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Nutanix (NTNX) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Nutanix Inc. NTNX is scheduled to report second-quarter fiscal 2019 earnings on Feb 28.

Notably, the company beat the Zacks Consensus Estimate in three of the trailing four reported quarters and missed it once, the average positive surprise being 32.55%.

In the last reported quarter, the company incurred a loss of 13 cents per share, narrower than the Zacks Consensus Estimate of a loss of 27 cents and the year-ago quarter’s loss of 16 cents.

Revenues jumped 13.7% from the year-earlier quarter to $313.3 million. Product revenues climbed 2.41% to $224.35 million while support & other services revenues surged 57.42% to $88.94 million.

What to Expect in Q2

For the second quarter of fiscal 2019, the company projects revenues between $325 million and $335 million. Nutanix forecasts non-GAAP net loss of 25 cents.

The Zacks Consensus Estimate for bottom line for the fiscal second quarter is pegged at a loss of 25 cents, wider than the year-ago quarter’s loss of 14 cents. The consensus estimate for revenues of $331.04 million indicates around 15.45% growth from the prior-year quarter’s reported figure.

Let’s take a look at how things are shaping up for the upcoming announcement.

Factors to Consider

Nutanix is benefiting from expanding clientele and growth in Software and support business.

Products like Nutanix Beam, Era and Flow are expected to help customers better manage their hybrid cloud environment. In November last year, the company announced new updates to Beam to enable customers to get full insight into the entire infrastructure environment which is likely to boost its adoption.

Earlier, in December 2018, the company entered into a partnership with Intel INTC to deliver Data Center Block hardware platforms.

A growing customer base with the addition of prominent names is expected to drive Nutanix’s growth. The company saw 83% year-over-year growth in customers with a lifetime spend of $3-$5 million and 111% rise in customers with a lifetime spend of more than $5 million in first-quarter fiscal 2019. Increasing AHV adoption rate has been a major growth driver.

The company is already gaining from shifting its business model to a subscription-based one. We, therefore, believe that the transition of its non-portable software sales to a recurring subscription-based licensing model in the fiscal second quarter, is a positive.

Nutanix’s deal wins are anticipated to aid the top line in the quarter. The company signed 63 deals worth more than $1 million in the fiscal second quarter, of which, three were above $5 million.

Moreover, the company expects the year-over-year decline in total billings and revenues that was experienced during its transition away from pass-through hardware to moderate, even though growth is not expected to accelerate until later.

However, insignificant changes in the pass-through hardware mix are expected in the forthcoming quarters for about a year. Nonetheless, the expected increase in gross margin might remain unaffected by the same.

Intense competition from the likes of Cisco CSCO, Hewlett Packard Enterprise HPE and NetApp remains a concern.

Nutanix currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nutanix Inc. Price and EPS Surprise

Nutanix Inc. Price and EPS Surprise | Nutanix Inc. Quote

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