Nutanix (NTNX) Q3 2026 Earnings Transcript

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DATE

Wednesday, May 27, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Rajiv Ramaswami
• Chief Financial Officer — Rukmini Sivaraman
• Vice President, Investor Relations — Richard Valera

TAKEAWAYS

• Revenue -- $703 million, exceeding the upper end of the $680 million to $690 million guidance range set previously.
• Annual Recurring Revenue (ARR) -- $2.435 billion, representing 15% growth year over year.
• Net Dollar-Based Retention Rate (NRR) -- 106% at quarter-end, reflecting ongoing expansion within the installed base.
• Average Contract Duration -- 3.4 years, cited as “slightly higher than our expectations.”
• Non-GAAP Gross Margin -- 87.8% for the quarter.
• Non-GAAP Operating Margin -- 22.3%, above the prior guidance range of 16%-17%, attributed to lower operating expenses due to slower hiring and higher revenue.
• Non-GAAP Net Income -- $136 million, with fully diluted EPS of $0.47 per share on 287 million shares outstanding.
• GAAP Net Income -- $72 million, with EPS of $0.25 per share.
• Free Cash Flow -- $197 million, translating to a 28% free cash flow margin.
• Cash, Equivalents, and Short-Term Investments -- $2.018 billion at period end, up from $1.874 billion at the previous quarter's end.
• Share Repurchase Activity -- Board authorization was increased by $750 million, and $50 million in stock was repurchased in the quarter, with an additional $32 million used to retire shares for employee RSU tax obligations.
• New Customers -- Over 700 new logos added, with broad distribution across enterprise and commercial segments.
• Key New Wins -- Two significant seven-figure deals involved adoption of Nutanix’s platform while retaining existing external storage (EverPure FlashArray and Dell PowerFlex); another major contract featured Nutanix Kubernetes deployment by an APJ aerospace and defense supplier.
• Public Cloud Uptake -- Quarter-over-quarter increases in customer adoption and NC2 deployments, attributed in part to server price inflation and elongated lead times.
• Bookings Performance -- CEO Ramaswami reported “strong bookings, and outperformance versus our guided metrics,” with CFO Sivaraman specifying “bookings was strong at over 20% on a TCV basis.”
• AI Solutions -- Nutanix IdentityAI was launched to support agentic AI workloads, initially compatible with NVIDIA GPUs and expanding “going forward” to AMD GPUs.
• Product Launches & Partnerships -- Announced support for NetApp and Lenovo external storage, with availability “expected within this calendar year”; introduction of NKP Metal for Kubernetes on bare metal and expansion of agentic AI offerings.
• Revenue and Operating Margin Guidance -- Full-year fiscal 2026 revenue raised to $2.82 billion to $2.84 billion and non-GAAP operating margin increased to approximately 22.5%; Q4 guidance set at $725 million to $745 million revenue and operating margin of 21%-23%.

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RISKS

• Management noted that “Supply chain challenges continue to drive higher prices and generally longer lead times for server hardware from our partners, pressuring customer budgets and timelines.”
• Continued “dynamic environment” may prolong hardware constraints into fiscal 2027; customers are “experiencing supply related shortages and price increases,” which continue to impact the timing of revenue conversion from bookings.
• The Middle East, a “mid single digit percent of our revenue,” faces “more challenging” new business conditions due to regional instability, reflected in a “prudent approach” to Q4 outlook.
• GAAP to non-GAAP metric basis differences may affect direct comparability to consensus estimates for margin and earnings results.

SUMMARY

Nutanix (NASDAQ:NTNX) delivered quarterly revenue of $703 million and ARR grew 15% year over year at the end of Q3 fiscal 2026, surpassing both revenue and non-GAAP operating margin guidance, and reported strong free cash flow and bookings. Management highlighted notable product and partnership launches—including support for NetApp and Lenovo storage, NKP Metal for Kubernetes, and expansion of the AI stack—which are designed to capitalize on migration activity from legacy environments and AI opportunities. Guidance was raised for both revenue and operating margins for the full fiscal year, despite explicit warnings that hardware supply and pricing pressures could persist into fiscal 2027 and regional disruptions may continue to impact bookings-to-revenue conversion timeframes.

• AI solutions—including Nutanix IdentityAI and new agentic AI capabilities—are positioned as incremental revenue streams and will support AMD GPUs in addition to NVIDIA, with further offerings planned for the second half of the year.
• Adoption of public cloud deployment options via NC2 increased meaningfully, driven by server hardware constraints and pricing dynamics, providing flexibility for clients facing infrastructure bottlenecks.
• The company's enhanced support for external storage platforms facilitated significant migrations for customers wishing to retain existing hardware, directly addressing legacy VMware replacement opportunities.
• Bookings growth over 20% TCV in the quarter reflects underlying demand, while conversion to recognized revenue remains delayed by ongoing supply chain disruptions and shifting customer procurement practices.
• Expansion in both new logo additions and renewal performance contributed to a higher full-year TCV bookings outlook, though execution remains dependent on resolution of supply chain challenges and geopolitical risks.

INDUSTRY GLOSSARY

• NC2: Nutanix Cloud Clusters, enabling Nutanix's platform to run in public cloud environments such as AWS, Azure, and OVH.
• Agentic AI: An AI software solution supporting agent-driven workflows, designed to run and orchestrate complex, multi-step processes on GPUs.
• External Storage: Storage infrastructure (such as EverPure FlashArray or Dell PowerFlex) that remains outside Nutanix's core HCI stack, now integrated via Nutanix platform support for easier migration.
• TCV (Total Contract Value): The aggregate value of contracts signed within a given reporting period, used as a forward-looking bookings metric.

Full Conference Call Transcript

Richard Valera: Good afternoon. And welcome to today's conference call to discuss third quarter fiscal year 26 financial results. Joining me today are Rajiv Ramaswami, Nutanix's CEO and Rukmini Sivaraman, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing third quarter fiscal year 26 financial results. If you would 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 10-K and our subsequent quarterly reports on Form 10 Q, 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 2, in San Francisco. We hope to see you there. Finally, our Q4 fiscal 26 quiet period will begin on Saturday, July 18. And with that, I will turn the call over to Rajiv. Rajiv?

Rajiv Ramaswami: Thank you, Richard and good afternoon, everyone. In our Q3, 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 Q3, 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 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 will 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. 2 of our largest new logo wins in the quarter, reflect success with our initiative to support external storage.

1 was a 7-figure win with a North American based health care services provider who chose the Nutanix cloud platform to replace their incumbent infrastructure software while retaining their EverPure FlashArray 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 are pleased with the progress we have 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 1 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 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, health care, 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 course 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 OBS 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 to migrate their Omnicell workloads to the Nutanix cloud platform. During the third quarter, we made a number of important product and partnership announcements. Mainly in conjunction with our annual .NEXT customer and partner conference in Chicago. Which drew over 5 thousand attendees. We announced Nutanix IdentityAI in March at NVIDIA's DTC 26. 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 neo clouds. This solution is anticipated to become available in the second half of 26. 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 FY 2029. 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 multiyear growth. And with that, I will hand it over to Rukmini Sivaraman.

Rukmini Sivaraman: Thank you, Rajiv, 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 2026 and the updated full year 2026 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 million 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 equivalents, and short term investments of $2.018 billion Moving to capital allocation. Up from $1.874 billion at the end of Q2. 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 employee's 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 million to $745 million, Non GAAP operating margin 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 billion 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 million 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 TCV 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 on 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 2027. 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. To withdraw your question, please press star 11 again. Please limit yourself to 1 question and 1 follow-up. Our first question comes from the line of Matt Martino with Goldman Sachs. Your line is open.

Analyst: Hey, good evening. Thank you for taking the questions. Rajeev, maybe to start with you. We are 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 is 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 back backdrop does not improve materially over the next kind of 3 to 6 months?

Rajiv Ramaswami: Yeah. Yes, Matthew. 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 had seen hardware prices from several 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 FY 2027. Now customers, how are they adapting? Well, they are looking for more flexibility on software licensing terms. There are some instances of customers delaying project but those are not very common, but that has that is happened 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 several 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 have seen some customers do that directly that your servers are more easily available and sometimes cheaper than buying enterprise servers. 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.

Rukmini Sivaraman: Yeah. Very clear. And then, Rukmini, for you, you know, 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 is 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? Thank you, Matthew, for that question. So a couple of points to note.

1, as you pointed out, and as Rajiv just covered, is the supply chain environment continues to be dynamic. And so and as we have talked about in the past, some of those dynamics can impact revenue timing from quarter to quarter. So that is the first piece. The second piece I will say is 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, Matthew, in terms of what it will take for us to get to the higher end, it is really I think if the supply environment continues to progress as it is, then, you know, we factor that in. But if it is better or we find that customers are able to navigate it better than we have assumed, then 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. Yeah.

Rajiv Ramaswami: And maybe I will add Yeah. I will add a couple more things there just clarifying the opening also. I think, you know, it also depends on how much traction we get quickly with our external storage solution, for example. And public cloud solution. So, you know, we do have new products coming to market. We have got the Pure Storage array and the PowerFlex already in the market. So that could also help.

Rukmini Sivaraman: Agreed. Thank you, Rajiv. Thanks, Matthew.

Operator: Thank you. Our next question comes from the line of Param Singh Oppenheimer and Company. Your line is open.

Analyst (Param Singh): So for my first 1, I 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 kind of trying to get a sense of what ARR traction could look like once incremental vendors come online with PowerStore this summer and then NetApp and then they are going later this calendar year.

Rajiv Ramaswami: Thank you. Yeah. Param, let me take that. Good question, of course. And you know, what we as we said in my--you know, during the call here earlier was the vast majority of data center infrastructure today is still external storage connected to legacy hypervisors on servers. Rich? With the solutions that we have in the market, with the tools that we already have, we have already started seeing traction. So you saw, for example, we had 2 significant deals that we about just on the call here, 1 with PowerFlex, 1 with EverPure. And then PowerStore coming on fairly soon here. Is gonna also accelerate that. And then later in the year, we should get NetApp.

So as we talked about at our Investor Day, over time, we intend to get to, you know, a big chunk of this addressable market And we do expect good continued growth. Now, obviously, it is slow. I mean, it is a small portion of our business at this point in time, but it is 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 in a supply chain constrained environment. So that is the that is the piece there. Was there a second part of your question that I did not address, Param?

Analyst (Param Singh): Oh, yeah. I wanted to understand, you know, how are you priced compared to your Oh, the pricing.

Rajiv Ramaswami: Yeah. Sorry. Yeah. Got it. So on the pricing, our goal is to try and price the solution as close to a full stack as possible. So we have today if you look at our stack, we have virtual compute, we have virtual networking, we have a full 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. Rich? 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 is not fully depreciated that they want to reuse. Rich? We want to make it easy for them. And at the same time, they are 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, etcetera. 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.

Analyst (Param Singh): Got it. Thank you so much, Rajiv. And as my follow-up really quickly, on the AI product that you, you know, you introduced and you talked about, any early feedback from customers there? You know, enterprise AI adoption is still in early stages, and in flux, but wanted to understand how the customers feel about your product portfolio as it stands today. And would you price that as an add-on or kind of like out of your full stack? Thank you. It just it just first of all, it just we do get captured value for that.

Rajiv Ramaswami: 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 is 2 parts of the solution. There is the solution that we can send directly to enterprises that they build their own you know, GPU clusters and build and run and operate it. The second part of our solution that we announced at our .NEXT conference is targeted towards neo-clouds and service providers. And 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, health care, education, some of these more regulated verticals tend to focus on having clusters on-prem, but it is still early days. And, yeah, 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 and a tailwind to our overall business over time. Got it. Thank you so much for those answers, Rajiv. Really appreciate it.

Operator: Thank you. Our next question comes from the line of Jim Fish with Piper Sandler. Your line is open.

Analyst (James Fish): Hi, guys. Thanks for the question here. Maybe circling back on the first 1 and kind of trying to get more certainty here. You And 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, it seems like you are seeing a pickup in NC2 because of rising server costs. Is that kind of the message you are you are trying to convey here is, hey. Look. Use us.

We can help you kinda go between it. And as a result, your NC2 offering is seeing incremental growth.

Rajiv Ramaswami: Yes. And for sure, by the way, Jim, on the second part of your question, there is 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 of this. We were doing a financial services company. We had a win this 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 actually get servers on AWS.

And use our software on it, and that those are more easily available and faster to get going. And so they are doing that. Rich? They are probably gonna do some mix of on prem migration, but also use a portion of this to migrate to Nutanix on AWS. In other cases, we have seen customers saying, it is going to take me some time to get servers. Let me start with NC2 on the public cloud, and then I can, you know, bring that back on-prem as and when my servers get ready. 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 have not really quite, you know, given you any more specifics at this point yet, and it is still I would say it is still a minority portion of our business for sure, but it is growing.

Analyst (James Fish): Portion of our business. Then, Rookmini, on the metric side of things, decent spike up of duration here, which is a little bit atypical of this quarter to begin with and you guys did not really call out any major massive kind of wins that would have influenced that. So can you walk us through what is causing that little bit of pickup here? And if that is kind of the rate we should be thinking about heading into Q4? And if we are going to see a bottom in net retention rate now here at 106, or if this is, again, kind of the rate to think about. Thanks, guys.

Rukmini Sivaraman: 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, you know, as we know, duration can also help on the revenue performance. So that is on duration. Nothing specific to note. And I would not necessarily assume that continues.

We just saw a mix in Q3 that contributed to that. And then to your question on NRR, you know, I will say it is important to note that the fact that we have outlined over the last couple of quarters as to the delaying recognition of revenue relative to bookings also impacts ARR and NRR. Rich? So that is what we are continuing to see here. And then the other piece that I have noted before is that average ACV or the ASPs of our new logo have been sort of increasing. Over the past few years, and we give a bit of 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 continuing 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 Wamsi Mohan with Bank of America. Your line is open.

Analyst: Yes. Thank you so much. You said full year TCV bookings are higher than at the 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: Yeah. I can take that, Wamsi. Thanks for the question. Look. I would say I think the reason we sort of gave you the color on bookings, which historically, we have not done as you know, but we have been doing it over the last few quarters because we think it is important for you to know what is 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 have not quantified specifically how much revenue is being deferred because of this. 1.

But what I will say that is, look, I think we have--we have--I think we have abundantly made clear on this call that some of the 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 for the supply chain challenge. And of course, this quarter, we are happy to be able to raise our full year number coming off of our Q3 and going into Q4.

So I would say it continues to be a factor here Wamsi, in terms of our revenue impact, but we have not really quantified it in terms of specifics. Okay. I think-- thank you. Yeah. Thank you. And then just to follow-up, you know, you mentioned something in your prepared remarks around the margins, right, just basically better top line and, you know, timing of hires. You have been obviously outperforming on this metric. Mike, how much of this upside would you say is just timing of spend maybe whether it is you know, hiring, whether it or maybe other things around revenue mix, or delayed investments.

I mean, how should we think about sustainability here given what we know from like, internally what you know from your plans here? Yeah. So on operating margin, I would 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 are, you know, obviously, we have taken our revenue guidance up for the full year as well, and we do believe that there is a large market opportunity that we need 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, and that is sort of the headline. Now, in addition,, like I said in my remarks, we have some fluctuations for the quarter in terms of timing of hiring, which we do expect to get caught up here over the over the next coming period of time. And then I think we will 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, right, in terms of going into next year and beyond. Okay. Thank you so much. Bye. Thank you.

Operator: Our next question comes from the line of Sammy Chatterjee with JPMorgan. Your line is open.

Analyst: Hi. Thank you for taking my question. This is MP on for Samik Chatterjee. For my first question, just wanted to ask, like, how did the sales via OEM partners track relative to your own expectations heading into the quarter? And any color on expectations for to track through the rest of the calendar year? Thank you. And I have a follow-up.

Rajiv Ramaswami: I will, so you are talking about sell through our OEM partners. Rich? And if you look at those, we have Cisco, we have Dell, and we have Lenovo. Largely, those are the OEM partners. We do a small amount to HPE as well. And I would say that, lastly, tracked as we expected. We have had Cisco continue 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 is growing in a small from a small base. And we do expect that to potentially go do more once we have the power store 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. 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 maybe large enterprises versus small and medium enterprise enterprises? Do you see any meaningful difference across those cohorts? Thank you. Those new logos, I mean, we got 700 this quarter. They are well distributed across that entire segment spectrum. You know, we have a 3 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, you know, 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 is more customers available in the in the lower tiers than the upper tiers. But from a distribution perspective, you know, we are seeing wins across all of them. Rich? Everything from the Global 2000, the largest customers all the way down to the smaller customers. So it is a well distributed set of new logos. Thank you.

Operator: Thank you. Our next question comes from the line of Matthew Hedberg with RBC Capital Markets. Your line is open.

Analyst: Hey, guys. This is Simran on for Matthew Hedberg. Congrats on the quarter, and thanks for taking our questions. Just 1 from me. Can you help us think through your available to renew pool into Q4 and any early thoughts you have around full year fiscal year 2027.

Rukmini Sivaraman: Sure. I can take that. Hi, Simran. So for Q4, look, think nothing to call out. And we have said that 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 somewhere. So nothing unusual to call out on that front from a Q4 perspective. And then in terms of fiscal year 2027, again, as I think as you all know, we really typically guide to fiscal year 2027 in our In our August earnings call after we report Q4.

So I will just leave it at that for now and say that APR is expected to grow in fiscal year 2027 as 1 would expect and leave it there. Simran. Thanks for your question. Okay. Thank you.

Operator: Our next question comes from the line of Jim Long with Barclays. Your line is open.

Analyst: Thank you. Yeah. 2 questions if I could as well. First, I want to go back to the competition, not just as 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 you know, options around servers and bringing in, you know, 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 1.

And then number 2, on the AI offerings, I understand that some of them are pretty new, but can you just give us a sense of kind of how they are scaling and how we should think about you know, 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. Thank you.

Rajiv Ramaswami: Yeah. So on the first 1 on the competitive dynamics Jim, so, I mean, if you look at the competitors there. 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 is 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 is more of a come from, situation. And then where do they go? They go to 1 of 2 or 3 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 is a competitive landscape. It has not really changed much in the last several quarters. it is kind of been there. And they are competing there with the KubeVirt-based virtualization solution. And we tend to do very well when it comes to mission critical VMware workloads running in production. We have a very solid, you know, 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 is much, much easier for them to go to the public cloud on the Nutanix platform itself, and we have seen that part of our business continue to grow very nicely. We had some good examples that we showcased at our conference as well. You know, Stateside, for example, for the large bank that is operating at pretty high volumes, across Azure, AWS, and on prem, all using the Nutanix solution. So we so that is a competitive landscape.

We feel quite comfortable that, you know, the easiest option for these Broadcom customers to migrate to is to Nutanix. it is much simpler. It does not 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 is you know, we have had the latest versions of our AI solutions fairly new The Agentic AI stack that we announced in February and then an enhancement to that into the service provider base in April.

And we are starting to see good traction. But it is still early days. Would say most of our customers are still in their early days of experimentation. They are still trying to get GPU clusters on prem. You know, the supply is always an issue there as well. But we are encouraged because it is we see this as a huge market opportunity. We talked about this at our last Investor Day recently here about being a multibillion dollar TAM over time. But it is still pretty early days. But we are starting to see good encouraging signs among several industry verticals. Okay. Thank you very much.

Operator: Thank you. Thanks, Anne. Our next question comes from the line of Sanjit Singh with Morgan Stanley.

Analyst (Sanjit Singh): Hi. This is Abhishek Murali on for Sanjit Singh. Thanks for taking the question. 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 think it is probably on track. For the platform to go into effect by the end of the year. And how is the pipeline shaping up? Thanks for taking the question.

Rajiv Ramaswami: Yeah. There again, it is very early days. Rich, in terms of actually having a solution in the market. Rich? We do not quite have that yet. Mean, of course, to be clear, we are already selling you know, our platform already supports their CPUs, and we will support more and more of their CPUs. that is here now, and that is that even predates this latest partnership. On the GPU side, again, you we do not quite have that solution in the market. But what I would say is customers are looking for options. Rich?

In fact, if you look at the market for AI chips, there is NVIDIA, of course, and then there is AMD, and then there is a public cloud providers building their own chips. And then there is a whole slew of chips targeting inference coming out into the market. So our customers generally want more and more choice. They wanna be able to run their AI 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, you know, second half of FY 2027 is where we are gonna see the first traction with that solution. it is gonna help from a customer perspective. Thank you.

Operator: Our next question comes from the line of Mike Cikos with Needham. Your line is open.

Analyst (Michael Cikos): Oh, terrific. Thank you. And congrats on the consistent execution in 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. 2 questions if I could, but first, the company does not guide to or communicate its bookings, at least externally. 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 with delayed conversions Become more material in Q3 versus what was observed in Q2?

Just any color on those 2 dynamics would be really appreciated. And again, congrats on the consistent execution here.

Rukmini Sivaraman: Hi, Mike. Thank you for those questions. First, to your question on bookings. You know, you are right that it is not a metric we report or intend to report. The reason we have 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. 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 you know, into revenue over time.

And so 1 sort of point I would say is if you look at the in Q3, Mike, we saw that bookings was strong was strong at over 20% On a TCV basis. And so I wanted to call that out. I know some of you again try to calculate bookings based on RPO, so you would see that there as well. So that was Q3. We have not really quantified on a full year basis. Mike, how much it was relative to kind of 3 months ago or anything like that, but I wanna 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 am 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 are going to go with. I think Rajiv mentioned earlier that with some of the server providers, we are actually seeing lead times normalize. All the 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. Deploy. And so, you know, I would say, again, we are not giving quarter to quarter how much revenue is moving out. But in the aggregate, of course, we were pleased to be able to raise our Thank you. Full year revenue guide on the back of Q3. Thank you, Mike.

Operator: Our next question comes from the line of Radi Sultan with UBS. Your line is open.

Analyst (Radi Sultan): Awesome. Yeah. Thanks for taking the questions. Maybe just first for Rajiv. Just with the vSphere 9 deadline at the end of next year, any sort of trends in customer behavior as we approach that, that VMware deadline? And then what are you doing to sort of attack and accelerate some of those migrations ahead of that deadline end of next year?

Rajiv Ramaswami: Yeah. First of all, I mean, it is it is a point in time. Rich? And we have already said that this migration happens over time in multiple waves and is just 1 more point where customers have to make choices. Now the color I will give you on this is that most customers who have purchased VCF today have not fully adopted VCF. Rich? They are buying VCF. But they are deploying what they were deploying before, which is VCF with external storage.

And now the same thing will happen with VCF 9. it is gonna force these customers to go deploy and to go buy VCF 9, but it is not clear to me that they are gonna all deploy it fully. Rich? it is gonna take time, and they may still deploy portions of it. Now if they wanna deploy all of it, by the way, it is gonna require a substantial hardware refresh. Including their, you know, 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. Rich?

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 would like to, we can do a full HCI conversion. VCF 9 is gonna be quite a significant upgrade for you all in terms of the effort that you are gonna 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.

We and then we have also the automated migration tools behind that and, of course, the commercial incentive All of those put together to provide a good proposition for customers to migrate. As I said, we are seeing, you know, we are seeing this. Rich? We are seeing this with the customers coming and migrating every quarter. As we saw in our new logos. Got it.

Analyst (Radi Sultan): Super helpful. And then just 1 follow-up for Rukmini. Just to be thinking about TCV bookings coming in higher relative to expectations for the year. Just wanted to clarify, was that simply Q3 TCV bookings outperformed and now your expectations for the full year are higher or that is also inclusive of sort of Q4 TCV bookings you kind of expect to be higher than last quarter. Then maybe if that is the case, can you maybe just unpack, like, what actually is driving that outperformance. Thank you.

Rukmini Sivaraman: Yes. Thanks, Radi, for the questions. I would say, look, I think overall for the year was the comment we made, that for the full year, we are we are expecting the TCV bookings growth to be higher than we would expected 3 months ago. And in terms of what is driving that, I think a couple of things. 1 is the point that someone asked earlier on a longer contract duration. Which is which helps with TCV, of course. And then we have also seen better renewals performance. So those are the 2 main things driving the TCV bookings growth higher.

And, of course, you know, we are continuing to make sure that we are 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. Thank you so much. Thank you.

Operator: Our next question comes from the line of Simon Leopold with Raymond James.

Analyst (Victor Chu): Hi. This is Victor on for Simon. So I think you kind of answered that in your last remark. But just to clarify, 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: Yes. I am not sure what the question is, Victor. I think what we are trying what we said in our prepared remarks is that our bookings expectations for the full year for on a TCV basis is higher than we had expected 3 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 was strong at over 20% Year over year.

Analyst (Victor Chu): And that and slightly higher revenue recognition, and that is what is driving your higher guidance outlook slightly? But yeah, because we are happy to raise our What between, you know, what changed between last quarter and this quarter, you know, that is giving you confidence in, you know, your ability to do that. Is it just better traction that you are seeing?

Rukmini Sivaraman: The bookings to raise the full year revenue guidance. Is that the question?

Analyst (Victor Chu): Yeah.

Rukmini Sivaraman: Yeah. So, I mean, we obviously beat Q3. Which we were really happy to see that Q3 was really strong quarter, So happy to beat Q3 and then take up the guidance for the full year as well.

Analyst (Victor Chu): Okay. And just really quickly, how much of the new logo wins are coming from VMware versus new HCI customers? I think you it is predominantly from customers transitioning. Is that is that correct?

Rajiv Ramaswami: And most of them are coming from VMware customers. Rich? VMware platform customers. Yeah. Thank you.

Operator: Thank you. Our next question comes from the line of Benjamin Bollin with Cleveland Research Company. Your line is open.

Analyst (Benjamin Bollin): Good evening, everyone. Thank you for taking the question. Rajeev, I think you have introduced some programs to decouple software from hardware and kinda make customers' lives easier. Could you talk about some of the things that you are doing, and how you think that is impacting the overall visibility? And then I have a follow-up.

Rajiv Ramaswami: Yeah. By the way, we have had this with most of our OEM partners for quite a while. Rich? I mean, we 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 is Dell or HP or Lenovo. The exception was Super Micro. Rich, where typically with Super Micro in the past, the solution was more you know, Nutanix software and Supermicro hardware But, of course, we do not 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, 'Customers, you make your software choice. And then, yeah, if you would like to go buy Super Micro hardware, please feel free to do so. Also have your choices about the customer. So that is the only thing that we have made recently on in terms of the supply. Situation. Rich? Just to provide customers again, you know, make very clearly their choices of you know, where they tend to go. Now in the past, you know, this is not as much of an issue. Rich?

But with the supply being what it is, now we have to provide even more flexibility and choice. And that is what we did. And so that is now, you know, how we typically sell today. Rich? And basically, what we are doing is you know, customers usually are looking at buying our software, you choose which hardware you wanna put it Okay.

Analyst (Benjamin Bollin): The 1 other question is I know you are not quantifying the amount of time or the duration from when you are collecting the cash to, you know, maybe when the software rev rec 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 and where that stands with customers and you know, how that has changed over the past few quarters?

Rajiv Ramaswami: I mean, I will 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, 3 to 4 weeks, to 6 months. Rich? That is a range. That we see. And it varies by the week, by the month, by the configuration by the vendor. Thank you. Thanks, Benjamin.

Operator: Ladies and gentlemen, I am showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.

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