Nutanix (NTNX) Q1 earnings preview: Shift to subscription model to impact outcome

For tech firm Nutanix (NASDAQ: NTNX), the last fiscal year has been a transformative period, with the cloud software provider making significant progress in its transition to the subscription-based business model. The company is estimated to have entered the new fiscal year on a positive note, backed by new customer wins.

Since revenue is not recognized instantly under the new business model – but over a period of time – the top-line and margins might continue to come under pressure in the first quarter of 2020. That won’t be good for the company, which has been trying to end the current losing streak and return to profitability.

Also see: Nutanix Q4 2019 Earnings Conference Call Transcript

The results will be released on Monday after the closing bell. Meanwhile, the management’s aggressive marketing efforts, complementing the pipeline expansion, will offset the negative impact to some extent.

Forecast

Market watchers predict a loss of $0.75 per share for the October quarter, wider than the $0.13-per share loss recorded a year earlier. Revenues are expected to come in at $306.41 million. While the bottom-line remained in the negative territory over the past several quarters, there was a progressive improvement sequentially. Earnings beat the consensus estimate in each of the trailing four quarters.

Going forward, the top-line should start gathering strength as the company enters the final stage of its transition to the subscription model. There will likely be a corresponding improvement in investor sentiment and the stock might emerge from the bear territory.

Others

Among competitors, Hewlett Packard Enterprise (HPE) is scheduled to publish fourth-quarter results on Monday after the regular trading hours.

Q4 Results

Nutanix reported stronger-than-expected revenues of around $300 million for the fourth quarter, despite a year-over-year decline due to weakness in billings. Adjusted for special items, net loss widened to $0.57 per share from last year’s loss of $0.11 per share.

Related: Microchip Technology Q2 earnings meet

A few months ago, the stock bounced back from a two-year low after the company impressed the market with positive fourth-quarter results. Yet, the shares are down 33% since the beginning of the year. In the past twelve months, they lost about 25%.

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