Nutanix Q1 Results Offset By Slowing Annual Recurring Revenue, Federal Vertical Weakness: Analysts

Nutanix, Inc. NTNX shares are trading lower on Wednesday. The company’s annual recurring revenue grew 18%, while revenue jumped 16%.

Needham analyst Mike Cikos reiterated the Buy rating on Nutanix, raising the price forecast to $90 from $80. He raised the fiscal 2025 estimate from $1.36 to $1.42.

Cikos highlights that Nutanix’s early success with new go-to-market partnerships and share gains from M&A disruption contributed to strong results in the first quarter of fiscal 2025.

Despite revenue guidance being above projections for the second quarter of fiscal 2025, management kept its outlook unchanged, which the analyst views as a conservative approach.

Cikos also notes Nutanix’s strong track record in setting expectations. Operating margin expansion provides flexibility for continued investment in sales and marketing and R&D, he added.

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Northland Capital Markets analyst Nehal Chokshi reiterated the Market Perform rating on Nutanix, raising the price forecast to $77 from $74.

The analyst notes that Nutanix added 630 customers in the quarter — a 66% year-over-year increase. This indicated a re-acceleration in customer acquisition after a three-year lull.

This growth is attributed to a focus on SMBs and the impact of Broadcom Inc.‘s AVGO purchase of VMW VMW.

Despite strong revenue, operating profit, and free cash flow results, the analyst observes a slowdown in annual recurring revenue (ARR) growth to 18% year-over-year, down from 22% in the previous quarter.

The weak incremental ARR of $58 million, a 43% year-over-year decline, is primarily driven by underperformance in the federal vertical, linked to delayed government spending resolutions.

Additionally, the analyst suggests that the elongation of large deals is contributing to the disappointing drop in incremental ARR, as reflected in the deterioration of NRR from 123% in fiscal 2023 to 110% in the first quarter of 2025.

Price Action: NTNX shares are trading lower by 7.17% to $67.18 at last check Wednesday.

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