Nutanix Q3 2026 Earnings Call | Multi-Cloud Platform Migrations Drive Substantial Software ARR

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 $73 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, 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 multicloud 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 external storage. Another significant win was with a 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 offering 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 India-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-prem while maintaining disaster recovery services on NC2 in OVH. They also plan on migrating their Oracle 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 Agentic 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 .NEXT, we announced new capabilities for our Agentic AI solution to support a new generation of AI cloud providers or NeoClouds. 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 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 multicloud, 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.

Yes, Matt. 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, how are customers 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, we have a number of tools to help them offset these issues, and they are 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.

Yeah, I'll add a couple more things there, just clarifying also. I think it also depends on how much traction we get quickly with our external storage solution, for example, and public cloud solution. We do have new products coming to market. We've got the Pure Storage array and the SmartNIC in the market. So that could also help.

Pam, let me take that. Good question. As we said during the call earlier, the vast majority of data center infrastructure today is still external storage connected to your legacy hypervisor on servers. With the solutions that we have in the market, with the tools that we already have, we already started seeing traction. You saw, for example, we had two significant deals that we talked about 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. As we talked about at Investor Day, over time we intend to get to a big chunk of this addressable market, and we do expect good continued growth. Obviously, it's small. 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 hardware in a supply chain-constrained environment. Was there a second part of your question that I didn't address?

Got it. So on the pricing, our goal is to try and price the solution as close to a full stack as possible. So today, if you look at our stack, we have virtual compute, virtual networking, 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. In the core platform, customers have an option. 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. We want to make it easy for them. And at the same time, we're always looking to over time bring them on as an 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, etc. 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.

It is, first of all, we do 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 that build their own GPU clusters and build, run, and operate it. The second part of our solution that we announced at our .NEXT conference was targeted towards NeoClouds and service providers. I would say we are in the early stages on both. We continue to see wins every quarter here, and we have seen wins this quarter as well across the verticals that we talked about: financial services, for example, healthcare, education. Some of the more regulated verticals tend to focus on having clusters on-prem, but it's still early days. 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 all.

Yes. For sure, Jim, on the second part of the question, there's no doubt that server constraints, enterprise server constraints, are causing customers to look more at the public cloud with NC2. We have a couple of examples that I can talk about here just to give you some color on this. We were 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 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 that those are more easily available and faster to get going, and so they're doing that. 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, what we said was we are seeing an uptick. We are seeing more customers and we're also seeing more consumption of NC2. We haven't really given you any more specifics at this point yet. And it is still, I would say, a minority portion of our business for sure, but it's a growing portion of our business.

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 transactions 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 would say it's important to note that the factors that we've outlined over the last couple of quarters as to the delaying recognition of revenue relative to bookings also impacts ARR and NRR. Right? So that's what we're continuing to see here. And then the other piece that I've noted before is that the average ACB or ASPs of our new logo transactions have been steadily increasing over the past few years and we give a bit of quantification of that in our investor today 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 continued to focus on driving adoption and expansion of our solutions within the customer base and that continues to remain a focus going forward.

Yeah I can take that. 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, but what I will say is that look, I think we have seen, we've made abundantly 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 that we would have been able to raise all the numbers for our full year if not fully 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 clearly in terms of our revenue impact but we haven't really quantified it in terms of specifics.

Yeah, so on operating margin I'd say look, we were happy to take our full year guide up relative to what we said 3 months ago and the point I was making is that look, we've obviously 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, 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.

Thank you.

I will, so this is 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 partners that we have. We do a small amount to HP as well. And I would say they 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, the business is growing but it's growing from a small base and we do expect that to potentially grow more once we have the PowerStore solution in the market because they are much more aligned towards external storage than they are to serving HCI which is what we have today in the market with them.

Those new logos, I mean we got 700 this quarter. They're well distributed across that entire spectrum. You know we have a three-tier segmented model to go after our customer base. We have the top tier which is large enterprise and then we have the middle tier which is the smaller side of enterprise and commercial and then the tier below that and more channel-led in that scenario. Now if you look at just the volume, typically of course there are more customers available in the lower tiers than the upper tiers but from a distribution perspective, we are seeing wins across all of them, 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.

Yeah. So on the first one, the competitive dynamics, Tim. So 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. They are and that's where most of our customers are coming from and or migrating away from. And if you look at what Gartner talks about, 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 the 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 Kubernetes based virtualization solution and we tend to do very well when it comes to mission critical VMware workloads running in production because we have a very solid performant 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 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, you know, Stage Seat for example with a large bank that's operating at pretty high volumes across Azure, AWS, and on-prem all using the Nutanix solution. So that's the competitive landscape. We feel quite comfortable that the easiest option for the Broadcom customers to migrate to is Nutanix. It's much simpler, 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. It's you know 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. The supply is 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.

Thank you. Thank you.

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. 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 the 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, I think second half of FY27 is where we're going to see the first traction with that solution, which is going to help from a customer perspective.

Yeah, first of all, it is a point in time, right? And we've always 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 today have not fully adopted VCF, right? They're buying VCF, but they're deploying what they were deploying before, which is vSphere with external storage. And now the same thing will happen with VCF9. It's going to force these customers 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, more options on the table saying preserve your hardware for example, come to us with the existing solution you've got with external storage if you'd like. We can do a full HCI conversion. VCF9 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 these capabilities, it is complex. And then of course we have these options of external storage, public cloud, and 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 this with customers coming and migrating every quarter as we saw in our new logos.

Yeah. Thank you.

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 or HP or Lenovo. The exception was Supermicro 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 Supermicro but typically they tend to purchase those together. Now given the supply situation that we have right now, we wanted to decouple this and say customer, you make your software choice and then if you'd like to go buy Supermicro hardware please feel free to do so. So you also have your choices about the customers. So that's the only change that we've made recently in terms of the supply situation, just to provide customers again very clearly that choices of where we tend to go. Now in the past this was more not an issue, 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 and basically what we're doing is customers usually are looking at buying a software and you choose which hardware you want to put it on.

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 3 to 4 weeks, to 6 months. That is the range that we see and it varies by the week, by the month, by the configuration, by the vendor.