Earlier last month, enterprise cloud computing player Nutanix (Nasdaq: NTNX) announced its third quarter results that surpassed market expectations. But the depressing outlook driven by macro conditions sent the stock falling 22% in the after-hours trading session.

Nutanix’s Financials

For its third quarter, revenues grew 17% to $524.6 million, ahead of the market’s forecast of $516 million. EPS came in at $0.28, compared with $0.04 a year ago and ahead of the Street’s forecast of $0.17. Free cash flow was $78.3 million, falling short of estimates of $85.5 million. Annual Recurring Revenue (ARR) grew 24% to $1.82 billion, and Annual Contract Value (ACV) Billings grew 20% to $288.9 million.

By segment, Nutanix’s product revenues grew 20% to $255.5 million while revenues from support and other services grew 14% to $269.1 million.

For the fourth quarter, Nutanix forecast revenues of $530-$540 million falling well below the market’s estimates of $546 million. It expects to end the year with revenues of $2.13-$2.14 billion, which was also short of the Street’s consensus of $2.141 billion. Nutanix attributed its weaker guidance to increasing deal sizes as it engages bigger enterprises, leading to longer sales cycles.

Nutanix’s VMWare Market Focus

Nutanix remains focused on addressing the market of dissatisfied customers from Broadcom’s acquisition of VMWare. It recently entered into a collaboration with Dell Technologies to offer new joint solutions for hybrid multi-cloud. The enhanced partnership will include Dell Resell, the ability to purchase Nutanix Cloud Platform software integrated with Dell servers directly from Dell, and Support for Storage, in which Nutanix Cloud Platform will be able to run in existing IP-based 3-Tier environments utilizing Dell’s PowerFlex storage. The move will help Dell and Nutanix offer a turnkey hyper-converged infrastructure (HCI) solution available in various PowerEdge server models and configurations.

As part of the strategy, Nutanix also released a new Nutanix Kubernetes Platform (NKP) that simplifies the management of container-based applications using Kubernetes. NKP will provide a complete, CNCF-compliant cloud-native stack that will enable platform engineering teams to manage Kubernetes clusters consistently and securely across on-premises, hybrid, and multi-cloud environments.

This standardization will help reduce operational complexity, overhead, and silos within organizations. It utilizes automation and AI-driven insights for deployment, security, monitoring, and upgrades to reduce complexity and human error, and allows NKP to provide reliable storage and databases-as-a-service. By building on pure upstream CNCF-conformant Kubernetes, Nutanix has also managed to avoid issues associated with forked versions and built in compatibility with CNCF-compatible partner solutions.

Nutanix’s investments in gaining VMWare’s customers will take time. Most enterprise VMware customers are tied to multi-year contracts, and Nutanix will most likely be able to replace VMWare only when contracts are up for renewal. Even then, Nutanix will not be the only option as vendors like IBM, Pure Storage, and Hewlett Packard Enterprise are all vying for the same business.

Nutanix’s GenAI Offerings

Meanwhile, Nutanix continued to accelerate the enterprise adoption of Generative AI, and recently announced its Nutanix AI Partner Program that is focused on bringing together GenAI applications on top of Nutanix Cloud Platform and GPT-in-a-Box. It also expanded its partnership with NVIDIA and announced GPT-in-a-Box 2.0, which will deliver expanded NVIDIA GPU and LLM support, along with simplified foundational model management and integrations with NVIDIA NIMs and the Hugging Face LLM Library.

Its stock is currently trading at $53.92 with a market capitalization of $13.2 billion. It hit a 52-week high of $73.69 last month and has recovered from the 52-week low of $26.47 it was trading at a year ago.

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