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Nutanix Stock Skyrockets 21% After Earnings

‘We’re pleased to see our new relationship with HPE start to blossom,’ says Nutanix CEO Dheeraj Pandey during the company’s quarterly earnings call Monday night.

Nutanix stock has been soaring in after-hours trading Monday night after the hybrid cloud specialist reported strong first fiscal quarter earnings thanks, in part, to its new partnership with Hewlett Packard Enterprise.

“We had a strong quarter, a record number of large deals, continued progress in the rollout of a subscription model and a growing demand for new products,” said Nutanix CEO and founder Dheeraj Pandey during his company’s first fiscal quarter 2020 earnings call with media and analysts. “Our long-term differentiation continues to be at the intersection of public and private clouds in how we virtualize, simplify and integrate the silos to make computing invisible anywhere.”

Nutanix stock hit $34.84 per share in after-hours trading, up 21 percent from when the stock market closed Monday at $28.75 per share. The San Jose, Calif.-based company currently has a market cap of $5.52 billion.

[Related: Nutanix Hires Former Nexenta CEO To Build ‘Hybrid Cloud Powerhouse’]

Nutanix, which recently hired a new channel chief, reported software and support sales reaching $305 million, up 9 percent year over year in the first quarter of 2020, which ended Oct. 31, 2019. The company also saw deferred revenue skyrocket nearly 40 percent year over year to $975 million in its first quarter.

One key area of new growth came from Nutanix’s new partnership with Hewlett Packard Enterprise around hyperconverged infrastructure and HPE’s GreenLake’s consumption-based pay-per-use offering.

“We’re pleased to see our new relationship with HPE start to blossom. This being the first quarter since the integrated products, HPE’s huge customer base can now easily adopt Nutanix,” said Pandey. “As a result, we saw a number of new customer wins in these solutions during the quarter. In the first quarter, more than half of our HPE customers were also new logos to Nutanix, validating this new partnership and our software increased exposure to HPE’s install base.”

Pandey said the HPE partnership is resonating “faster than any of our past OEM partnerships.” The CEO said Nutanix and HPE won a nearly $2 million deal in the first quarter with a new large EMEA-based insurance company. “Early success is compelling this customer to already explore our Database-as-a-Service use case with Nutanix Era,” he said.

Nutanix ended the first quarter with nearly 15,000 total customers and closed a record high of 66 deals worth more than $1 million. Nutanix also saw continued new product traction with 28 percent of deals including at least one product outside the company’s core offering.

Nutanix reported total revenue of $315 million, representing less than one percent sales growth year over year. However, the flat revenue during the quarter is due to Nutanix’s ongoing transition to software subscription and a significant reduction of hardware revenue from the prior year. Hardware revenue accounted for only $9.7 million in the quarter, down from $32.5 million year over year. Subscription revenue generated $218 million, up from $127 million year over year.

“We think we have stable term lengths now. Our sales people are getting used to selling subscription. Our customers are getting used to hearing about subscription. Our channel partners have gotten enabled,” said Pandey. “We know how to defend value and protecting value of pure software is getting better as well. All in all, this was a tough 12 months [of transition] for us, but I think it was well worth it. … We’ve put some real meat behind the bones when it comes to pipeline, marketing and demand generation.”

For the full year of fiscal 2020, Nutanix expects software and support revenues to be between $1.3 billion and $1.4 billion.

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