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Earnings Preview: Nutanix likely to benefit from software and support in Q1

Enterprise cloud platform provider Nutanix Inc. (NTNX) is scheduled to report its earnings for the first quarter of fiscal 2019 on Tuesday after the market close. The company has a strong revenue growth trend arising from the enterprise cloud services that attracted the interests of the investors. Experts expect software and support segment to dominate in the revenue growth contribution.

Analysts, on average, expect Nutanix to post a loss of $0.27 per share on revenue of $305.1 million for the first quarter. In comparison, during the previous year quarter, the company had reported a loss of $0.16 per share on revenue of $275.55 million. Majority of the analysts has recommended a “strong buy” or “buy” rating on the stock with an average price target of $61.63.

The company’s top line will be benefited by the growing customer base as well as the strength in the Software and Support segment. The customers are continuing to select Nutanix as a low-cost alternative instead of other vendor offerings. However, Nutanix’s bottom line will be hurt by the increase in costs and expenses as more deals are being added under its domain.

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Nutanix ended the fourth quarter of fiscal 2018 with 10,610 end-customers, adding 1,000 new end-customers in the quarter. The company also expanded an existing customer engagement by closing a deal greater than $20 million in the fourth quarter.

The company posted a wider loss for the fourth quarter due to a rise in operating expenses. Revenue increased 20% as Nutanix continued to execute its shift toward rising software revenue. Software and support revenue jumped 49% and billings climbed 37%.

For the first quarter, the company had expected revenue in the range of $295 million to $310 million, implying software and support revenue growth of about 40% to 45% year-over-year. Adjusted loss was anticipated to be $0.26 to $0.28 per share. Non-GAAP operating expenses are predicted to be $280 million to $290 million.

The company’s forecast reflects a faster removal of pass-through hardware than originally expected, accelerating the reduction of zero margin billings and revenue with the benefit of improved gross margins.

Shares of Nutanix opened higher on Monday and is trading in the green territory during mid-afternoon. The stock has risen over 16% in the year so far and over 19% in the past year.

 

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