Nutanix Catalysts Include HCI Growth, VMware Market Share Shift, And AI Demand: Analyst

Oppenheimer analyst Param Singh initiated coverage on Nutanix Inc NTNX with an Outperform rating and a price target of $80.

Singh’s optimistic outlook hinges on several critical factors, including the rising demand for HyperConverged Infrastructure (HCI), market share opportunities from weakening VMware, and strong adoption of unstructured data solutions, particularly for AI-driven workloads.

Singh accentuated that Nutanix benefits from the shift in enterprise data centers toward HCI solutions, which integrate computing, storage, and networking into a single, streamlined platform.

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Singh said the HCI software market, expected to grow at a 15.3% compound annual growth rate (CAGR) through 2028, is creating a substantial growth opportunity for Nutanix.

As a leading HCI software provider, Nutanix is well-positioned to capitalize on this expanding market, particularly as VMware faces customer backlash following substantial price increases imposed by parent company Broadcom Inc AVGO.

Singh highlighted a significant shift in market dynamics, noting that VMware’s customer dissatisfaction, especially after Broadcom’s acquisition, drives enterprises to consider alternative vendors.

Nutanix, with its comprehensive HCI software stack and free Linux-based KVM hypervisor AHV, offers a compelling value proposition for customers looking to migrate away from VMware’s costly solutions.

Gartner data projects VMware’s HCI market share will decline from 70% in 2024 to 40% by 2029, presenting a significant market share gain opportunity for Nutanix.

The analyst also pointed out the increasing demand for unstructured data management as enterprises accelerate the adoption of AI applications. Singh noted that many organizations report a growth rate of 30%-60% in unstructured data.

Nutanix, with its vital file and object storage capabilities, is well-positioned to serve this demand. The company recently launched its “GPT-in-a-Box” solution, optimized for AI and machine learning workloads, incorporating AI frameworks, large language models (LLMs), and seamless integration with Nvidia Corp NVDA GPUs for accelerated computing.

Singh outlined a robust financial forecast for Nutanix, driven by its expanding customer base, improving profitability, and strategic focus on high-growth markets. He projected Nutanix’s subscription revenue to grow at a 16.3% CAGR from fiscal 2024 to fiscal 2027, surpassing the HCI market’s average growth rate.

Singh expects the company’s operating margin to increase from 16.2% in fiscal 2024 to 23.1% by fiscal 2027, reflecting prudent research and development (R&D) management and sales and marketing expenses.

Singh projects revenue of $574 million and pro forma EPS of $0.31 for the third quarter of fiscal 2025.

For fiscal 2025, the analyst expects revenue of $2.46 billion and pro forma EPS of $1.42. For fiscal 2026, he estimates revenue of $2.90 billion and pro forma EPS of $1.89. For fiscal 2027, Singh projects revenue of $3.29 billion and pro forma EPS of $2.32.

Singh also underlined Nutanix’s achievement of the “Rule of 40” metric, which combines year-over-year revenue growth and free cash flow margin.

This performance metric is highly regarded among software stocks, and Nutanix’s attainment signals strong operational efficiency and growth potential.

In his analysis, Singh argued that Nutanix’s current valuation needs to fully reflect its market leadership in HCI software, the anticipated share gains from VMware, and the potential benefits from AI-driven workloads. He stated Nutanix could see its valuation re-rate higher, closer to the industry average EV/sales multiple of 9.6x. Given the company’s solid fundamentals and growth outlook, Singh’s $80 price target is based on an 8.3x multiple of calendar 2025E revenue, which he views as conservative.

Price Action: NTNX stock is up 1.90% at $73.61 at last check Wednesday.

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