Nutanix, Inc.

please visit the Press Releases section of our IR website. During today's call, management will make forward-looking statements including financial guidance. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements. For a more detailed description of these and other risks and uncertainties, please refer to our FTC filings, including our most recent annual report on Form 10-K, as well as our earnings press release issued today. These forward-looking statements apply as of today, and we undertake no obligation to revise these statements after this call. As a result, you should not rely on them as predictions of future events. Please note, we must otherwise specifically reference all financial measures to exclude certain charges. We have provided, to the extent available, reconciliations of these non-GAAP financial measures to GAAP financial measures on our IRL website and in our earnings press release. Nutanix will be participating in the UBS Global Technology and AI Conference in Scottsdale on December 1st, the Raymond James TMT and Consumer Conference in New York on December 8th, and the Barclays Global Technology Conference in San Francisco on December 11th. We hope to see some of you at these events. Finally, our second quarter fiscal 2026 quiet period will begin on Monday, January 19th. And with that, I'll turn the call over to Rajiv. Rajiv?

Thank you, Rich, and good afternoon, everyone. In our first quarter, we saw solid demand for our solutions with bookings that were slightly ahead of our expectations and continued progress with our partners. However, the solid performance of the business didn't translate into revenue within the quarter as previously expected. Late in the quarter, we saw more business than expected with start dates outside of the quarter. This resulted in some revenue being shifted out of Q1. As we evaluated the impact of this recent change in our business mix on our fiscal 2026 outlook, we now expect to see more revenue differed than we had previously planned, driving a reduction in our full-year revenue guidance. Rukmini will provide more details on these changes in her comments. But there are a few key points I'd like to make. First, our view of the fundamentals of our business and Booking's growth expectations for the year remain unchanged. Second, these changes do not impact our free cash flow expectations for FY26, which we are modestly increasing. And finally, this is solely a timing issue. and the amount of revenue we expect to recognize over time from business booked in FY26 remains unchanged. With that said, in our first quarter, we delivered quarterly revenue of $671 million within our guided range and grew our ARR 18% year over year to $2.28 billion. We also saw another quarter of healthy new logo additions and solid free cash flow generation. In Q1, we continue to see success in the marketplace with our cloud platform. Our most notable wins, a few of which I'll highlight, demonstrate the appeal of our solution to businesses that are looking to modernize their IT footprints, deploy modern apps and AI, and adopt hybrid multi-cloud operating models. One of our largest expansion wins was with a North American-based provider of agricultural products and services that was looking for an alternative to their existing three-tier virtualization solution that included a potential future path to public cloud. They chose our Nutanix Cloud Platform to run their mission-critical applications across their global manufacturing and business operations footprint, appreciating the public cloud optionality provided by our Nutanix Cloud Clusters or NC2 capability. They also chose Nutanix Kubernetes Platform in anticipation of future deployment of modern workloads, as well as Nutanix Cloud Management and Nutanix Unified Storage. Another example of a new logo win with a customer looking to take advantage of the hybrid multi-cloud capabilities of our platform was a European government agency that was looking for a solution to deploy and manage their modern applications across public and private clouds. They are planning to run their modern applications on a Kubernetes platform on top of NC2 on AWS. And we continue to add some of the world's largest companies as new customers in Q1, including a seven-figure Global 2000 new logo with an EMEA-based provider of energy products and services. This customer was looking to implement a comprehensive cybersecurity solution. They chose the Nutanix Cloud Platform to run these security applications, as well as Nutanix Cloud Management for its common management interface, superior ease of use, simple one-click upgrades, and the ability to securely run across multi-cloud environments. They also chose Nutanix Unified Storage for management of their unstructured data. Finally, a first quarter new logo in our US federal business highlighted the GenAI and modern application capabilities of our platform. This government agency was looking to modernize their infrastructure and to utilize AI to enhance its effectiveness and efficiency. They chose a full stack Nutanix solution, including our cloud platform, Nutanix unified storage, and Nutanix database service, as well as our Nutanix enterprise AI and Nutanix Kubernetes platform to support development and deployment of their modern and Gen-AI applications. Moving on, we also continue to make progress on our initiative to support external storage with our platform, including selling our solutions supporting Dell's PowerFlex to another Global 2000 customer in Q1. During this quarter, we also announced that Nutanix plans to support Dell's PowerStore with general availability expected in the summer of 2026. And we remain on track to deliver our solutions supporting pure storage FlashArray within this calendar year. Finally, we continue to receive industry recognition in Q1. Nutanix was named a leader in the 2025 Gartner Magic Quadrant for distributed hybrid infrastructure. Our inclusion in the leader's quadrant along with several leading public cloud providers, reflects the evolution of our offering to a true hybrid multi-cloud platform. In closing, our business performed solidly in the first quarter, including bookings that were slightly ahead of our expectations, ARR growth of 18% year over year, another healthy quarter of new logo additions, and solid free cash flow performance. The change to our revenue guidance relates solely to the timing of revenue recognition. I believe the fundamentals of our business remain healthy and unchanged. We remain focused on delighting our customers while driving sustainable, profitable growth. And with that, I'll hand it over to Rukmini Sivaraman. Rukmini?

Thank you, Rajiv, and thank you, everyone, for joining us today. I will first discuss our Q1 26 results, followed by Q2 26 guidance, and our updated fiscal year 26 guidance. In Q1, we reported quarterly revenue of $671 million within the guidance range of $670 to $680 million, representing a year-over-year growth rate of 13%. While bookings in Q1 were slightly ahead of our expectations, we saw a larger than expected proportion of land and expand bookings with future start dates late in the quarter, resulting in a shift of some revenue from Q1 into future periods. As a reminder, under U.S. GAAP, revenue recognition generally begins when the license starts. which means bookings with future start dates shift revenue recognition into later periods, even though cash collection may occur earlier. This is solely timing-related and does not change the overall revenue expected to be recognized over time. If land and expand bookings had come in with the proportion of future start dates that we had assumed, Q1 revenue would have been above the high end of the guided rate. ARR at the end of Q1 was $2.284 billion, representing year-over-year growth of 18%. NRR, or net dollar-based retention rate, at the end of Q1 was 109%, flat quarter-over-quarter. Note that this ARR and NRR are under our updated methodology that started with Q1-26. as previously discussed on our last earnings call. In Q1, average contract duration was 3.1 years. Non-GAAP growth margin in Q1 was 88%. Non-GAAP operating margin in Q1 was 19.7% towards the lower end of our guided range of 19.5 to 20.5%, primarily due to lower revenue. Non-GAAP net income in Q1 was $121 million or fully diluted EPS of 41 cents per share based on fully diluted weighted average shares outstanding of approximately 297 million shares. GAAP net income and fully diluted GAAP EPS in Q1 were $62 million and 21 cents per share respectively. Free cash flow in Q1 was $175 million, representing a free cash flow margin of 26%. Moving to the balance sheet, we ended Q1 with cash, cash equivalents, and short-term investments of $2.062 billion, up from $1.993 billion at the end of Q4. Moving to capital allocation, in Q1, we repurchased $50 million worth of common stock under our existing share repurchase authorization and used about $89 million of cash to retire shares related to our employees' tax liability for their quarterly RSU vesting. Both of these help to manage share dilution. Moving to guidance, our guidance for Q2 26 is as follows. Revenue of $705 to $715 million. Non-GAAP operating margin of 20.5 to 21.5%. Fully diluted weighted average shares outstanding of approximately 296 million shares. Moving to the full year, our updated guidance for fiscal year 26 is as follows. Revenue of 2.82 to $2.86 billion, representing a year-over-year growth rate of 12% at the midpoint of the range. Non-GAAP operating margin of 21 to 22%, same as our prior guide, despite the lower revenue guide. Free cash flow of $800 to $840 million, an increase from our prior guidance and representing a free cash flow margin of 28.9% at the midpoint. I will now provide some additional context regarding our fiscal year 26 guidance. First, as Rajiv mentioned, it is important to note that our full year bookings growth expectations remain unchanged relative to our last earnings call. We are also pleased to raise our free cash flow guidance for the full year. However, As we saw late in Q1, we are seeing that the timing of conversion of bookings into revenue is evolving with our business. We believe this is due to a couple of factors, including, one, increased customer demand for greater flexibility to start licenses aligned with their adoption timeline, resulting in more bookings with future start dates, and two, the growing proportion of our business through our third party OEM partners, for which we only recognize revenue when our partners ship an appliance. As a result, we now expect more revenue to shift from fiscal year 26 into future periods, while the total amount of revenue recognized over time remains unchanged. Second, a note on seasonality. We expect the quarter-over-quarter revenue trend from Q2 to Q3 to be similar to what we saw last year in fiscal year 25. Third, we continue to balance prudent investments for continued growth with a focus on efficiencies and expanding margins over time. This is reflected in our updated operating margin and free cash flow guidance for the full year. In closing, We believe the underlying value of our business remains unchanged. Demand and bookings expectations are unchanged. Our free cash flow outlook is higher. Revenue expected to be unchanged over time, but starting later. And our guidance philosophy is unchanged. With that, operator, please open the line for questions.