Shares of Nutanix (NTNX) earlier this month hit a new record high of $66.99 after the company in late February reported better-than-expected fiscal Q2 (Jan.) results. Recently trading around $61.75, the stock has risen 29.4% YTD versus a 9.1% gain for the Nasdaq Composite.

Demand remains healthy for Nutanix’s hybrid multi-cloud software platform that’s used to run apps and manage data across clouds. In this new era of increased tech cost scrutiny, Nutanix’s solutions help companies reduce complexity in their operations, boost efficiency and contain expenses. The company is now attracting a bigger pool of larger organizations.

Total revenue in FQ2 rose 16% to $565.2 million, 2.5% above the consensus estimate. Annual contract value (ACV) billings gained 23% to $329.5 million, coming in 8% above the high end of the guidance range of $295 million to $305 million. Total annual recurring revenue (ARR) of $1.74 billion was up 26%. Gross margin of 87.3% rose 250 basis points year over year, while operating margin of 21.9% jumped 750 basis points. Per-share earnings of 46 cents topped the consensus by 17 cents.

For customers, the Nutanix Cloud Platform offers modernization and provides a seamless path to the public cloud. The platform has the ability to smoothly run and manage workloads wherever the optimal performance and TCO can be achieved.

The company’s largest wins in FQ2 demonstrated the appeal of the Nutanix Cloud Platform to organizations that are looking to adopt hybrid multi-cloud operating models and fully optimize the performance of their workloads, while also improving their TCO, according to Nutanix CEO Rajiv Ramaswami.

In the January quarter, strong renewals across the customer base were an important growth driver. There were some early renewals as well as co-term renewals. In terms of the pipeline, there’s now a higher mix of larger deals, although they bring with them greater variability when it comes to the timing of closing new and expansion business.

Nutanix is seeing larger deals in the pipeline because the platform has matured enough to support bigger enterprises. The company has assembled a dedicated sales team to go after these larger customers. Nutanix is also seeing an expanding opportunity to win some business from VMware (now owned by Broadcom). Unhappy VMware customers who don’t like Broadcom’s disruption in pricing and contract terms are now considering alternative vendors.

On the FQ2 earnings call, Ramaswami said the VMware pipeline is expanding because there are “significant concerns” from VMware customers about the Broadcom acquisition, which is leading to a “multi-year opportunity for us to win new customers and to gain share.” While he said the pipeline is “quite substantial and growing,” the timing and magnitude of these deals is a bit unpredictable. Ramaswami said he expects the VMware contribution to build gradually.

Why the slow ramp? First off, many VMware customers signed multi-year enterprise agreements (with 3- to 5-year terms) prior to the acquisition closing. This bought them some time to make decisions. Also, a number of VMware accounts are still on legacy storage, which would, in many cases, require a refresh of storage and/or servers before these customers could move to the Nutanix Cloud Platform. This infrastructure lag would impact the timing of Nutanix software purchases.

For customers looking to modernize and migrate away from VMware, Nutanix basically has a “like-for-like solution,” Ramaswami said. Nutanix offers full-stack capabilities, ranging from the hypervisor to software-defined storage, networking and management. The company has been targeting more advertising dollars to maximize the awareness of its platform as the easiest viable alternative for VMware customers who are looking for a change.

Nutanix has put in place incentives for partners helping to assist VMware customers in their evaluation of its platform. As partners bring in new VMware customers, Nutanix is giving them even more incentives, according to Ramaswami. The company is also assisting VMware customers with their migrations. For VMware customers who are ready to migrate well before their current contracts are up, Nutanix is offering price incentives to help them deal with dual operating costs.

For FQ3 (April), Nutanix expects total revenue of $510 million to $520 million—the midpoint was $5 million above the consensus. For FY’24 (July), the company sees both revenue and ACV billings growth of 15% at the midpoints, with free cash flow of $420 million to $440 million (above the previous outlook of $340 million to $360 million). Looking ahead to FY’25, Nutanix will have a larger customer renewal cohort relative to FY’24, which will provide a nice tailwind.

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