Billion Dollar Unicorns: Nutanix Focuses On Software

According to IDC, sales from hyper-converged systems, which collapse core storage and compute functionality into a single, highly virtualized solution, grew 64.3% to $3.7 billion in 2017, accounting for 34% of the total converged systems market. San Jose-based hyperconverged storage provider Nutanix (Nasdaq NTNX ), which went public in 2016, is at the second place in the hyperconverged systems market 

Nutanix’s Financials

For the third quarter, Nutanix reported revenues of $289.4 million, up 41%. GAAP net loss narrowed to $85.7 million from loss of $96.8 million in Q317. Non-GAAP net loss was $34.6 million or $0.21 per share. Analysts were looking for loss of $0.19 on revenue of $279 million.

By segment, support revenue was up 50% to $68.3 million. Product revenue was up 38% to $221.1 million with software revenue growing 57% to $158.5 million and hardware revenue growing 5% to $62.6 million.

Nutanix added 820 new end-customers during the quarter, taking its total end-customers count to 9,690. Deals greater than $1 million grew by 28%.

Nutanix has been transitioning to a software-defined business model. It grew software and support billings by 67%, including three software and support deals worth more than $5 million each. Pass-through hardware billings decreased to 17% of total billings in the quarter, down from 25% a year ago.

Q3 GAAP gross margin was 67%, up from 59.5% a year ago. Cash and short-term investments were up 164% to $923.5 million.

For the fourth quarter of fiscal 2018, Nutanix expects revenues between $295 and $300 million and non-GAAP net loss per share between $0.20 and $0.22. Analysts were expecting a loss of $0.13 per share on $289 million in revenue.

Nutanix’s New Offerings

Nutanix has introduced three new innovative products for multi-cloud environments:

Nutanix Flow solves customers’ security concerns through a unique application-centric focus combined with native virtual machine (VM) micro-segmentation that protects against internal and external threats. It completes its core infrastructure services offering and provides customers with a software-defined networking solution for the multi-cloud era.

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