Nutanix Earnings Call: Growth Intact Amid Supply Strain

Nutanix Inc ((NTNX)) has held its Q2 earnings call. Read on for the main highlights of the call.

Nutanix’s latest earnings call painted a picture of a company executing well operationally while navigating growing macro and supply-chain headwinds. Management highlighted a revenue beat, robust ARR growth, strong margins and healthy free cash flow, but also acknowledged worsening CPU and memory shortages that are pushing out hardware deliveries and forcing a reset of near-term revenue expectations.

Revenue Beat and Double-Digit ARR Growth

Nutanix reported Q2 revenue of $723M, topping its guidance range of $705M to $715M and underscoring resilient demand for its platform. Annual recurring revenue climbed to $2.356B, a 16% year-over-year increase that reflects steady expansion of its subscription base despite some renewal timing noise.

Margins and Profitability Surge Above Expectations

Profitability was a standout, with non-GAAP gross margin reaching 88.6% and non-GAAP operating margin hitting 26.2%, well above the guided 20.5% to 21.5%. Non-GAAP net income came in at $164M, or $0.56 per share, while GAAP net income was $103M, or $0.36 per share, showing that scale and operating discipline are firmly kicking in.

Strong Free Cash Flow and Shareholder Returns

Free cash flow reached $191M in Q2, translating into a 26% FCF margin and reinforcing the company’s cash-generating power even as supply issues build. Nutanix ended the quarter with $1.874B in cash and short-term investments, after deploying $333M on share repurchases and spending about $48M to retire shares tied to RSU tax liabilities.

Bookings Strength and Record New Customer Wins

Total contract value bookings grew in the mid-teens percent, signaling that underlying demand is still moving higher even if revenue recognition is being delayed by hardware shortages. The company added more than 1,000 new customers, its strongest quarterly new-logo performance in eight years, driving a 24% year-over-year jump in remaining performance obligations.

AMD Partnership Broadens AI Ambitions

A multiyear strategic partnership with AMD adds a new growth leg focused on AI infrastructure and agentic AI platforms. AMD plans a $150M common-stock investment and up to $100M in joint R&D and go-to-market funding, with the first Nutanix-powered agentic AI platform targeted for late 2026 to expand the company’s reach into enterprise AI workloads.

Enterprise Wins and Platform Expansion Across Vendors

Management highlighted notable deals with a large Global 2000 asset manager, a major healthcare provider and an expanded relationship with a big EMEA IT services player, underscoring traction with blue-chip customers. Nutanix also rolled out GA support for EverPure with Pure Storage, secured multiple wins with Dell PowerFlex and continued to enhance its cloud platform and AI offerings for hybrid, multi-cloud and regulated environments.

Supply-Chain Constraints Distorting Revenue Timing

The main near-term drag is worsening shortages of CPUs and memory, with CPU availability flagged as the most acute bottleneck, lengthening server lead times for customers. These constraints are delaying server procurement and pushing out when Nutanix can recognize revenue and collect cash, turning what would be near-term upside into a timing issue rather than a demand problem.

Lowered Revenue Outlook and Margin Step-Down

Reflecting these supply issues, Nutanix cut its Q3 revenue guidance to $680M to $690M and trimmed its full-year revenue outlook to $2.80B to $2.84B. The company also guided Q3 non-GAAP operating margin down to 16% to 17%, although it kept the full-year operating margin target intact at 21% to 22%, signaling confidence that profitability will rebound as delayed deals convert.

NRR Deceleration and Renewal Timing Effects

Net dollar-based retention eased to 107%, a deceleration that investors will watch closely in coming quarters. Management pointed to timing factors, including delayed U.S. federal renewals tied to a government shutdown backlog, as key drivers of near-term ARR and NRR pressure rather than structural deterioration in customer behavior.

Limited Visibility Into Supply Normalization

Management emphasized that industry-wide demand for AI compute is complicating predictions about when CPU and memory supplies will normalize. They expect these constraints to persist for an indeterminate, multi-quarter period, adding uncertainty to the pace of revenue and free cash flow conversion even as bookings and demand trends remain healthy.

Bookings Measurement Noise From Cancelable Backlog

A small low-single-digit percentage of cancelable backlog, a legacy contract feature, is creating some distortion in RPO-based bookings metrics. This quirk can introduce quarter-to-quarter swings in reported bookings growth, making it harder to compare periods cleanly and pushing investors to look at multi-quarter trends instead of single-quarter data points.

Cash Deployment and Dilution from Strategic Investment

The cash balance fell from $2.062B at the end of Q1 to $1.874B at Q2-end, reflecting the heavy use of cash for buybacks and equity-related tax settlements. While AMD’s $150M equity investment further aligns strategic interests, it comes with low-single-digit dilution, underscoring management’s willingness to trade some ownership for long-term AI and infrastructure growth opportunities.

Guidance and Forward-Looking Outlook

For Q3 FY26, Nutanix guided revenue to $680M to $690M and non-GAAP operating margin to 16% to 17%, with roughly 288M fully diluted shares, while full-year FY26 guidance calls for $2.80B to $2.84B in revenue, 21% to 22% non-GAAP operating margin and $745M to $775M in free cash flow. Management expects TCV bookings growth to outpace revenue and sees bookings stronger than previously planned, but warned that supply constraints will push more free cash flow and deal conversion into the back half, especially Q4.

Nutanix’s earnings call balanced strong execution against external friction, with a revenue beat, expanding ARR and high-margin performance offset by AI-driven supply-chain tightness and softer near-term guidance. For investors, the story hinges on whether robust bookings, growing customer adoption and the AMD-backed AI roadmap can outweigh temporary hardware shortages and renewal timing noise over the coming quarters.