Nutanix's $2.55B ARR says the VMware exodus still pays, on someone else's server lead times
ARR and revenue both grew 16% in the July quarter, helped by external storage and NC2. Fiscal 2027 guidance implies mid-single-digit growth off that run rate, with hardware delays sitting inside the guide.
The Product Desk
What happened
- Nutanix reported revenue of $757.1 million for the quarter ended July 31, up 16% and ahead of the $738.3 million consensus.
- Annual recurring revenue reached $2.55 billion, also up 16%.
- Adjusted earnings came in at 60 cents a share against 37 cents a year earlier and a 49-cent estimate.
- CEO Rajiv Ramaswami credited external storage, the NC2 public-cloud offering, Kubernetes and database management for the quarter.
Why it matters
- capability Buyers who cannot fund new nodes are now reachable, so a VMware displacement no longer has to wait on the customer's storage refresh calendar.
- cost The server price rises land on customer budgets rather than Nutanix's price list, which is why the pressure surfaces as slower project starts instead of discounting.
- exposure Once licences are dated to server arrivals, part of the fiscal 2027 revenue line depends on delivery schedules set by hardware vendors, not by Nutanix.
- decision Nutanix chose to spend the headcount savings rather than bank them, funding AI, cloud-native and sovereignty work out of margin it had just proved it could earn.
What support for external storage arrays removes from a Nutanix deal is the server invoice. The company says customers can now adopt its software stack while continuing to run the servers and storage they already own, which cuts migration cost and complexity [11]. Nutanix supports platforms from Dell Technologies, Everpure and NetApp, and although NetApp support is only in limited availability, the company says it already contributed to several seven-figure annual contract value deals in the quarter [12]. External storage is a small share of deployments today, and Ramaswami expects it to accelerate in fiscal 2027 [13]. NC2, which runs the same software in public clouds, does a similar job of letting a customer proceed without replacing as much infrastructure [23].
That flexibility is doing work because the hardware underneath got expensive. Server prices and delivery times have both moved against customer budgets, and Ramaswami said there is "no near-term letup," with the company assuming increases run through the fiscal year just started [14]. Nutanix has not repriced its software, but hardware costs move the timing and size of projects [15], and the company plans to use more future start dates in fiscal 2027 so licences and revenue recognition line up with late server deliveries [16].
When the pipeline does convert, the operating leverage is real. Operating income of $198 million against $119.5 million a year earlier is about 66% growth on 16% revenue growth, roughly four times the top line [5][24], and the adjusted operating margin widened by 7.9 points to 26.2% [6][25]. Free cash flow reached $277.6 million from $207.8 million [7].
The guide does not extend that line. First-quarter revenue is guided to $755 million to $765 million against an analyst figure of about $756 million [18], a midpoint 0.4% above the quarter just closed [27]. Four times that midpoint is $3.04 billion, some $165 million short of the full-year midpoint, so the growth is booked for later quarters [29]. Annualise the July quarter and the full-year midpoint implies about 5.8% growth [26]. Free cash flow is guided to $850 million to $950 million [21], under the $1.11 billion the quarter annualises to [30]. Part of the margin step is deliberate: the roughly 5% headcount reduction is being reinvested, mostly in AI, cloud-native products, sales capacity and digital sovereignty [22], and the guided margin midpoint of 24.5% sits 1.7 points below what the quarter delivered [20][28].
Which leaves the Broadcom question resting on customer behaviour rather than product. Ramaswami called the pace of defections "steady and climbing," put the migration window at about five years, and named inertia rather than technology as the obstacle [17]. Nutanix added more than 3,000 customers over the year, though the CEO warned against reading quarterly additions closely because a handful of large deals can swing the count [10]. Shares rose more than 6% in initial after-hours trading [8]. The pace of the VMware displacement is being set by budget cycles and server lead times, not by anything Nutanix ships.
What to watch
- Whether NetApp support leaves limited availability, and how much external storage annual contract value shows up in fiscal Q1.
- Whether server lead times force Nutanix to widen its use of future start dates, and what that does to reported revenue relative to ARR.
- Whether the 24% to 25% fiscal 2027 margin guide holds once the reinvested headcount savings appear in operating expense.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence58
- Adoption62
- Hype gap+14
- Incentives68
- Confidence55
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Nutanix revenue for the quarter ended July 31 rose 16% from a year earlier to $757.1 million.
- [2]
The consensus revenue estimate for the quarter was $738.3 million.
- [3]
Adjusted earnings rose to 60 cents a share from 37 cents a year earlier, beating the 49-cent analyst estimate.
- [4]
Annual recurring revenue reached $2.55 billion, up 16%.
- [5]
Operating income jumped to $198 million from $119.5 million a year earlier.
- [6]
Adjusted operating margin rose to 26.2% from 18.3%.
- [7]
Free cash flow rose to $277.6 million from $207.8 million.
- [8]
Shares climbed more than 6% in initial after-hours trading.
- [9]
CEO Rajiv Ramaswami said "it was a strong Q4 overall" and cited broad-based performance including external storage, the NC2 public-cloud offering, Kubernetes and database management.
- [10]
For the full year Nutanix added more than 3,000 customers, though the CEO cautioned against reading too much into quarterly customer additions because the number varies with the balance between a few large deals and many smaller transactions.
- [11]
Nutanix's expanding support for external storage arrays lets customers adopt the Nutanix software stack while continuing to use servers and storage they already own, reducing migration cost and complexity; Ramaswami said customers can preserve existing storage and servers and just replace their software with Nutanix software.
- [12]
Nutanix now supports multiple storage platforms from Dell Technologies, Everpure and NetApp; NetApp support is in limited availability and Nutanix said it contributed to several seven-figure annual contract value deals in the quarter.
- [13]
External storage represents a small share of deployments, but Ramaswami said it is growing rapidly and should accelerate in fiscal 2027.
- [14]
Higher server prices and extended delivery times strain customer budgets; Ramaswami said "we don't see any near-term letup" in hardware price increases and that the company assumes they continue through the fiscal year just started.
- [15]
Hardware inflation has not changed Nutanix's software prices, but it can affect the timing and size of customer projects.
- [16]
The company expects to use more future start dates in fiscal 2027, aligning software licences and revenue recognition with delayed server deliveries.
- [17]
Ramaswami described the pace of Broadcom-related VMware defections as "steady and climbing," said migration activity could continue for about five years, and said the main obstacle is customer inertia rather than technology.
- [18]
For fiscal Q1 Nutanix forecast revenue of $755 million to $765 million and an operating margin of 26% to 28%; analysts were projecting revenue of about $756 million.
- [19]
For fiscal 2027 Nutanix expects revenue of $3.18 billion to $3.23 billion, against a $3.20 billion consensus.
- [20]
For fiscal 2027 Nutanix guided an adjusted operating margin of 24% to 25%.
- [21]
For fiscal 2027 Nutanix guided free cash flow of $850 million to $950 million.
- [22]
Nutanix recently cut about 5% of its workforce and plans to reinvest most of the savings in artificial intelligence, cloud-native products, sales capacity and digital sovereignty, which Ramaswami called "a retooling of investment."
- [23]
NC2 runs Nutanix software in public clouds and, with external storage support, gives customers ways to proceed without replacing as much infrastructure.
- [24]
Operating income grew about 65.7% year over year, roughly four times the 16% revenue growth rate.
- [25]
Adjusted operating margin expanded by 7.9 percentage points year over year.
- [26]
Annualising the July quarter gives a $3.028 billion run rate; the fiscal 2027 revenue midpoint of $3.205 billion implies about 5.8% growth on that base.
- [27]
The fiscal Q1 revenue guidance midpoint of $760 million is 0.4% above the $757.1 million just reported.
- [28]
The fiscal 2027 adjusted operating margin midpoint of 24.5% is 1.7 points below the 26.2% reported for the quarter.
- [29]
Four times the Q1 guidance midpoint is $3.04 billion, about $165 million below the fiscal 2027 revenue midpoint of $3.205 billion.
- [30]
Q4 free cash flow annualises to about $1.11 billion, above the $900 million midpoint of fiscal 2027 free cash flow guidance.
Get this ledger inside ChatGPT. Ask about any Clarity Today story and the answer comes with its figure, every claim with its verdict, and the sources. Free, no account. Add it to ChatGPT or Claude
Sources
1 independent publisher whose own reporting we read for this story.
- siliconangle.comNutanix tops estimates as external storage growth helps counter hardware squeeze
1 article · August 26, 2026
Topics and entities
Follow any of these and your For You feed starts watching them — no settings page required.