Nutanix's 2026 Q1 Earnings Call: Contradictions Emerge on Nrr Dynamics and U.S. Federal Revenue Growth Outlook

Date of Call: None provided

Financials Results

• Revenue: $671M, up 13% YOY
• EPS: Non-GAAP EPS $0.41 per diluted share; GAAP EPS $0.21 per diluted share
• Gross Margin: 88% non-GAAP gross margin
• Operating Margin: 19.7% non-GAAP operating margin, toward lower end of guided 19.5%–20.5% range

Guidance:

• Q2 FY26: Revenue $705M–$715M; non‑GAAP operating margin 20.5%–21.5%; diluted shares ~296M.
• FY26: Revenue $2.82B–$2.86B (midpoint ≈ +12% YOY); non‑GAAP operating margin 21%–22% (unchanged); free cash flow $800M–$840M (up vs prior guide; ~28.9% FCF margin at midpoint).
• Revenue reduction reflects timing shifts (more bookings with future start dates and OEM recognition timing); bookings growth expectations unchanged.

Business Commentary:

• Revenue and Bookings Performance:
• Nutanix reported quarterly revenue of $671 million, within the guided range, representing a year-over-year growth rate of 13%.
• Bookings were slightly ahead of expectations, but the solid performance did not translate into revenue as expected due to business with start dates outside of the quarter.

• The company reduced its full-year revenue guidance due to the timing of revenue recognition, though the overall fundamentals of the business remain unchanged.

• Customer Demand and New Logo Wins:

• Nutanix saw ARR growth of 18% year-over-year, with notable new logo additions and solid free cash flow generation.

• The company highlighted significant wins, including a North American-based provider of agricultural products and a European government agency, attributing this success to the appeal of their hybrid multi-cloud capabilities.

• Impact of Business Model and Revenue Timing:

• The company observed a larger-than-expected portion of bookings with future start dates, resulting in revenue being shifted into future periods.

• This was due to increased customer demand for flexibility in aligning license timelines with their adoption schedules, particularly in Broadcom migrations.

• Supply Chain Tightness and Strategic Adjustments:

• Nutanix acknowledged potential supply chain constraints and anecdotally reported component shortages, which could impact future business.
• To mitigate this, the company is expanding its hardware competitor list and supporting more external storage options to provide broader applicability of its software.

Sentiment Analysis:

Overall Tone: Neutral

• Management said bookings were slightly ahead and ARR grew 18% YoY to $2.284B but Q1 revenue was shifted by future license start dates; they raised FY26 free cash flow guidance to $800M–$840M while keeping bookings outlook unchanged, framing the revenue change as timing-related.

Q&A:

• Question from Matt Hedberg (RBC): NRR was flat quarter-over-quarter—can you speak to the dynamics between new logos and expansions this quarter and throughout FY26?
  Response: NRR stabilized at 109% QoQ; new logos add to ARR but expansions drive NRR, so larger new‑logo deal sizes don't necessarily increase NRR.

• Question from Matt Hedberg (RBC): How did the U.S. federal business perform relative to expectations and what was the impact of the government shutdown?
  Response: U.S. federal grew double‑digits YoY off an easy comp, is <=10% of revenue, will be more variable going forward, and uncertainty was factored into guidance.

• Question from James Fish (PSC): You started reporting RPO—what was the bookings/RPO growth and why did backlog decline; does seasonality explain the apparent shift into fiscal Q4?
  Response: RPO grew ~26% YoY; the small backlog decline is consistent with normal seasonality and FY26 first‑half/second‑half mix is similar to FY25.

• Question from James Fish (PSC): How should we think about pushout time frames compared with past supply‑chain pushouts?
  Response: Pushouts are mainly due to customer‑requested flexible start dates tied to Broadcom migrations and OEM recognition rules, not supply shortages in Q1; company is mitigating via more server partners, broader hardware/storage support and cloud options.

• Question from Matthew Martino (Goldman Sachs): How much of the Q1 revenue slip was customer‑requested future start dates vs OEM shipment timing vs deal slippage, and is this timing only or indicative of demand softness?
  Response: Primarily the higher proportion of bookings with future start dates; bookings were slightly ahead, so management views this as timing rather than demand softness.

• Question from Matthew Martino (Goldman Sachs): Given revenue recognition is shifting later, how should we model duration/timing into FY27?
  Response: FY27 will depend on three factors—deferred FY26 revenue, FY27 bookings, and any FY27 deferrals; management will provide more color at Investor Day.

• Question from Samik Chatterjee (JPMorgan): Have higher component/hardware costs reduced customer propensity to spend and what would FY26 guide look like adjusted for timing?
  Response: No material demand pullback observed despite hardware cost pressures; the FY26 guide reduction reflects timing (customer start‑date flexibility and OEM recognition), not a demand collapse.

• Question from Ruplu Bhattacharya (Bank of America): How does the pipeline of large deals look and what percent of revenue is from third‑party OEMs; any update on Dell and Cisco expectations?
  Response: Healthy pipeline with several large deals but uncertain timing; OEM mix is growing—Cisco ramping, Dell early-stage with PowerFlex coming next summer—management hasn't quantified OEM % yet.

• Question from Ruplu Bhattacharya (Bank of America): Is the increase in bookings with future start dates structural and could keeping margins/investments steady hurt future growth?
  Response: Trend seen as structural (multi‑year Broadcom migrations and growing OEM business); company will balance prudent investment and margin improvement and expects higher FCF while continuing to invoice/collect cash.

• Question from Nehal Chokshi (Northland Capital Markets): Did you disclose how much bookings were up YoY and what can you say about cancelable backlog?
  Response: Bookings YoY not disclosed; cancelable backlog is a small portion of RPO and generally converts to revenue over time.

• Question from Nehal Chokshi (Northland Capital Markets): What market share are you capturing in VMware migrations and are customers moving to container‑only or mixed environments?
  Response: No precise market‑share number provided; management says they're winning a meaningful portion of migrations and customers typically run mixed environments—existing workloads mostly VMs, net‑new on containers.

• Question from Jason Ader (William Blair): Why did migration‑related pushouts surface now rather than earlier—budget, macro, or something else?
  Response: Not new but more pronounced now because Broadcom migration volume has increased, creating a larger need for flexible license start dates; the effect manifested late in Q1.

• Question from Jason Ader (William Blair): Should Nutanix be more aggressive on upfront pricing to win VMware renewals given hardware refresh costs?
  Response: Nutanix aims to be competitive but the key barrier is customers needing new hardware; company focuses on reducing hardware refresh needs via broader hardware and external storage support and highlighting TCO benefits.

• Question from Michael Cikos (Needham): Is revenue recognition dependent on OEM partners' shipment timelines or customer flexibility, and can Nutanix help OEMs move boxes?
  Response: Revenue recognition is tied to OEM shipment timing; Nutanix does not control OEM ship schedules and has limited ability to accelerate partner shipments.

• Question from Michael Cikos (Needham): Of the roughly $80M midpoint shortfall for the year, how much is driven by Q1 versus expected future quarters?
  Response: Management didn't provide a dollar split; Q1 would have been above guidance if initial assumptions held and seasonality this year resembles last year.

• Question from Benjamin Bollin (Cleveland Research): What are you doing to make large customer migrations easier (POC, replatforming, training) and shorten cycles?
  Response: They deliver effective POCs, expand hardware/storage certifications, provide professional services and deal‑pursuit teams, and pursue workload‑specific entry points rather than full immediate displacement.

• Question from Benjamin Bollin (Cleveland Research): Is enterprise AI spending materially changing the opportunity or priorities for your customers?
  Response: Most customers are still early in AI adoption—primarily experimenting—so AI hasn't materially diverted broader spend yet.

• Question from Oppenheimer (Analyst): If migrations are larger deals, why didn't RPO reflect stronger benefit this quarter and shouldn't migrations drive revenue acceleration into 2027?
  Response: While migrations increase TCV, many bookings had future start dates which shifted revenue timing; RPO includes deferred revenue and noncancelable backlog and quarter‑to‑quarter moves were seasonal—acceleration into 2027 depends on bookings and deferral patterns.

• Question from Oppenheimer (Analyst): Why not be more aggressive to capture VMware migrations across the board?
  Response: Strategy focuses on removing barriers (major hardware/storage support and certifications) and balancing backward compatibility with investments in cloud‑native and AI rather than broad retroactive support for every legacy platform.

Contradiction Point 1

National Revenue Retention (NRR)

It involves differing explanations of how new logos impact NRR, which is a crucial metric for understanding customer retention and growth.

Can you explain the dynamics of NRR and how new logos and expansions affect it? - Simon (Matthew Martino's associate)

20251126-2026 Q1: NRR reflects customer retention and expansion, not directly impacted by new logos. Average deal sizes for new logos vary, with some customers migrating their entire estate at once. NRR remained stable at 109% for Q1, indicating balanced performance between retention and new business. - [Rukmini Sivaraman](CFO)

How do new logo dynamics, including full migrations, impact NRR? How should we differentiate new logos from expansions this quarter and through 2026? - Simran Biswal (RBC Capital Markets, Research Division)

2026Q1: New logos don't typically affect NRR as they don't directly impact retention or expansion. The increase in average deal sizes could lead to full migrations, which might impact expansion, but this remains a puts and takes situation. NRR was flat quarter-over-quarter as reported. - [Rukmini Sivaraman](CFO)

Contradiction Point 2

U.S. Federal Revenue and Growth Expectations

It involves differing perspectives on the performance and growth expectations of the U.S. Federal business, which could impact revenue projections and investor expectations.

How did the U.S. Federal business perform relative to expectations, and what impact did the government shutdown have? - Unknown Analyst

20251126-2026 Q1: U.S. Federal revenue is 10% or less of annual revenue with seasonal strength in Q1. U.S. Federal grew double digits year-over-year. Future variability expected due to personnel changes and policy changes. Optimistic on the opportunity and factored the uncertainty into Q2 and fiscal year guidance. - [Rukmini Sivaraman](CFO)

Can you discuss customer growth from competitors and federal vertical insights? - Meta Marshall (Morgan Stanley)

2025Q2: In the federal sector, performance improved in Q2 but remains a small portion of revenue. The U.S. government's dynamics impact our outlook. - [Rajiv Ramaswami](CEO)