Summary
Nutanix reported preliminary second quarter fiscal 2023 revenue of $486.5 million, up 17.8% from the prior-year quarter. Gross profit rose 20.0% to $399.7 million, and gross margin was 82.2%, up 1.5 percentage points. The company still recorded an operating loss of $56.5 million, but that loss narrowed from the prior-year quarter, and operating margin was -11.6%, up 11.3 percentage points. Net loss narrowed to $70.8 million, and diluted EPS improved to -$0.31. The results are preliminary and unaudited, and the company did not file its Form 10-Q on time.
Cash generation stood out. Operating cash flow was $74.1 million, up 187.5% from the prior-year quarter. Free cash flow, a non-GAAP measure, was $63.0 million. Management described the quarter as producing record free cash flow margin. Deferred revenue reached $1.53 billion, up 10.1% from the prior-year quarter, which points to the strength of subscription renewals. ACV billings rose 23% to $267.6 million, and ARR rose 32% to $1.38 billion. Average contract term slipped to 3.0 years from 3.1 years. Nutanix ended the quarter with 23,620 end customers as of January 31, 2023.
On a year-to-date basis, revenue was $920.1 million, up 16.2%. Gross profit was $750.8 million, up 19.1%. The operating loss narrowed to $137.2 million, and the net loss narrowed to $170.3 million. Diluted EPS improved to -$0.74. Operating cash flow for the first half was $139.6 million, up 326.8%. The improvement reflects cost discipline and a mix shift toward software, but it also benefits from comparison with a prior-year period that included large debt-related charges.
Guidance points to slower sequential revenue in the near term. For the third quarter of fiscal 2023, Nutanix guided revenue of $430 million to $440 million and ACV billings of $220 million to $225 million. For the full fiscal year 2023, the company raised revenue guidance to $1.80 billion to $1.81 billion and ACV billings guidance to $905 million to $915 million. It reaffirmed expected free cash flow of $100 million to $125 million for the full fiscal year 2023. The company did not include expense guidance for either the third quarter or the full fiscal year because of the review of third-party software use.
The accounting issue is the main risk. Management found that evaluation software from third-party providers was used for interoperability testing, validation, customer proofs of concept, training, and customer support over a multi-year period. The Audit Committee investigation identified control deficiencies that constitute a material weakness in internal control over financial reporting. Additional costs are likely, and the company has not provided expense information in its preliminary results or outlook. The delayed 10-Q creates risks around delisting, legal proceedings, and government enforcement actions. The company also faces sales execution risk. Higher-than-normal attrition among sales representatives left about 27% of the global sales team still ramping as of January 31, 2023. Macroeconomic uncertainty and the subscription transition continue to affect deal terms and revenue timing. General and administrative expense rose on a proposed securities class action settlement and related legal costs, partly offset by insurance recoveries.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $486.5M | $433.6M | +12.2% | $413.1M | +17.8% |
| Gross profit | $399.7M | $351.1M | +13.8% | $333.1M | +20.0% |
| Gross margin | 82.2% | 81.0% | +1.2 pp | 80.6% | +1.5 pp |
| Research & development | $142.3M | $149.2M | -4.6% | $141.6M | +0.5% |
| Sales & marketing | $229.8M | $236.1M | -2.7% | $241.6M | -4.9% |
| General & administrative | $84.1M | $46.1M | +82.4% | $44.3M | +89.9% |
| Total operating expenses | $456.2M | $431.4M | +5.8% | $427.5M | +6.7% |
| Operating income (loss) | -$56.5M | -$80.3M | +29.6% | -$94.4M | +40.2% |
| Operating margin | -11.6% | -18.5% | +6.9 pp | -22.9% | +11.2 pp |
| Net income (loss) | -$70.8M | -$99.1M | +28.6% | -$115.1M | +38.5% |
| Net margin | -14.6% | -22.9% | +8.3 pp | -27.9% | +13.3 pp |
| Diluted EPS | -$0.31 | -$0.43 | +$0.12 | — | — |
Risks
The company identified a material weakness in internal control over financial reporting tied to non-compliant use of third-party evaluation software over a multi-year period; controls did not effectively identify the software licensing compliance risk or reinforce timely reporting of ethical concerns. Remediation may be unsuccessful or additional weaknesses may be discovered.
The Audit Committee investigation found intentional misconduct by certain employees and non-compliant software use, leading to significant legal and accounting costs. The company could face an SEC investigation, penalties, injunctions, a cease and desist order, or other equitable remedies.
A putative federal securities class action and a stockholder derivative action were filed against the company and certain current and former officers or directors. These matters could be time-consuming, result in significant expense, divert management attention, and lead to material adverse outcomes. G&A expense increased 90% for the three months and 54% for the six months ended January 31, 2023, due primarily to $71.0 million of charges for the proposed securities class action settlement, partially offset by $39.9 million recoverable under insurance policies.
The company has recently seen higher than normal attrition among sales representatives. As of January 31, 2023, approximately 73% of global sales team members were fully ramped while about 27% were still ramping, and replacements take time to train, which may constrain billings and revenue growth. Sales and marketing expense decreased 5% for the three and six months ended January 31, 2023, and sales and marketing headcount decreased 7% from January 31, 2022 to January 31, 2023.
The continued shift to a subscription-based business model can reduce billings, revenue, and cash flow because term-based licenses average approximately three years versus life-of-device licenses estimated at approximately five years. Customers may also choose shorter subscription terms or pay only the initial year upfront.
Reliance on manufacturers, including channel and OEM partners, to produce the hardware appliances on which the software runs exposes the company to supply chain delays that can impair its ability to provide services to end customers in a timely manner.
The ongoing subscription transition and updated pricing and packaging may cause customer concerns or confusion, which can slow adoption and renewal rates among current and future customers. Renewals are becoming more significant for future revenue as existing subscriptions come up for renewal.
SaaS KPIs
All quarters →Free Cash Flow
Annual Recurring Revenue (ARR)
Total Billings
Subscription Billings
Repeat purchase rate (18+ months)
Annual Contract Value (ACV) Billings
Average Contract Term
Subscription Revenue
Global 2000 End Customers
Summary, forecast, risks and KPIs are extracted from Nutanix, Inc.'s SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.