MarketWatch First Take: Nutanix heads for first $1 billion year, shares rebound
Nutanix Inc. appears to be on track to hit $ 1 billion in annual revenue next year, one of many positive signs for the company that seem to support its vision of a hybrid-cloud future.
Nutanix NTNX, +0.00% reported better-than-expected fiscal fourth quarter results Thursday, as the company wrapped up its first full fiscal year since its successful 2016 initial public offering. The company’s outlook for the first quarter of its new fiscal year was more interesting, though: Its forecast calls for quarterly revenue of $ 240 million to $ 250 million on a non-GAAP basis, while Wall Street analysts were modeling for first-quarter revenue of about $ 231 million, according to FactSet.
With analysts on average expecting annual revenue of $ 1.04 billion for fiscal 2018, the beat on the first-quarter forecast provides more confidence for investors that Nutanix will hit the mark this year. Nutanix Chief Executive Dheeraj Pandey, in a brief interview with MarketWatch, declined to make that prediction, though.
“I think we have been very consistent with our forecasts in the past,” Pandey said, while not commenting directly on analysts’ estimates. “We are provident about our future numbers.”
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Nutanix has developed software and hardware that combines storage and computing on one device, and allows for better management of hybrid-cloud systems, with some data on premises and some in the cloud. The technique, which is referred to as “hyperconvergence,” has grown in popularity and led to rivals being acquired by tech heavyweights like Hewlett Packard Enterprise Co. HPE, +2.15% and, most recently, Cisco Systems Inc. CSCO, +0.28%
After a heady introduction to Wall Street, though, Nutanix stock has struggled, which was only exacerbated after its lockup period for insider selling expired in March. Shares have dropped more than 17% so far this year, as the S&P 500 index SPX, +0.20% has increased more than 10%.
Shares rebounded in late trading Thursday, though, adding more than 5% as the company shared more favorable results beyond the earnings and outlook. It saw many large customer wins, a trend continuing from the quarter before, as 43 customers signed deals for more than $ 1 million in the quarter, up 39% from a year ago.
As some analysts expected, Nutanix also talked about how it will be an early adopter of new accounting rules that will change the way revenue is recognized for all companies. Nutanix is adopting the rules for the current quarter, and it will present its outlook for the next fiscal year on a GAAP basis, and restate one year of past financials, in a conference call with analysts Tuesday.
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In general, the move will be “bittersweet,” Pandey said, since software revenue will be recognized immediately, giving Nutanix stronger revenue totals but wiping away the predictability that deferred revenue provided.
It is a “good thing for current quarter, but not for future quarters,” Pandey said. “We knew exactly how much was going to come when you defer, [now] you have less visibility.”
Still, investors may be pleased that the company is going to get this big accounting change out of the way early, taking a page from Microsoft Corp. MSFT, -1.11% so it can focus on growing its core business, introducing new products and trying to become profitable. If Nutanix can manage that trick, as well as put a $ 1 billion-plus revenue forecast in front of investors next week, it could live up to the high prices paid for shares in the wake of its IPO.