're well distributed across that entire spectrum. We have a three tier segmented model to go after our customer base. We have the top tier, which is a large enterprise, and then we have the middle tier which is smaller side of enterprise and commercial and then third tier is below that and more channel led in that scenario. Now if you look at just the volume, typically of course there's more customers available in the lower tiers than the upper tiers. But from a distribution perspective, we are seeing wins across all of them. Right? Everything from the Global 2000, the largest customers, all the way down to the smaller customers. So it's a well distributed set of new logos.
Ilana Sumit Chatterjee
Thank you.
OPERATOR
Thank you. Our next question comes from the Line of Matt Higber with RBC Capital Markets. Your line is open.
Simran
Hey guys, this is Simranand from AT Hedberg. Congrats on the quarter and thanks for taking your question. Just one from me. Can you help us think through your available to renew pool into fourth quarter
Rukmini Sivaraman (Chief Financial Officer)
and any early thoughts you have around fiscal year 27? Sure, I can take that. Hi Simran. So for Q4 look I think nothing to call out and we've said that you know we have quarter to quarter movement in terms of when those renewals get transacted often just due to the normal course of business and when customers choose to choose to transact Simran. So nothing unusual to call out on that front from a Q4 perspective. And then in terms of fiscal year 27 again, as I think as you all know we really typically guide to fiscal year 27 in our in our August earnings call after we report Q4. So I will just leave it at that for now and say that ATR is expected to grow in fiscal year 27 as one would expect and leave it there. Simran, thanks for your question.
OPERATOR
Okay, thank you. Our next question comes from the line of Tim Long with Barclays. Your line is open.
Tim Long (Equity Analyst)
Thank you. Yeah, two questions if I could as well. First, I want to go back to the competition. Not just, not as much on pricing, but when you think about competitive landscape, VMware and the others, you obviously got a lot going on here with bringing on storage vendors and options around servers and bringing in cloud based and other more flexible solutions. How do you think the competitive landscape is stacking up against all the options that you guys are providing to keep growth going here? Number one and then number two on the AI offerings, I understand that some of them are pretty new, but can you just give us a sense of how they're scaling and how we should think about thinking about the TAM or growth or size that those businesses could be ultimately any color you can give us around. That would be helpful.
Rajeev Ramaswamy
Thank you. Yeah. So on the first one of the competitive dynamics, Tim, so I mean if you look at the competitors there and some of them are partners too, so the competition typically would be, I would call out of course VMware and Broadcom. I would say now that's where most of our customers are coming from and are migrating away from and if you look at what Gartner talks about, I mean the vast majority of customers are looking to exit over time. So that's more of a come from situation. And then where do they go? They go to one of two or three places. They go to Nutanix, they go to Red Hat, they go to Microsoft, a small number, and then some of them go to the public cloud directly. So that's a competitive landscape. It hasn't really changed much in the last several quarters. It's kind of been there. So Red Hat is competing there with the Kubot based virtualization solution and, and we tend to do very well when it comes to mission critical VMware workloads running in production because we have a very solid platform for doing that with the public cloud. Sometimes customers do make strategic decisions to go to the public cloud, but what they find is it's much, much easier for them to go to the public cloud on the Nutanix platform itself. And we've seen that part of our business continuing to grow very nicely. We have some good examples that we showcased at our conference as well. State street, for example, a large bank that's operating at pretty high volumes across Azure, AWS and on prem, all using the Nutanix solution. So that's a competitive landscape. We feel quite comfortable that the easiest option for the Broadcom customers to migrate to is to Nutanix. It's much simpler, it doesn't require any work on the applications itself and can be largely automated as well. And with our expansion into external storage, we provide even more options and easier options for those customers to migrate to. Your second part about AI adoption, I think I covered that a bit earlier. We've had the latest versions of our AI solutions are fairly new. The agentic AI stack that we announced in February and an enhancement to take that into the service provider base in April. And we're starting to see good traction. But it's still early days. I would say most of our customers are still in their early days of experimentation. They're still trying to get GPU clusters on prem. Supplies are always an issue there as well. But we are encouraged because we see this as a huge market opportunity. We talked about this at our last investor day recently here about being a multi billion dollar TAM over time. But it's still pretty early days. But we're starting to see good encouraging signs among several industry verticals. Okay, thank you very much. Thank you. Thank you.
OPERATOR
Our next question comes from the line of Sanjit Singh with Morgan Stanley. Your line is open.
Abhishekhmar Leon
Hi, this is Abhishekhmar Leon for Sanjit Singh. Thanks for taking the question. I was wondering if we could get an update on the AMD partnership. Understood that revenue contribution is supposed to happen in fiscal year 27, but I've already on track for the platform to go into effect by the end of the year. And how is the pipeline shaping up? Thanks for your question.
Rajeev Ramaswamy
Yeah, there again, it's very early days in terms of actually having a solution in the market. We don't quite have that yet. I mean, of course to be clear, we're already selling our platform, already supports their CPUs, and we will support more and more of their CPUs, and that's here and now. And that even predates this latest partnership on the GPU side. Again, we don't quite have that solution in the market, but what I would say is customers are looking for options, right? In fact, if you look at the market for AI chips, there's Nvidia, of course, and then there's amd, and then there's a public cloud providers building their own chips and then there's a whole slew of chips targeting inference coming out into the market. So our customers generally want more and more choice. They want to be able to run their AI applications, especially their inferencing and agentic applications, with the lowest cost, the most efficient way possible, and minimize the cost per token. So having AMD as an option here for us as we go into the market, Really, I think second half of FY27 is where we're going to see the first traction with that solution is going to help from a customer perspective.
OPERATOR
Thank you. Our next question comes from the line of Mike Seacoast with Needham. Your line is open.
Mike Seacoast (Equity Analyst)
Terrific. Thank you. And congrats on the consistent execution and the volatile backdrop here. This is now the second consecutive quarter where management has discussed higher bookings expectations versus the prior earnings call, which is great color, particularly in light of the delayed conversion timeline to revenue. Two questions if I could. But first, the company doesn't guide to or communicate its bookings, at least externally.
Mike Seacoast (Equity Analyst)
Is there any way you can help qualify or quantify to what degree your bookings outlook has improved over the last 90 to 180 days? And then the follow up there is did the volume of deals improve with delayed conversions, become more material in Q3 versus what was observed in Q2? Just any color on those two dynamics would be really appreciated. And again, congrats on the consistent execution here.
Rukmini Sivaraman (Chief Financial Officer)
Hi Mike, thank you for those questions. First, to your question on bookings, you're right that it's not a metric we report or intend to report. The reason we've been providing some incremental color here over the last couple of quarters is exactly the reason that you pointed out which is that we are having revenue timing shift out.
Rukmini Sivaraman (Chief Financial Officer)
And so we thought it would be important to provide that color of the underlying demand and the underlying performance, if you will, from a bookings perspective that will translate into revenue over time. And so one sort of point I will say is if you look at the in Q3, Mike, we saw that bookings was strong at over 20% on a TCV basis. And so I wanted to call that out. I know some of you again calculate, try to calculate bookings based on rpo. So you'll see that there as well. So that was Q3, we haven't really quantified on a full year basis, Mike, how much it was relative to kind of three months ago or anything like that. But I want to give you that number which was really strong for Q3 from an overall bookings growth perspective. And then I think your second question was on thinking about the volume of deals that are coming in with sort of this revenue in the future in Q3 relative to Q4. And look again, I'm not sort of breaking out the specifics of that, Mike, because it can move around from quarter to quarter because again, it just depends on what these customers are saying, which platform they're going to go with. I think Rajiv mentioned earlier that with some of the server providers we're actually seeing lead times normalize, although prices remain elevated. And in others the lead times remain really elongated. So it does vary based on what the customers are choosing to deploy. And so I would say that again, we're not giving quarter to quarter how much revenue is moving around, but in the aggregate, of course, we were pleased to be able to raise our full year revenue guide on the back of Q3.
Mike Seacoast (Equity Analyst)
Thank you.
OPERATOR
Thank you, Mike.
Milana Radi Soltang
Our next question comes from Milana Radi Soltang with ubs. Your line is open.
Rajeev Ramaswamy
Awesome. Yeah, thanks for taking the questions. Maybe just first for Rajeev, just with the VCF9 deadline end of next year, any sort of trends in customer behavior as we approach that VMware deadline and what are you doing to sort of attack and accelerate some of those migrations ahead of that deadline, end up next year? Yeah, first of all, I mean it is a point in time, right? And we've already said that this migration happens over time in multiple ways. This is just one more point where customers have to make choices. Now the color I'll give you on this is that most customers who have purchased VCF to date have not fully adopted vcf. Right. They're buying vcf, but they're deploying what they were deploying before, which is vsphere with external, external storage. And now the same thing will happen with VCF9. It's going to force these customers to go deploy, to go buy VCF9. But it's not clear to me that they're going to all deploy it fully, right? It's going to take time and they may still deploy portions of it. Now if they want to deploy all of it. By the way, it's going to require a substantial hardware refresh, including their embedded storage solutions. Now at that point they have even more of a choice to choose to migrate to a modern platform like Nutanix or keep going with them. So we are certainly giving these customers a lot of options now, right? More options on the table saying preserve your hardware, for example, come to us with the existing solution you got with external storage if you'd like to, we can do a full HCI conversion. BCF9 is going to be quite a significant upgrade for you all in terms of the effort that you're going to have to put in. You may still not benefit from all of its capabilities. It is complex. So and then of course we have, you know, these options of external storage, public cloud and then we have also the automated migration tools behind that and of course the commercial incentives, all of those put together to provide a good proposition for customers to migrate. And like I said, we're seeing, you know, we're seeing this, right? We're seeing this with customers coming and migrating every quarter as we saw in our new locals.
Milana Radi Soltang
Got it, got it. Super helpful. Maybe just one follow up for Rukmini. Just as we think about that TCB bookings coming in higher relative to expectations for the full year. I just wanted to clarify Was that simply Q3TCB bookings outperformed and now your expectations for the full year are higher or that's also inclusive of sort of Q4TCB bookings you kind of expect to be higher than last quarter. Then maybe, if that is the case, maybe just unpack what actually is driving that outperformance. Thank you.
Rukmini Sivaraman (Chief Financial Officer)
Yeah, thanks Radi, for the questions. So I would say, look, I think overall for the year was the comment we made that for the full year we're expecting the TCB bookings growth to be higher than we'd expected three months ago. And in terms of what's driving that, I think a couple of things. One is the point that someone asked earlier on longer contract durations, which is, which helps with tcv, of course. And then we've also seen better renewals performance. So those are the two main things driving the TCV bookings growth higher. And of course, you know, we're continuing to make sure that we're watching and navigating all of the, all of the factors around the timing of bookings to revenue, but pleased with the overall bookings performance to date. And we gave you color on the expectations for the full year.
Milana Radi Soltang
Thank you so much.
OPERATOR
Thank you.
Victor
Our next question comes from the line of Simon Leopold with Raymond James. Your line is open. Hi, this is Victor on for Simon. I think you kind of answered that in your, in your last remark, but just to clarify that the higher full year revenue revision is a reflection of your expectations around better bookings traction and the higher tcv. Is that correct?
Rukmini Sivaraman (Chief Financial Officer)
Yes. I'm not sure what the question is, Victor. I think what we said in our prepared remarks is that our bookings expectations for the full year on a TCV basis is higher than we had expected three months ago. And then I also pointed out that if you look at Q3, and I know some folks calculate Q3 bookings based on RPO, but overall bookings growth in Q3 was also strong at over 20% year over year
Victor
and slightly higher revenue recognition. And that's what's driving your higher guidance outlook? Slightly. But yeah, what changed between, you know, what changed between last quarter and this quarter? You know that that's giving you confidence in your ability to do that. Is it just better traction that you're seeing in our ability to raise the full year revenue guidance? Is that the question? Yeah.
Rukmini Sivaraman (Chief Financial Officer)
So I mean, we obviously beat Q3, which we were really happy to see that Q3 was a really strong quarter. So happy to beat Q3 and then take up the guidance for the full year as well.
Victor
Okay. And just really quickly, how much of the new logo wins are coming from your competitors versus new HCI customers? I think it's predominantly from customers transitioning. Is that correct?
Rajeev Ramaswamy
Most of them are coming from VMware customers. Right. VMware.com customers.
Victor
Thank you.
OPERATOR
Thank you. Our next question comes from the line of Ben Bolen with Cleveland Research Company. Your line is open.
Ben Bolen (Equity Analyst)
Good evening, everyone. Thank you for taking the question. Rajeev, I think you've introduced some programs to decouple software from hardware and kind
Rajeev Ramaswamy
of make customers lives easier. Could you talk about some of the things that you're doing and how you think that's impacting the overall visibility? And then I have a follow up. Yeah. By the way, we've had this with most of our OEM partners for Quite a while, right? I mean, if you look at the selling motion today or even in the past, we sell software to customers and they choose the hardware, whether it's Dell, RHP or Lenovo. The exception was Super Micro, right? Where typically with Supermicro, in the past, the solution was more Nutanix software and Supermicro hardware together. But of course, we don't see the Supermicro solution on our books at all. But it goes directly to Super Micro. But typically they tend to purchase those together. Now, given the supply situation that we have right now, we wanted to decouple this, right? And say, customers, you make your software choice and then, yeah, if you'd like to go buy Super Micro hardware, please feel free to do so. You also have your choices of other customers. So that's the only change that we've made recently in terms of the supply situation, right? Just to provide customers, again, make very clearly the choices of where we tend to go. Now, in the past, this was more not an issue, right? But with the supply being what it is now we have to provide even more flexibility and choice. And that's what we did. And so that is now how we typically sell today. Right? And basically what we're doing is customers, you really are looking at buying our software and you choose which hardware you
Ben Bolen (Equity Analyst)
Okay. The one other question is, I know you're not quantifying the amount of time
Rajeev Ramaswamy
or the duration from when you're collecting the cash to maybe when the software rev rack is commencing today, but could you talk a little bit about where you think average lead times are on the appliance business or from appliance vendors today, where that stands with customers and how that has changed over the past few quarters? I mean, I'll just give you a broad range because it depends on the configuration, it depends on the vendor. Anything from a few weeks, when I say, you know, three to four weeks, to six months, right? That is a range that we see. And it varies by the week, by the month, by the configuration, by the vendor.
OPERATOR
Thank you, ladies and gentlemen, I'm sure. No further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
Login to comment