Why Nutanix Shares Are Plummeting After Hours

Nutanix Inc NTNX reported third-quarter revenue growth of 17.2% year-over-year to $403.66 million, beating the consensus of $397.87 million. Adjusted EPS was $(0.05), above the consensus of $(0.22).

The gross margin expanded by 185 bps to 80.2%. Adjusted gross margin expanded by 160 bps to 83.3%.

ACV billings increased 28% Y/Y to $204.7 million, ARR was up 46% Y/Y to $1 billion, and the average contract term fell to 3.2 years from 3.3 years.

Adjusted operating expenses reduced by 5% Y/Y to $341.7 million. Loss from operations reduced to $(92.35) million, from $(180.57) million in 3Q21.

Nutanix generated cash from operating activities year-to-date of $29.54 million, compared to cash used of $(75.18) million a year ago. Free cash outflow was $4.74 million.

“Late in the third quarter, we saw an unexpected impact from challenges that limited our upside in the quarter and affected our outlook for the fourth quarter. Increased supply chain delays with our hardware partners account for the significant majority of the impact to our outlook, and higher-than-expected sales rep attrition in the third quarter was also a factor,” commented Rajiv Ramaswami, President, and CEO.

4Q22 Outlook: Nutanix expects ACV billings of $175 million - $185 million and Revenue of $340 million - $360 million, vs. a consensus of $439 million. It expects an adjusted Gross Margin of ~79% to 80% and an adjusted Operating Expense of $360 million - $365 million.

FY22 Outlook: The company expects ACV billings of $735 million - $745 million and Revenue of $1.535 billion - $1.555 billion, vs. a consensus of $1.63 billion. It expects an adjusted Gross Margin of ~82% and an adjusted Operating Expense of $1.4 billion - $1.407 billion.

Price Action: NTNX shares are trading lower by 24.40% at $16.20 during the post-market session on Wednesday.

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