Q3 2024 Nutanix Inc Earnings Call

May 29, 2024

Okay.

Speaker Change: Good day, and thank you for standing by and welcome to <unk> Q3, 2024 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone.

Operator: Good day, and thank you for standing by, and welcome to Nutanix's Q3 2024 Earnings Conference. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star, one, one on your telephone.

Operator: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rich Valera, VP of Investor Relations at Nutanix. Good afternoon.

Speaker Change: And then here an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Rich Valera VP of Investor Relations at <unk>.

Richard Valera: Good afternoon.

Richard Valera: Welcome to today's conference call to discuss third quarter fiscal year 2024 financial results. Joining me today are Rajiv Ramaswami, Nutanix's President and CEO, and Rukmini Sivaraman, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing third quarter fiscal year 2024 financial results.

Richard Valera: Welcome to today's conference call to discuss third quarter fiscal year 2024 financial results.

Speaker Change: Joining me today are our key ramaswami, <unk> President and CEO.

Speaker Change: Maybe you said Robin mechanics as CFO.

Speaker Change: After the market closed today mechanics issued a press release announcing third quarter fiscal year 2024 financial results.

Speaker Change: To read the release please visit the press releases section of our IR website.

Speaker Change: During today's call that is.

Richard Valera: If you'd like to read the release, 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 risk and uncertainty, some of which is beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements.

Speaker Change: And it will make forward looking statements, including financial guidance.

Speaker Change: 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.

Richard Valera: For a more detailed description of these and other risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q, as well as our earnings press release issued today. These four 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 the future.

For a more detailed description of these and other risks and uncertainties. Please refer to our SEC filings, including our most recent annual report on Form 10-K, and our subsequent quarterly reports on Form 10-Q, 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.

Richard Valera: Please note, unless otherwise specifically referenced, all financial measures we used on today's call, except for revenue, are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided, to the extent available, reconciliations of these non-GAAP financial measures to GAAP financial measures on our website and in our earnings press release. Nutanix will be participating in the Bank of America Global Technology Conference in San Francisco on June 7, and we hope to see some of you there. Finally, our fourth quarter fiscal 2024 quiet period will begin on Wednesday, July 7. And with that, I'll turn the call over to Rajiv. Rajiv?

Speaker Change: Note unless otherwise specifically referenced all financial measures we use on today's call except for revenue are expressed on a non-GAAP basis and have been.

Speaker Change: When adjusted to exclude certain charges.

Speaker Change: We have provided to the extent available reconciliations of these non-GAAP financial measures to GAAP financial measures on our website and in our earnings press release.

Speaker Change: Mechanics will be participating in the bank of America Global Technology Conference in San Francisco on June four.

Speaker Change: We hope to see some of you there.

Speaker Change: Finally, our fourth quarter fiscal 2024 quiet period will begin on.

Speaker Change: On Wednesday July 17th.

Speaker Change: And with that I'll turn the call over to Rajiv Rajiv.

Rajiv Ramaswami: Thank you, Rich. And good afternoon, everyone. We delivered a solid third quarter, with results that came in ahead of our guidance. We continue to see steady demand for our solutions, driven by businesses prioritizing their digital transformation and infrastructure modernization initiatives and looking to optimize their Total Cost of Ownership, or TCO. A closer look at the third quarter.

Rajiv Ramaswami: Thank you Rick and good afternoon, everyone.

Rajiv: We delivered a solid third quarter with results that came in ahead of our guidance.

Rajiv: We continue to see steady demand for our solution.

Rajiv: By businesses prioritizing that digital transformation and infrastructure modernization initiatives.

Rajiv: And looking to optimize the total cost of ownership.

Rajiv: <unk>.

Rajiv: Taking a closer look at the third quarter.

Rajiv Ramaswami: We were happy to have exceeded all our guidance. We delivered quarterly revenue of $525 million and grew our ARR 24% year over year to $1.82 billion. We also had another quarter of solid free cash flow generation. Overall, our third quarter financial performance reflected continued discipline execution. Our largest wins in the quarter demonstrated the appeal of the Nutanix cloud platform to organizations that are looking to modernize and improve the efficiency of their data center footprint while managing through some of the disruptions from recent industry M&A. Our largest new customer win of the quarter was an eight-figure ACV deal with a North American-based Fortune 50 financial services company that was looking to streamline and automate the deployment and management of their substantial fleet of databases.

Rajiv: We were happy to have exceeded all our guidance metrics.

Rajiv: We delivered quarterly revenue of $525 million.

Rajiv: And Google.

Rajiv: 24% year over year to 1.82 billion.

Rajiv: We also had another quarter of solid free cash flow generation.

Rajiv: Overall, our third quarter financial performance reflected continued disciplined execution.

Rajiv: Our largest wins in the quarter demonstrated the appeal.

Rajiv: <unk> cloud platform to organizations that are looking to modernize and improve the efficiency of the data center footprint.

Rajiv: While managing through some of the disruption from recent industry M&A.

Rajiv: Our largest new customer win of the quarter wasn't eight figure <unk> deal with a north American based Fortune 50 financial services company.

We're looking to streamline and automate the deployment and management.

Rajiv: Are there substantial fleet of databases.

Rajiv: This customer is.

Rajiv Ramaswami: This customer purchased the Nutanix cloud platform with Nutanix database service to automate all of their internal database deployment and management needs, while also modernizing the three-tier footprint previously used for running their database. This wind was substantially larger than our typical land wind and marked the culmination of an approximately two-year engagement.

Rajiv: Thanks to our platform.

Rajiv: <unk> database service.

Rajiv: To automate all of that in terms of the database deployment and management needs.

Rajiv: While also modernizing the Tcf footprint previously used for running their database.

Rajiv: This win was substantially larger than our typical land win.

Rajiv: And Mark the culmination of an approximately two year engagement.

Rajiv: Another notable win in Q3.

Rajiv Ramaswami: Another notable win in Q3 was a significant renewal and expansion with a North American-based Fortune 500 provider of consumer packaged goods. This customer, whose data center footprint had historically been split between Nutanix and a competitor, was looking to standardize their automation and self-service capabilities on a single platform. They decided to standardize our Nutanix cloud platform, including our AHV hypervisor and Nutanix Cloud Manager, to handle their self-service and automation needs. They also added Nutanix Unified Storage and Nutanix Database Service for their unstructured data management and database automation needs, respectively, going forward.

Rajiv: While the significant renewal and expansion with a north American based fortune 500 provider of consumer packaged goods.

Rajiv: This customer with data center footprint.

Rajiv Ramaswami: This customer plans on swapping out the competitor's software in their existing footprint and also utilizing Nutanix Cloud Platform for all of their expansion. We see these wins as a testament to our ability to both land significant deals and expand within the largest companies. And we are encouraged by the substantial increase in the number of customers and partners engaging with us, including some of the world's largest companies. However, these larger opportunities tend to have longer sales cycles, can involve aggressive competitive response, and exhibit greater variability with respect to timing and outcome.

Rajiv: Obviously been split between mechanics, and a competitor.

Rajiv: Was looking to standardize that automation and self service capabilities on a single platform.

Rajiv: They decided to standardize on mechanics truck platform.

Rajiv: Including our <unk> hypervisor.

Rajiv: And <unk> cloud management to handle that self service and automation needs.

Rajiv: They also added the kind of unified storage and the patents database service.

Rajiv: Unstructured data management and database automation needs respectively.

Rajiv: Going forward.

Rajiv: This customer plans or swapping out the competitive software in their existing footprint and also utilizing mechanics cloud platform for all of their expansion needs.

Rajiv: We see these wins as a testament to our ability to both land significantly.

Rajiv: And expense within the largest company.

Rajiv: And we are encouraged by the substantial increase in the number of customers and partners engaging with us.

Rajiv: Including some of the world's largest companies.

Rajiv: However.

Rajiv: These larger opportunities tend to have longer sales cycles.

Rajiv: Ken and more aggressive competitive responses.

Rajiv: And exhibit greater variability.

Rajiv: With respect to timing and outcome.

Speaker Change: <unk> will provide more color on the impact of these dynamics.

Speaker Change: Last week, we held our annual docked next conference in Barcelona, Spain.

Rajiv Ramaswami: Rukmini will provide more color on the impact of these. Last week, we held our annual.NEXT conference in Barcelona, Spain, where the excitement from the 4,000 plus attendees was tangible.

Speaker Change: Where the excitement from the 4000 plus attendees was tangible.

Speaker Change: At <unk>, we made a number of announcements demonstrating continued progress and plans on enhancing the functionality of the inorganic star platform.

Rajiv Ramaswami: At.NEXT, we made a number of announcements, demonstrating continued progress and plans on enhancing the functionality of the Nutanix cloud platform and broadening our partnership, especially with respect to support for modern applications and enterprise AI. On the Enterprise AI front, we announced GPT in a Box 2.0, which will deliver expanded GPU and large language model support, as well as Automated Configuration and Management of Model Inference Endpoints for Gen

Speaker Change: And broadening our partnerships.

Speaker Change: Especially with respect to support modern applications and enterprise AI.

Speaker Change: On the enterprise front.

Speaker Change: We announced DPT in a box to Darko <unk>.

Speaker Change: He will deliver expanded GPU and large language model support.

Speaker Change: Automated configuration and management of modest influence endpoints for <unk> applications.

Speaker Change: Simplified model management.

Rajiv Ramaswami: Simplified Model Management, and an expanded BASA program. This includes a new partnership with Hugging Face to provide access to the HuggingFace library of large language models for Nutanix customers, as well as an expanded partnership with NVIDIA that includes the planned integration of NVIDIA's Inference Microservices, or NIMS, into our automated enterprise AI solution. More broadly, we continue to see a high level of interest and additional events with GPT in a box in Q3, including a win with a large India-based government agency looking to deploy Gen AI with fraud detection as the initial use. On the modern application front, We announced the Nutanix Kubernetes Platform, or NKP, to simplify management of container-based modern applications using Kubernetes, on-premises and in any major public cloud service.

Speaker Change: And an expanded partner program.

Speaker Change: This includes a new partnership with hugging face.

Speaker Change: To provide access to the hugging face library of large language models fund mechanics customers.

Speaker Change: As well as an expanded partnership with Nvidia.

Speaker Change: That includes the planned integration.

Speaker Change: And media influence micro services our NIM.

Speaker Change: Into our automated enterprise AI solution.

Speaker Change: More broadly we continue to see a high level of interest and additional wins.

Speaker Change: <unk> DPT in a box in Q3.

Speaker Change: Including a win with a large EMEA based government agency that is looking to deploy danai with fraud detection at the initial use case.

Speaker Change: On the modern application front, we announced the new tanks kubernetes platform or <unk> to.

Speaker Change: To simplify management of container based modern applications using <unk>.

On premises.

Speaker Change: And any native public cloud service.

Speaker Change: We also took initial steps and extending our data services for kubernetes, our NDA to cloud native containerized environments.

Rajiv Ramaswami: We also took initial steps in extending our data services for Kubernetes, or NDK, to cloud-native containerized environments. This will simplify the development of resilient, data-intensive modern applications in public clouds and allow customers to ultimately run them anywhere. In keeping with our Project Beacon vision, we announced the broadening of our partnership with Dell. While Nutanix software already works well with Dell hardware, we announced two new elements of our long-standing partnership. First,

Speaker Change: This will simplify the development of resilient data had been some modern applications in public cloud.

Speaker Change: And allow customers to ultimately run them anywhere.

Speaker Change: In keeping with our project Beacon vision.

Speaker Change: Yeah.

Speaker Change: Finally, we announced a broadening of our partnership with depth.

Speaker Change: While the mechanic software already works well with Dell hardware.

Speaker Change: We announced two new elements of our long standing partnership.

Speaker Change: First.

Rajiv Ramaswami: Then I'm going to sell a tightly integrated hyperconverged solution, combining the Nutanix Cloud Platform software with their PowerEdge server. This will provide our customers with the choice of procuring Nutanix's platform directly from them. We expect that this solution will be available later this calendar year.

Speaker Change: They're not going to sell a tightly integrated hyper converged solution, combining the inorganic stock platform software.

Speaker Change: Delta power it.

Speaker Change: This will provide our customers.

Speaker Change: But the choice of procuring new tenants with platform directly from that.

Speaker Change: We expect that this solution.

Speaker Change: We'll be available later this calendar year.

Speaker Change: Second.

Rajiv Ramaswami: We will together deliver the Nutanix cloud platform powered by AHV hypervisor for compute and Dell PowerFlex for storage. This will allow customers to reuse some of their existing IP-based Dell three-tier storage hardware, protecting their investment and giving them choice. We are in the development stage for this offering at this time and expect it to be available in calendar 2025. Now, I'd like to comment on the recently published results of our sixth annual Nutanix Enterprise Cloud Index. A survey of 1,500 IT decision makers around the world found that the top three priorities identified by respondents were data security and ransomware protection.

Speaker Change: We will together deliver the organic start platform powered by HP Hypervisor for compute.

Speaker Change: And then a power flex for storage.

Speaker Change: This will allow customers to reuse some of their existing IP based del Pts storage hardware.

Speaker Change: Protecting that investment and giving them choice.

Speaker Change: We are in the development stage for this offering at this time and expect it to be available in calendar 2025.

Speaker Change: Now I'd like to comment on the recently published results of our sixth annual mechanics Enterprise Cloud index.

Speaker Change: A survey of 1500, it decision makers around the world.

Speaker Change: The top three priorities identified better funding for data security and Ransomware protection.

Speaker Change: Implementing the right hybrid IV operations.

Speaker Change: And implementing AI strategy.

Speaker Change: I see these results is playing to the strengths of the Nexstar platform.

Speaker Change: Mr Ransomware protection with our data led capability.

Speaker Change: Enables hybrid multi cloud operating models.

Speaker Change: And has strong support for AI with our <unk> in a box solution.

Speaker Change: In closing I.

Rajiv Ramaswami: I'm pleased with our solid Q3 results, ongoing innovation on our cloud platform, particularly with respect to its support for modern applications and generative AI, and on the progress we continue to make on partners. We remain focused on delighting our customers while driving sustainable, profitable growth. And with that, I'll hand it over to Rukmini Sivaraman.

Speaker Change: I am pleased with our solid Q3 results.

Speaker Change: Our ongoing innovation on our cloud platform.

Particularly with respect to a support for modern applications and gender atvs.

Speaker Change: And on the progress we continue to make on partnerships.

Speaker Change: We remain focused on delighting, our customers, while driving sustainable profitable growth.

Speaker Change: And with that I'll hand, it over to Rick many similar.

Speaker Change: <unk>.

Rukmini Sivaraman: Thank you, Rajiv. I will first review our Q3 fiscal 24 results, followed by guidance for Q4 fiscal 24, and implied full year fiscal year 24 guidance. Results in Q3-24 came in above the high end of our range across all guided machines. ACV billings in Q3 were $289 million, above the guided range of $265 to $275 million, representing year-over-year growth of 20%. Revenue in Q3 was $525 million, higher than the guided range of $510 to $520 million, representing a year-over-year growth rate of 17%. ARR at the end of Q3 was $1.82 billion, representing year-over-year growth of 24%.

Speaker Change: Thank you Rajiv.

Rick: I'll first review, our Q3 fiscal 'twenty four results followed by guidance for Q4 fiscal 'twenty four and the implied full year fiscal year 'twenty for guidance.

Rick: Results in Q3 24 came in above the high end of our range across all guided metrics ACD billings in Q3 were $289 million above the guided range of $265 million to $275 million represent.

Rick: <unk> year over year growth of 20%.

Rick: Revenue in Q3 was $525 million higher than the guided range of $510 million to $520 million, representing a year over year growth rate of 17%.

Rick: <unk> at the end of Q3 was $1.82 billion representing year over year growth of 24%.

Rukmini Sivaraman: In Q3, we continue to see modestly elongated average sales cycles compared to historical levels. Average contract duration in Q3 was 3 years, 0.2 years higher than Q2, and the non-gap growth margin in Q3 was 86.5%, higher than our guided range of approximately 85%. Non-GAAP operating margin in Q3 was 14%, higher than our guided range of 7.5% to 8.5%, largely due to, one, lower operating expenses as a result of higher than expected non-recurring payments related to one of our partnership agreements and timing of hiring, and two, higher revenue and higher growth margin. Non-GAAP net income in Q3 was $85 million, or fully diluted EPS of 28 cents per share based on fully diluted weighted average shares outstanding of approximately 302 million shares.

Rick: In Q3, we continued to see modestly elongated average sales cycles compared to historical levels.

Rick: Average contract duration in Q3 was 3.2 years higher than Q2.

Rick: non-GAAP gross margin in Q3 was 86, 5% higher than our guided range of approximately 85%.

Rick: non-GAAP operating margin in Q3 was 14% higher than our guided range of 7.5% to 8.5%.

Rick: Largely due to one lower operating expenses as a result of higher than expected non recurring payments related to one of our partnership agreement and.

Rick: And timing of hiring.

Rick: And to higher revenue and higher gross margin.

Rick: non-GAAP net income in Q3 was $85 million or fully diluted EPS of <unk> 28 cents per share based on fully diluted weighted average shares outstanding.

Rick: Approximately 302 million shares.

Rick: Dsos based on revenue and ending accounts receivable were 39 days in Q3.

Rukmini Sivaraman: DSOs based on revenue and ending accounts receivable were 39 days in Q3. Free cash flow in Q3 was 78 million dollars, representing a free cash flow margin of 15%. We ended Q3 with cash, cash equivalents, and short-term investments of $1.651 billion, up slightly from $1.644 billion at the end of Q2. We continued repurchasing shares in Q3 under the Share Repurchase Program previously authorized by our Board of Directors. We have repurchased about $106 million worth of shares year-to-date through Q3-24.

Rick: Free cash flow in Q3 was $78 million.

Rick: Representing a free cash flow margin of 15%.

Rick: We ended Q3 with cash cash equivalents and short term investments of $1.651 billion up slightly from 164 4 billion at the end of Q2.

Rick: We continued repurchasing shares in Q3 under the share repurchase program previously authorized by our board of directors.

Rick: We have repurchased about $106 million worth of shares year to date through Q3 'twenty four.

Rick: As a reminder, our sustainable generation of free cash flow enabled us to transition to net share settlement to pay for employees tax liability on Odyssey vesting, starting in Q2 and going forward.

Rukmini Sivaraman: As a reminder, our sustainable generation of free cash flow enabled us to transition to net share settlement to pay for employees' tax liability on RSU vesting, starting in Q2 and going forward, from our previous method of sell-to-cover. We used $58 million of our cash in Q3 and $53 million in Q2 for a total of over $111 million of cash year-to-date for this purpose.

Rick: From our previous method of selling to cover.

We used $58 million of our cash in Q3 and $53 million in Q2 for a total of or $111 million of cash year to date for this purpose.

Rick: More information on the mechanics of net share settlement and its impact can be found in the appendix section of our earnings presentation found on our Investor Relations website.

Rukmini Sivaraman: More information on the mechanics of net share settlement and its impact can be found in the appendix section of our earnings presentation found on our investor relations website. This, along with our share repurchase program, will help us continue to manage dilution. Moving to Q4-24, our guidance for Q4 is as follows: ACV billing of $295 to $305 million. Revenue of $530 to $540 million, a non-GAAP gross margin of 85 to 86%, a non-GAAP operating margin of 9 to 10%, and fully diluted shares outstanding of approximately 302 million shares.

This along with our share repurchase program will help us continue to manage dilution.

Rick: Moving to Q4 'twenty for our guidance for Q4 is as follows.

Rick: HCV billings of $295 million to $305 million.

Rick: Revenue of $530 million to $540 million.

Rick: non-GAAP gross margin of 85% to 86%.

Rick: non-GAAP operating margin of 9% to 10%.

Rick: Fully diluted shares outstanding of approximately 302 million shares.

Rick: The updated guidance for full year fiscal year 'twenty four is as follows.

Rukmini Sivaraman: The updated guidance for full year, fiscal year 24, is as follows: ACV billing of 1.12 to 1.13 billion dollars, representing a year over year growth of 18% at the midpoint of the range. Revenue of $2.13 to $2.14 billion, representing a year-over-year growth of 15% at the midpoint, a non-GAAP growth margin of approximately 86%, a non-GAAP operating margin of approximately 15%, and free cash flow of $520 to $540 million, representing a free cash flow margin of 25% at the midpoint.

Rick: I see the billings of one point to one two to 1.13 billion.

Rick: Presenting a yard over your growth of 18% at the midpoint of the range.

Rick: Revenue of 2.132 to one 4 billion, representing a year over year growth of 15% at the midpoint.

Rick: non-GAAP gross margin of approximately 86%.

Rick: non-GAAP operating margin of approximately 15%.

Rick: And free cash flow of $520 million to $548 million, representing a free cash flow margin of 25%.

Rick: Point.

Rick: I will now provide some commentary regarding our updated fiscal year 'twenty for guidance specifically the following four points.

Rukmini Sivaraman: I will now provide some commentary regarding our updated fiscal year 24 guidance, specifically the following four points. First, we are seeing continued and significant new opportunities for our solution. However, we continue to see a higher mix of larger deals in our pipeline, which is driving greater variability in our new and expansion business. The number of opportunities greater than $1 million in ACV in our pipeline has grown at higher than 30% for each of the last three quarters compared to the corresponding quarters last year. Relatedly, the dollar amount of pipeline from opportunities greater than $1 million in ACV has grown at well over 50% for each of the last three quarters compared to the corresponding quarters last year.

Rick: First we.

Rick: We are seeing continued and significant new and expansion opportunities for our solutions.

Rick: However, we continue to see a higher mix of larger deals in our pipeline, which is driving greater variability in our new and expansion business.

Rick: The number of opportunities greater than $1 million in HCV and our pipeline has grown at higher than 30% for each of the last three quarters compared to the corresponding quarter last year.

Rick: Relatedly the dollar amount of pipeline from opportunity is greater than $1 million in HCV has grown at well over 50% for each of the last three quarters compared to the corresponding quarter last year.

These larger opportunities often involve strategic decisions and C suite approvals, causing them to take longer to close.

Rukmini Sivaraman: These larger opportunities often involve strategic decisions and C-suite approvals, causing them to take longer to close and to have greater variability in timing, outcome, and deal structure. As we mentioned previously, we have continued to see a modest elongation of average sales cycles relative to historical levels. Our fiscal year 24 new and expansion ACV and ARR performance year to date have been affected by these dynamics and have been below our initial expectations at the beginning of the fiscal year. We expect these dynamics to continue in Q4. As an example,

Rick: And to have greater variability in timing outcome and deal structure.

Rick: And as we mentioned previously we have continued to see a modest elongation of average sales cycles relative to historic levels.

Speaker Change: Our physical New York, 24, new and expansion HCV and a at our performance year to date.

Speaker Change: Have been affected by these dynamics and have been below our initial expectations at the beginning of the fiscal year.

Speaker Change: We expect these dynamics to continue in Q4.

Speaker Change: As an example.

Rukmini Sivaraman: For the 8-figure ACV transaction in Q3 that Rajiv mentioned, we expect the billings and cash collection to be in Q4, while the associated subscription revenue is expected to be recognized over multiple years starting in fiscal year 25. Additionally, it is worth noting that this transaction was approximately two years in the making, taking longer to close than our prior expectations, but it came in with a longer contract duration and a higher total contract value than expected. We anticipate similar variability in deal structures and longer sales cycles for some of the larger opportunities in our pipeline. Second,

Speaker Change: For the eighth figure ACB transaction in Q3 that Rajiv mentioned, we expect the billings and cash collection to be in Q4.

Speaker Change: Why is the associated subscription revenue is expected to be recognized over multiple years, starting in fiscal year 'twenty five.

Additionally, it is worth noting that this transaction was approximately two years in the making taking longer to close than our prior expectation, but came in with a longer contract duration and a higher total contract value by unexpected.

Speaker Change: We anticipate similar variability and deal structures and longer sales cycles for some of the larger opportunities in our pipeline.

Second.

Rukmini Sivaraman: The guidance assumes that our renewables business will continue to perform well in Q4. Third, the full-year guidance continues to assume that average contract duration will be flat to slightly lower compared to fiscal year 23, as renewals continue to grow as a percentage of our billing. Fourth, the updated full-year free cash flow guidance includes the benefit of the eight-figure ATV transaction which was booked in Q3. In addition, the full-year free cash flow guidance also assumes the impact of certain non-recurring benefits over the course of the year, including approximately $40 million of operating expenses, of which we expect to receive approximately $30 million of non-recurring cash payments related to one of our partnership agreements.

Speaker Change: The guidance assumes that our renewals business will continue to perform well in Q4.

Speaker Change: Third the full year guidance continues to assume that average contract duration will be flat to slightly lower compared to fiscal year 'twenty three as it in all its continuing to grow as a percentage of our billing.

Speaker Change: Fourth the updated full year free cash flow guidance includes the benefit of the eight figure ACB transaction, which was booked in Q3.

Speaker Change: In addition, the full year free cash flow guidance also assumes the impact of certain nonrecurring benefit over the course of the year, including approximately $40 million of operating expenses of which we expect to receive approximately $30 million of nonrecurring.

Speaker Change: Cash payments related to one of our partnership agreement.

Speaker Change: In closing we are pleased that our Q3 performance exceeded guidance across all metrics and to continue to make significant progress aligned with our stated philosophy of sustainable profitable growth.

Speaker Change: With that operator, please open the line for questions.

Operator: As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. And we please ask that you limit yourself to one question and one follow-up. Again, that's one question and one follow-up and one minute for our first question. And our first question comes from Pinjalim Bora from J.P. Morgan. Your line is now open.

Speaker Change: And thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again and we please ask that you limit yourself to one question and one follow up again and ask one question and one follow up and one moment for our first question.

Speaker Change: And our first question comes from Jonathan <unk> from JP Morgan. Your line is now open.

Speaker Change: Oh, Great Hey, guys. Congrats on the question. Thanks for taking the question.

Pinjalim Bora: Oh, great. Hey, guys, congrats on the question. Thanks for taking the question. Rajiv, I have one question for you. I wanted to ask you about the decision to kind of extend EHV to support computer-only nodes. On the one hand, it seems like it could actually help you create an on-ramp to migrate workloads into the Nutanix HCI platform. But on the other hand, it could elongate the time for a customer to make that decision since EHV might increase the time they stay on their existing 3D architecture. So maybe talk about that, put some take there.

Speaker Change: Rajeev.

Speaker Change: One question for you.

Mind will ask you about the decision to kind of extend the AWP support computer only nodes on one hand, it seems like it could actually help you create an on ramp to migrate workloads into the new <unk> platform.

Speaker Change: On the other hand could elongate the time for a customer to make that decision since CHP.

Speaker Change: Might increase the time be they stay on their existing <unk> architecture, So maybe talk about that.

Rajiv Ramaswami: And is there any incremental investment in that decision that we should be thinking about as we think about next year? Yeah, I think, excellent question, Pinjalim. We thought about this one long and hard.

Speaker Change: Puts and takes.

Speaker Change: There and is there any incremental investment.

Speaker Change: And that decision that we should be thinking about as we as we think about next year.

Speaker Change: Yes, I think excellent question pendulum, we thought about this one long and hard.

Rajiv Ramaswami: Here's kind of the rationale for why we're doing this. One of the things we've talked about as customers migrate from legacy three-tier to HCI architecture is that it typically requires them to do a hardware refresh, get rid of their legacy storage arrays and their existing servers and move to an HCI configuration. And that can actually slow things down a bit in terms of our ability to get into an account because they have to wait for their hardware depreciation cycles to pass typically before they buy new hardware.

Speaker Change: He is kind of the rationale for why we're doing this one of the things we've talked about as customers migrate from legacy <unk> to HCI architecture is that it requires them typically to do a hardware refresh of that legacy storage arrays.

Speaker Change: And some in their existing servers and we will go ahead Ti configuration, then that actually can slow things down a bit in terms of our ability to get into an account.

Speaker Change: Because they have to wait for their hardware depreciation cycles.

Speaker Change: Typically before they buy a new hybrid.

Rajiv Ramaswami: Now, the rationale for this announcement with Dell is that we are starting out by supporting AHV with PowerFlex, which is one of their Dell storage plans. Now, doing so allows us to get in the door, right, with existing customers who have made an investment in the storage array already without having to remake the storage array. And so it allows us faster entry into an account, not slower; it's going to be faster, right with a portion of our portfolio.

Now the rationale with this announcement with Dell is we're starting out by supporting EHP with power Flex, which is one of the storage platform.

Speaker Change: Now doing so allows us to get in the door right with existing customers, who have made an investment in the storage array already.

Speaker Change: Without having to replace the storage rate.

Speaker Change: And so it allows us faster entry into in a car not slower it's going to be faster right with a portion of our portfolio.

Rajiv Ramaswami: And we are still very much on that mission of converting, over time, our customers to this modern cloud HCI architecture, which creates a platform for the future. So, on balance, this gives us easier insertion into accounts where they're not quite ready to go depreciate their hardware yet, allowing us to then, over time, convert them over to HCI. And so that's the rationale behind us supporting external storage. We are starting out with just IP storage only. And that was specifically with the Dell PowerFlex at this time.

Speaker Change: And we are still very much on the admission of converting over time, our customers with a modern cloud architecture.

Speaker Change: This creates a platform for the future. So on balance that gives us easier insertion into accounts, where they are not quite ready to go depreciate that hardware yet.

Speaker Change: Allowing us to then over time convert them over to <unk>.

Speaker Change: So that's the rationale behind us supporting external storage.

Speaker Change: We are starting out with that IP storage, only and that was specifically with delta or flex.

Speaker Change: At this time and.

Rajiv Ramaswami: Right. And again, I think that's rational. Yeah, understood. Any thoughts on the incremental investment that we should think about maybe going into next fiscal year? I think it's factored into our current run rate, by the way. We already have our engineering teams, and this solution is in development currently, and it's included in our ongoing R&D experience. And this is one quick follow-up for Rukmini. Is it possible for me to, to understand the kind of size of this eight-figure deal?

Speaker Change: And again I think that's the rationale.

Speaker Change: Yeah understood and any thoughts on the incremental investment that we should think about maybe going into next fiscal year. I think it is factored into our current run rate by the way on this.

Speaker Change: We already have an engineering team centered solution is in development currently and it's included in our ongoing R&D expenses.

Understood and one quick follow up for Ruffini is is it possible to point to to understand kind of the size of this eight figure deal.

Rajiv Ramaswami: That might be from a point of view of just free cash flow guidance that you have seems like a huge $100 million upside. If I if my numbers are correct, that I looked, Thank you, Pinjalim.

Speaker Change: That might be from my point of view of just the free cash flow guidance.

Speaker Change: Uh huh.

Speaker Change: It seems like a huge $100 million upside.

Speaker Change: I think if my numbers are correct that I looked at.

Speaker Change: Thank you have a pendulum so we're not commenting on the specific size of the deal beyond what we said in terms of eight figure ACB and I'll also remind folks that we do collect cash upfront for all the multiyear contract and we alluded to the fact that this transaction came in.

Rukmini Sivaraman: So, you know, we're not commenting on the specific size of the deal beyond what we said in terms of eight-figure ACV. And I'll also remind folks that, you know, we do collect cash up front for all, even if it's a multi-year contract. And we alluded to the fact that this transaction came in with a longer contract duration than we had initially expected. The total ACV, total TCV, actually the total contract value was larger than we had expected, Pinjalim. And so, yeah, we're happy to be able to raise our free cash flow guide to the range that we did, 520 to 540. Got it, congratulations on the goal, and thank you.

Speaker Change: The longer contract duration than we had initially expected the total ACB total D. C V actually the total contract value was larger than than we had expected pendulum and so yeah, we're happy to be able to raise our free cash flow guide to the range that we did $525 million to $40 million.

Speaker Change: Full year.

Speaker Change: Got it congrats on the quarter. Thanks.

Speaker Change: And thank you.

Speaker Change: And one moment our next question.

Operator: And one moment for our next question. And the next question comes from James Fish from Piper Sandler. Your line is now open. Hey guys, this is Quinton. I'm from James Fish.

Speaker Change: And our next question comes from James Fish from Piper Sandler Your line is now open.

Quintin: Hey, guys. This is quintin on for James Thanks for taking my questions.

James Edward Fish: Thanks for taking our questions. Rajiv, maybe for you first, I'd love to hear some incremental color you have around the partnerships with Cisco. Obviously, we've announced some deployment optionalities there, but how are your win rates there?

Speaker Change: Rajiv maybe for you first I would love to hear incremental color you have around the partnerships with Cisco obviously.

Speaker Change: Announced some deployment optionality is there but.

Speaker Change: How are your win rates there how have reps kind of adopted the selling of new tax platform.

Rajiv Ramaswami: How have reps kind of adopted the selling of the Nutanix platform? And any traction you can further talk on would be great. Sure. So in Q3, we saw some good additional events for this new solution with Cisco, and we've seen good, encouraging progress with respect to Cisco's ability to bring in new logos for us. Also, at.NEXT last week, we announced that we are certifying our AHV hypervisor to run on Cisco UCS servers.

Speaker Change: Any traction you can kind of further talk on would be great.

Speaker Change: Sure.

Speaker Change: So in Q3, we saw some good additional wins for this new solution with Cisco and we've seen good encouraging progress with respect to Cisco and the ability to bring in new logos for us.

Speaker Change: Also at <unk> last week, we announced that we are certifying our <unk> hypervisor to run on fiscal Ucs servers.

Rajiv Ramaswami: This will enable customers to repurpose their existing Cisco servers to run our software, connected to our storage-only nodes, and again, running our own software. So with respect to the contribution, we expect to see a growing contribution from Cisco in Q4 and, of course, into FY25. And certainly, we are encouraged by the partnership in terms of their reps, especially their specialist reps, because Cisco, again, has a very big sales force, but a lot of those sellers are also networking sellers. But they do have a specialist team, a sales team, coming in and focusing on data center sales, and those are the people who are more familiar with the Nutanix offering.

Speaker Change: This will enable customers to repurpose their existing Cisco servers to run our software connected to our storage only notes right again running our own software.

Speaker Change: With respect to the contribution we expect to see a growing contribution from fiscal in Q4.

Speaker Change: And of course into FY 'twenty five and.

Speaker Change: And thirdly, we are encouraged by the partnership in terms of their reps.

Speaker Change: Especially the especially snack because Cisco again has a very big salesforce, but a lot of those set us auto networking sellers, but they do have a specialist team sales team coming out of focusing on data center sales and those are the people who are more familiar with the <unk> offering. So we don't own all increased by as a contribution the overall contribution.

Rajiv Ramaswami: So we are overall encouraged by the contribution. The overall contribution for this year is small, modest, as we have said in the past, and we expect a bigger contribution into FY25. Yeah, that makes a lot of sense. And then you were touching on Pinjalim's question earlier. You know, after the AHV combination with Dell Storage, is there really anything from a feature or functionality standpoint that would limit a VMware customer from being able to move to AHV now that only the hypervisor has been enabled?

Speaker Change: This year, the small modest SB said in the past and we expect a bigger contribution to FY 'twenty five.

Speaker Change: Yes that makes a lot of sense and then maybe touching a bit on <unk> question earlier.

Speaker Change: After the <unk> combination with Dell storage is there really anything from a feature functionality standpoint that would limit a vmware customer from being able to move to HPE now that kind of the Hypervisor Omi has been enabled.

Rajiv Ramaswami: Or is it kind of an optionality where this opens up all VMware customers to move over to Nutanix? Thank you. Another great question there, Quintin.

Speaker Change: Or is it kind of.

Speaker Change: Optionality, where this opens up all Vmware customers.

Speaker Change: Tim over to new tenants.

Speaker Change: Again, another great question. So so first of all I had.

Rajiv Ramaswami: So, first of all, I want to say that, first of all, we are initially supporting only one storage platform, and that is PowerFlex, okay? But the concept is about offering AHV standalone to work with third-party storage, right? This is a big chunk of the install base out there, the legacy install base, which is, you know, separate virtualized servers connected to three-tier storage. Now, we are starting out with a very small footprint, to be clear, right?

Speaker Change: Wanted to say that first of all we are only initially supporting one storage platform and that is partly okay.

Speaker Change: But the concept is.

Speaker Change: Offering EHP stand alone to work with third party storage, which is a big chunk of the installed base out there.

Speaker Change: Our legacy installed base, which is separate virtualized servers connected to <unk> storage.

Speaker Change: We are starting out with a very small footprint to be clear we are not.

Rajiv Ramaswami: We are not, you know, we're only supporting one storage array, and it's an IP-based storage array. So, it'll be, you know, I don't think we'll ever get to a point where we support every storage array that's out there on the planet.

Speaker Change: They are only supporting one storage array and it's an IP based storage rates.

Speaker Change: <unk> be it'll be I don't think we will ever get to a point, where we'll support every storage array. That's out there on the planet that's not going to happen, we will start with <unk> flex and then over time incrementally add other IP based storage or not.

Rajiv Ramaswami: That's not going to happen. We will start with Dell PowerFlex and then, over time, incrementally add other IP-based storage arrays, right, not five-channel storage. So, expect that this is something that we can get a broader and broader opportunity scope over time, but it does open the door to supporting third-party stories. Thanks for your time.

Speaker Change: Non fibre channel storage. So I expect that this is something that we can get a broader and broader opportunity.

Speaker Change: Scope overtime.

Speaker Change: But it does open the door to supporting third party storage.

Speaker Change: Thank you all.

Speaker Change: And thank you.

Speaker Change: Yeah.

Speaker Change: And one moment for our next question.

Operator: Thank you all, and thank you. In one moment for our next question. And our next question comes from Jason Adder from William and Blair. Your line is now open.

Speaker Change: And our next question comes from Jason Ader from William Blair. Your line is now open.

Jason Noah Ader: Yes. Thank you. Good afternoon, guys just to follow up on the first few questions for Rajiv on the Standalone HV deployment option with third party storage.

Jason Noah Ader: Yeah, thank you. Good afternoon, guys. Just to follow up on the first two questions for Rajiv on the standalone AHV deployment option with third-party storage. How are you planning on pricing AHV in those types of environments? I know it's just starting with Dell PowerFlex, But is it sort of, is it right to think about the pricing being similar to kind of an HCI solution? Yeah, I mean, Jason, again, as you can imagine, the whole reason for doing this is to provide an alternative solution for customers who are looking to reuse their existing storage but replace their hypervisor.

Speaker Change: How are you planning on pricing HB and those kinds of environments I noticed you're starting with Gulf power Flex.

Speaker Change: But is it sort of is it right to think about the pricing would be similar to kind of our ACI solution.

Speaker Change: Yes, I mean again as you can imagine the whole reason for doing this is to provide an alternative solution for customers.

Speaker Change: Looking to reuse their existing storage.

Speaker Change: But replaced the Hypervisor.

Rajiv Ramaswami: So, but we also want to think about this as an on-ramp to HCI, not just, you know, the standalone hypervisor being the end game in itself. And therefore, we will figure out what the appropriate pricing needs to be to achieve that outcome. So, we haven't, price is offering, it's still in development, won't be available until next year. So, it's still early days for us. And we will monitor, you know, customer feedback and make more decisions on this over time. Great, and then a follow-up for Rukmini.

Speaker Change: So, but we also wanted to think about this as an on ramp to <unk> not just.

Speaker Change: The Standalone hypervisor being the end game in itself and therefore, we will.

Speaker Change: Figuring out what the appropriate pricing needs to be to achieve that outcome. So we havent prices offering is still in development won't be available until next year.

Speaker Change: Still early days for us and we will monitor.

Speaker Change: Customer feedback and make more decisions on this or that.

Speaker Change: Okay, Great and then a follow up for <unk>.

Rukmini Sivaraman: I know you mentioned in the new and expansion business that it was below your expectations coming into the year because of the longer sales cycles. Could you comment on how the pipeline has fared relative to your expectations entering the year? Because it sounds like you gave some data points there. It sounds like the pipeline is extremely strong. Thank you, Jason.

Speaker Change: I know you mentioned on the new and expansion business, but it was below your expectations coming into the year because of the longer sales cycles.

Speaker Change: Could you comment on how the pipeline.

Speaker Change: Has fared relative to your expectations entering the year because it sounds like you gave some data points there it sounds like the pipeline is extremely strong.

Jason Noah Ader: Thank you Jason correct, I mean, I think we have a strong pipeline generation and and we gave you some qualification around the larger deal pipeline, which we did comment on last quarter as well.

Rukmini Sivaraman: Correct. I mean, I think we have a strong pipeline generation. And, and, you know, we gave you some qualifications around the larger deal pipeline, which we did comment on last quarter as well. And the qualification I had in my script was that if you look at opportunities greater than 1 million in ACV, as a threshold in our pipeline, that number of deals has grown at higher than 30%, right, for each of the last three quarters, and the dollar amount of that pipeline from opportunities greater than 1 million has grown even faster at well over 50%.

Jason Noah Ader: The the qualitative thing I had in my script was that if you look at opportunities greater than $1 million in ACB as a threshold in our pipeline. The number of deals is growing at higher than 30% and rightfully. So the last three quarters and the dollar amount of that pipeline from opportunities greater than 1 million has grown even faster at well over 50%.

Rukmini Sivaraman: And so the pipeline is, is, is strong. I think what we're seeing and what the market is a bit of a dichotomy on that versus, I think, what's closing, and I'd let you know, Rajiv, do you want to add more? Yeah, yeah, I mean, to your point. We are seeing this dichotomy, you know. We've got this vast opportunity opening up to us on the one hand. And that's for sure.

Jason Noah Ader: And so the pipeline is strong.

Speaker Change: Strong I think what we're seeing and what the market is a bit of a dichotomy on back versus I think whats clothing and I'd, let you know Rajiv do you want to add more.

Speaker Change: I mean, certainly to your point.

Speaker Change: We are seeing this dichotomy you in regards as lost opportunity opening up to us on the one hand.

Rajiv Ramaswami: But at the same time, you know, in terms of the deals that we are closing in the near term, right? I mean, these deals are taking longer, these larger deals. So on the opportunity side, you know, I was at.NEXT last week, and it is amazing to see the substantial increase in the customers who are engaging with us, including some of the world's largest companies and ones that we have won business with and who are willing to talk about it very publicly in terms of their modernization experiences, their migration experiences.

Speaker Change: And that for sure but at the same time.

For the deals that we're closing in the near term right. I mean these deals are taking longer these larger deals.

Speaker Change: So on the opportunity side, either dark next last week and it was amazing to see the substantial increase in the customers who are engaging with us.

Speaker Change: Including some of the world's largest companies.

Speaker Change: And ones that we have won business with and who are willing to talk about it very publicly in terms of their modernization experiences their migration experiences.

Speaker Change: And at the same time, we are seeing an increased level of activity with our China partner of our OEM partners are looking to engage deeper with us.

Speaker Change: The engagements themselves on the other side I've been taking longer than expected to close.

Rajiv Ramaswami: And they've shown greater variability with respect to the timing and the outcome than we expected. Now, I think this is because of a higher mix of larger, more strategic opportunities, and, of course, some of which are influenced by this Broadcom acquisition. Now with respect to this, this broadcast opportunity, we have said, and we do expect that this will take our time to play for all the reasons we previously discussed. That includes, you know, three reasons.

Speaker Change: And they've shown greater variability with respect to the timing and the outcome than we expected.

Speaker Change: No I think this is because of a higher mix of larger more strategic opportunities.

Speaker Change: And of course, some of which are influenced by the Broadcom acquisition.

Rajiv Ramaswami: First, you know, many VML customers have signed multi-year ELAs with VML prior to the acquisition, buying them time. Second, as we've talked about before, a lot of this installed base also requires a hardware refresh to run HCI. Although, you know, once we do get out of the AHP, we will start addressing a portion of this market as well. But also, I think the situation has been very dynamic recently. Number three, you know, we've seen Broadcom display a lot of flexibility with respect to their pricing and packaging changes, especially when they're faced with the probability of losing some of their larger customers or responding to pushback from the market and from the customer base. So those are some of the reasons why we've had some pressure on our recent new and expansion ACB performance. Thank you, and thank you.

Speaker Change: Now with respect to this there's not an opportunity.

Speaker Change: We have said and we do expect that this will take our time to play for other reasons. We previously discussed that includes three reasons.

Speaker Change: Yes, many vms customers have signed multiyear elas.

Speaker Change: <unk> prior to the acquisition buying them time.

Speaker Change: Second as we've talked about before a lot of installed base also requires a hardware refresh to Ron had Ci.

Speaker Change: So once we do get out of the HBV started dosing a portion of this market.

Speaker Change: As well.

Speaker Change: But also I think the situation has been very dynamic recently number three.

Speaker Change: Yeah, we've seen broadcom display a lot of flexibility with respect to that pricing and packaging changes, especially when they are faced with the probability of losing some of their larger customers.

Speaker Change: Wanting to push back from the market and from the customer base.

Speaker Change: So that's those are some of the reasons why we've had some pressure on our recent new and expansion the ACB performance.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: And one moment for our next question.

Operator: And one moment for our next question. And our next question comes from Wamsi Mohan from Bank of America. Your line is now open.

Speaker Change: And our next question comes from <unk> Mohan from Bank of America. Your line is now open.

Wamsi Mohan: Yes, thank you so much. Given your commentary on the longer time to close some of these deals, but that you're saying will last into Q4, would you say that changes any of your outlook also around 25?

Speaker Change: Yes. Thank you so much given your commentary on the longer time to close some of these deals but that you're saying will last into Q4.

Speaker Change: Would you say that changes any of your outlook also around 25.

Rajiv Ramaswami: I mean, why should it not sort of extend beyond Q4? That's my first question. I'll follow up. Yeah, thank you for that question, Wamsi. So, you know, to date this fiscal year, we've been outperforming our initial free cash flow expectations but have been below our initial expectations on new and expansion ACV and ARR, as you alluded to. While we're not commenting on fiscal year 25 or longer-term targets today, we remain committed to driving top-line growth and strong free cash flow generation, and we expect to provide our initial fiscal 25 guidance on our next earnings call, as we typically do. Okay, okay.

Speaker Change: Why should it not sort of extend beyond Q4.

Speaker Change: This is my first question and I'll follow up.

Speaker Change: Yeah. Thank you for that question.

Speaker Change: Lumpy. So you know to date this fiscal year, we've been outperforming our initial free cash flow expectations, but have been below our initial expectations on new and expansion ACB and Iraq as you alluded to.

Speaker Change: While we're not commenting on fiscal year, 'twenty five or longer term targets today, we remain committed to driving topline growth and strong free cash flow generation and we expect to provide our initial 25 guidance on our next earnings call as we typically do.

Speaker Change: Okay. Okay. Thanks for listening and I guess as a follow up I mean this this higher mix of larger deals right. You said like this has been tracking pretty strongly now for three quarters.

Rukmini Sivaraman: Thanks, Rukmini. And I guess as a follow-up, I mean, this higher mix of larger deals, right? You said this has been tracking pretty strongly now for three quarters. Um, what is driving the higher mix of larger deals? Is that more competitive traction?

Wamsi Mohan: I think Rajiv alluded to some of that. Or is there, you know, incremental attach across your stack? And would you say that the demand environment has changed materially across the last three quarters? Thank you so much. I can take that. There are multiple reasons for that, Wamsi.

Speaker Change: What is driving the higher mix of the larger deals was up more competitive traction I think rajeev alluded to some of that or is there incremental let Patrick Walsh your stack and would you say that the demand environment has changed materially across the last three quarters. Thank you so much.

Rajiv Ramaswami: So first, of course, look, there is a larger set of market opportunities available to us at these larger accounts, and these larger accounts tend to be associated with larger deals. Number one, number two, our platform has evolved to a point where now we can go after pretty much all the workloads that companies are running. So, this means we can go off a broader opportunity set. Number three, of course, the competitive dynamics in terms of what's happening with Broadcom are stimulating a portion of this. And so these are the reasons why we are seeing more and more large-scale projects in our pipeline. Okay, thank you so much, Rajiv. Thank you, and thank you.

Speaker Change: Maybe I can take that there's multiple reasons for that one.

Speaker Change: <unk>.

Speaker Change: So first of course look there is a larger set of market opportunities available to us at these larger accounts and these other constant to be associated with larger deals.

Speaker Change: Number one number two our platform has evolved to a point where now we can go after pretty much all the workloads that companies are running so.

Speaker Change: Which means we can go off a broader opportunity set.

Speaker Change: Three of course, the competitive dynamics in terms of what's happening with Broadcom is stimulating a portion of this and so these are the reasons why we are seeing more and more large data center.

Speaker Change: And our pipeline.

Speaker Change: Okay. Thank you so much with you.

Speaker Change: Thank you.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question comes from Simon Leopold from Raymond James Your line is now open.

Operator: And one moment for our next question, and our next question comes from Simon Leopold on behalf of Raymond Danes. Your line is now open.

Simon Matthew Leopold: Great, thanks. Appreciate you taking the question here. One of the things I wanted to follow up on was how your views have evolved regarding the opportunities to take business from VMware versus your assessment, say, six months ago. And then I've got a quick follow-up that I'll come back to. Maybe I'll take that start, Rukmini; you can provide more color.

Great. Thanks, I appreciate you taking the question here.

Simon Matthew Leopold: One of the things I wanted to follow up on was how your views have evolved regarding the opportunities to take business from Vmware versus your assessment say six months ago, and then I've got a quick follow up that I'll come back with.

Speaker Change: Maybe I think that does start with many who can provide more color that I would say largely.

Rajiv Ramaswami: I would say largely... You know, the opportunity is a multi-year opportunity, as we've been saying all along. It's not here and now in terms of closing deals, right? These things are going to take many years. We look at it as a multi-year tailwind for us, for all the reasons that we talked about, Simon. And I don't think that part of it has changed, right?

Speaker Change: The opportunity is a multi year opportunity as we've been saying all along it's not here now in terms of closing because these things are going to take many years that said, we look at it as a multiyear tailwind for us.

Speaker Change: For other reasons that we talked about Simon and I don't think.

Rajiv Ramaswami: It's been the same, as we've said, right? There are customers who sign DLAs, and therefore it takes time. There are the hardware refresh cycles involved in the process. The only big change that we've seen over the last couple of months, in fact, is that the situation with respect to what Broadcom is doing is also evolving rapidly. They've tried a bunch of things.

Speaker Change: Is that part of it has changed right. It's been the same as we said right this customer to assign DLA. Therefore, it takes time.

Speaker Change: The hardware refresh cycles involved in the process.

Speaker Change: The only big change that we've seen over the last.

Speaker Change: A couple of months in fact is that the situations Batiste acquired Broadcom is doing is also evolving rapidly.

Rajiv Ramaswami: They're, you know, stepping back on some of the things that they've tried. Of course, for the competitive situation, this is quite dynamic on that front. And, you know, these larger deals, of course, are taking longer for us to close. So the ones that are in the pipeline are taking longer for all these reasons that we talked about. So I'd say compared to the overall thesis about this being a multi-year opportunity, it hasn't really changed for us.

Speaker Change: Tried a bunch of things that are stepping back on some of the things that they've tried close of the <unk>.

The situation is quite dynamic on that front and these larger deals of course, taking longer also for us to close so the ones that are in the pipeline are taking for all these reasons that we talked about so so I would say compared to the overall thesis about this being a multiyear opportunity hasn't really changed for us.

Rajiv Ramaswami: In the short term, I think what we're seeing is these larger deals are going to take more time. And that's just a fact of life as we have to deal with the dynamics of all the things that are going on right now. I appreciate that. And then maybe my follow-up is tied into this, because from my perspective, the anecdotes seem like Broadcom's price hikes and bundling were bigger than I would have anticipated. I don't know what you were expecting, but they surprised me.

Speaker Change: In the short term I think what we're seeing is these larger deals are going to take more time and and.

Speaker Change: And that's just a fact of life as we have to deal with the dynamics of all of the things that are going on right now.

Speaker Change: I appreciate that and then maybe my follow up is tied into this is at least the anecdotes from my perspective seem like Broadcom price hikes in bundling, we're bigger than I would have anticipated I don't know what you were expecting but they surprise me. So I'm wondering if there is.

Speaker Change: Some inflationary aspect that maybe it's a tailwind for new panic that gives you the ability to be more aggressive.

Speaker Change: And potentially even raise price up against the inflation coming from Broadcom. Thank you.

Simon Matthew Leopold: So I'm wondering if there's some inflationary aspect that maybe it's a tailwind for Nutanix that gives you the ability to be more aggressive and potentially even raise prices up against the inflation coming from Broadcom. Thank you. Yeah, I think, first of all, I think clearly Broadcom is doing what they're doing in terms of the bundling and the subscription price increases and so forth. Now, when we look at our pricing response there, we've always been competitively priced from an HCI architecture, right? A lot of the competitive or the installed base out there is legacy, right, which is a three-tier architecture that separates serverless storage.

Rajiv Ramaswami: And our philosophy has always been to make sure that our solution pricing is attractive from a HCI perspective as companies move from the legacy architecture to the modern HCI. And that's still the underlying philosophy that drives our pricing, and we price to value. We've always been a premium offering in the market, and we pride ourselves on being really simple to use, delighting our customers, but also offering prices based on value. So we will continue to do that, Simon.

Speaker Change: Yes, I think.

Speaker Change: First of all I think clearly broadcom is doing.

Speaker Change: What theyre doing in terms of the bundling in the subscription price increases and so forth.

When we look at our pricing response there.

Speaker Change: We've always been competitively priced from HCI architecture, right a lot of the.

Speaker Change: The competitive or the installed base out there is legacy right, which is three tier architecture.

Speaker Change: With <unk> storage and our philosophy has always been to make sure that our solution pricing is attractive from a history perspective as companies move from the legacy architecture to.

Speaker Change: Modern OTI Africa, and Thats still the underlying philosophy that drives our pricing and we price to value. We've always been a premium offering in the market and we pride ourselves on being really simple to use delighting our customers.

Speaker Change: But also pricing based on value. So we continue to do that assignment. So that part hasn't changed I think and we will continue to be agile in terms of responding to what we see is competitive.

Rajiv Ramaswami: So that part hasn't changed, I think. And we will continue to be agile in terms of responding to whatever we see as competitive situations in the market. The one thing I'd add to reiterate that, Simon, is that while Broadcom's effective list prices for many of their customers may have increased significantly, the actual prices, meaning the discount levels in the market, especially when they're sort of at risk of losing business or otherwise challenged, can, as you can imagine, will be lower than those list prices, and, as Rajiv said, remain quite dynamic. Yeah, and we've seen them respond aggressively when Thank you, and thank you.

Speaker Change: Situations in the market.

Speaker Change: The one thing that's very much do reiterate that Simon is that why is that while broadcom effective list prices for many of their customers may have increased significantly the actual prices, meaning the discount levels in the market, especially when they're sort of at risk of losing business or otherwise challenge Ken as you can imagine will be lower than those list prices and as Rajeev said.

Speaker Change: Quite dynamic is what we're seeing in the market.

Speaker Change: And we've seen them respond aggressively when they're faced with the threat of losing large customers.

Speaker Change: Thank you. Thank you Simon.

Simon: Thank you.

Speaker Change: And one moment our next question.

Operator: In one moment for our next question, and our next question comes from Meta Marshall from Morgan Stanley. Your line is now open.

Speaker Change: Okay.

Speaker Change: And our next question comes from meta Marshall from Morgan Stanley. Your line is now open.

Meta A. Marshall: Great. Thanks.

Meta A. Marshall: Great, thanks. A couple of questions. Maybe first, you know, you mentioned kind of starting with PowerFlex and may consider others.

Meta A. Marshall: Couple of questions maybe first.

Meta A. Marshall: You mentioned kind of starting with powerful acts and May consider others. Just wondering what the time, it's going to take to kind of build the solution for powerful ex wood that shrink as you added other.

Meta A. Marshall: Other storage or just how to think about kind of adding an incremental or the time to add other incrementals and then as a second question, where maybe you didn't kind of mentioned or at least I missed if you did anything about early renewal dynamics this quarter.

Speaker Change: If I did miss it I apologize, but if you could just kind of restate it whether there are any dynamics there to be helpful. Thanks.

Rajiv Ramaswami: Just wondering, with the time, you know, it's going to take to kind of build the solution for PowerFlex, would that shrink as you added other storage or just how to think about kind of adding incrementally or the time to add other incrementals. And then, as a second question, Rukmini, you didn't kind of mention, or at least I missed, if you did anything about early renewal dynamics this quarter. I did miss it,

Speaker Change: I will cover power flex and liquidity will cover that I think it will be done so on the pump ex accretion of course, there is an initial development effort.

Rukmini Sivaraman: Apologies, but if you could just kind of restate whether there were any dynamics there to be noteful of, thanks. I'll cover PowerFlex, and Rukmini will cover renewal speed. So on the PowerFlex situation, of course, there is an initial development effort to take our hypervisor and make it standalone ready, right? We've never had that in the past because we've always sold our hypervisor as part of our HCI solution. And now, for the first time, we are disaggregating it.

Speaker Change: To take our Hypervisor and make it standalone ready right. We've never had that in the past because we've already solar hypervisor as part of our ACI solution and now for the first time, we are disaggregated. It. So there is some development work required to do that and we are doing that in the first.

Rajiv Ramaswami: So there is some development work required to do that, and we are doing that. And the first target is PowerFlex. Now, once we do this with PowerFlex, I expect that the additional effort to bring on other IP storage, right? Clearly, IP, not fiber channel.

Speaker Change: Target is par flex now once we do this is par flex I expect that the additional effort to bring on other IP storage right clearly not fiber town IP storage will be incremental it won't we won't have to do all of this all again once we have the first storage I qualify it with.

Rajiv Ramaswami: IP storage will be incremental. We won't have to do all of this over again. Once we have the first storage array qualified with incremental work, we should be able to bring in more IP storage arrays into the mix. Meta, on your second question about renewals. So we have seen outperformance of our renewals business so far this fiscal year due to a combination of a few things. One is good discipline around renewals, economics, and pricing.

Speaker Change: With incremental work, we should be able to bring in more IP storage arrays into.

Speaker Change: Into the mix.

Speaker Change: And to your second question on the nose. So we have seen outperformance of all the newest business. So far this fiscal year due to a combination of a few things one is good discipline around than it was economics and pricing.

Rukmini Sivaraman: Second, is improved on-time renewal performance. And then third, is some early and quote-on renewals, which I think was your specific question. And so the benefit of this stronger performance has primarily been seen in ACV billing and free cash flow.

<unk> improved on time performance.

Speaker Change: And then third is.

Speaker Change: Some early in <unk> I think was your specific question and so the benefit of this stronger performance is primarily been seen an ACB billings and free cash flow and just as a reminder, this will have a modest benefit of revenue because revenue from earlier and all the specifically on the early the northeast would only be recognized in the quarter in which they are deal. So yeah.

Rukmini Sivaraman: And just as a reminder, this will have a modest benefit to revenue because revenue from early renewals, specifically the early renewals piece, would only be recognized in the quarter in which they are due. So yeah, overall, you know, happy with the outperformance in renewals here today. Great, thank you. And thank you.

Speaker Change: Overall happy with the outperformance in renewals year to date.

Speaker Change: Great. Thank you.

Speaker Change: Yeah.

Speaker Change #100: And thank you.

Speaker Change #100: Okay.

Speaker Change #101: And one moment for our next question.

Operator: And one moment for our next question. And our next question comes from Mike Cikos from Needham and Company. See you guys.

Speaker Change #102: And our next question comes from Mike cycles from Needham and Needham <unk> Company.

Speaker Change #103: Your line is now you guys think.

Michael Joseph Cikos: Thanks. Great, thank you for taking the questions here. I just wanted to come back to the large deals and thank you for the statistics Rukmini around that million dollar ACV plus cohort. Can you help us think about, given the greater variability for the timing of those deals? Has there been any change in philosophy regarding how management constructs its guidance?

Speaker Change #104: Thank you for taking the questions here I just wanted to come back to the large deals and thank you for that statistic truck, meaning around that million dollars ACB plus cohort.

Speaker Change #105: Could you help us think about given the greater variability for the timing of those deals.

Speaker Change #105: Has there been any change in philosophy regarding how management construct its guidance.

Speaker Change #105: Thank you Mike for that for that question. So I would say in general our our guidance philosophy hasn't changed.

Rukmini Sivaraman: Thank you, Mike, for that question. So I would say, in general, our guidance, you know, philosophy hasn't changed. What we are trying to do is, of course, put more, create more visibility internally, and put more scrutiny around how we review the opportunities in our pipeline. And this is in partnership with our sales organization, as they think about, you know, these opportunities coming in, how we qualify them, and how can we think about just the quality of the pipeline in addition to the quantity of the pipeline.

Speaker Change #106: Changed Mike what we are trying to do is to of course put more.

Speaker Change #106: Create more visibility internally and put more scrutiny around how we view the opportunities in our pipeline and this is in partnership with with our sales organization as they think about it.

Speaker Change #106: These opportunities coming in and how we qualify them and how can we think about just the quality of the pipeline. In addition to the quantity of the pipeline. We also as you can imagine my closely watch duration here around how long the pipeline has been open and we'll continue to do so I think I would say we have as we've talked about on these calls.

Rukmini Sivaraman: We also, as you can imagine, Mike, closely watch the duration here, right, like how long the pipeline has been open, and we'll continue to do so. I think I would say, you know, we have, as we've talked about on these calls, closed some larger deals over the last few quarters, including the one we talked about that Rajiv will do and the eight-figure ATV that we talked about. But we'll continue to sort of build more data points, right, as we do more of those.

Speaker Change #106: Half close some larger deals you know over the last few quarters, including the one we talked about.

Speaker Change #106: Two when they figure I used to be that we talked about.

Speaker Change #106: But we'll continue to sort of build more data points, but as we as we do more of those so yes, I think trying to put more rigor into various properties. Both on the go to market side and on the on the finance side with the philosophy in terms of how we approach it.

Rukmini Sivaraman: So yes, I think trying to put more rigor into various processes, both on the go-to-market side and on the finance side, with the philosophy in terms of how we approach guidance hasn't changed, but certainly a lot more rigor being put into how we think about folks. Great. And just to follow up as well, I think at the end of your prepared remarks, I know you were citing some of the non-recurring benefits and cash payments related to partnership agreements. So first, can you just run through those numbers again real quickly?

Speaker Change #106: Our guidance hasn't changed but suddenly not motor to guard being put into how we think about forecasting.

Speaker Change #107: Great and just to follow up as well I think at the end of your <unk>.

Speaker Change #108: Prepared remarks, I know you were citing some of the nonrecurring benefits in cash payments related to our partnership agreements.

Rukmini Sivaraman: And then secondly, just as a reminder, what are those payments in relation to with respect to those partnership agreements? Yeah, so Mike, what we said was that when I was talking about the full year free cash flow guidance, we said that OPEX this year is expected to benefit by about 40 million, and cash flow by 30 million, which is 30 million off that 40. Because of these non-recurring cash payments, we don't expect them to recur beyond this period.

Speaker Change #109: First can you just run through those numbers again real quickly and then secondly.

Speaker Change #109: Just as a reminder, what are those payments in relation to with respect to those partnership agreements.

Mike: Yeah. So Mike what we said was that when I was talking about the full yard free cash flow guidance, we said that the opex. This year is expected to benefit by about $40 million.

Mike: And cash flow by $30 million, which is 13 million off that 40 because of these are non recurring cash payments, we don't expect them to the car.

Ed: Beyond kind of this theory, Ed and it's related to one of our partnership agreements, Mike and we're leaving it at that.

Rukmini Sivaraman: And it's related to one of our partnership agreements, Mike, and we're leaving it at that. I'm not going to get more specific on what the payment is, but it is a $ 40 million benefit to OPEX this year. It was throughout the year, and it's expected to be off that 40, 30 million will also be a free cash flow benefit this year. The only other maybe modeling point for you all is that 40 million of OPEX that I alluded to in terms of benefit is sitting in the R&D line within OPEX for Europe. I got it.

Speaker Change #112: I don't I'm not going to be more specific on what the payment is but it is a 40 million benefit to opex.

Speaker Change #112: This year it is throughout the year and it's expected to be off that 40 30 million will also be a free cash flow benefited this year. The only other maybe modeling point for you all is that $40 million of Opex that I alluded to in terms of benefit is sitting in the R&D line within Opex for your reference.

Speaker Change #113: Got it okay. Thank you very much thank you Mike.

Operator: Okay. Thank you very much, Rukmini, and thank you. And one moment for our next question. And our next question comes from Matt Hedberg from RBC Capital Markets. Your line is now open.

Speaker Change #114: And thank you.

Speaker Change #115: And one moment for our next question.

Speaker Change #116: And our next question comes from Matt Hedberg from RBC capital markets. Your line is now open.

Great. Thanks for taking my questions guys.

Matthew George Hedberg: Great, thanks for taking my questions, guys. I had a question, you know; there's been a lot of conversation here about the big deals and timing. It sounds great that they're growing in size, but obviously, you've noted that creates a fair amount of uncertainty there. I'm sort of curious, you know; are you doing anything to accelerate, I would call it more of the run rate business that might be more predictable? I assume, you know, partners like Dell and Cisco could be driving that. But are there other things you can do to maybe help offset the timing of larger deals?

Matthew George Hedberg: I had a question theres been a lot of conversation here on the large deals and timing and it sounds great that they are growing in size, but obviously you've noted that creates a fair amount of uncertainty there I'm sort of curious how are you doing anything to accelerate I would call. It more of the run rate business that might be more predictable I assume partners like Dell and Cisco could be driving that but are there. Other things you can do without maybe.

Speaker Change #118: Help offset the timing of larger deals.

Speaker Change #119: Yes, I think.

Rajiv Ramaswami: Yeah, I think, certainly, first of all, we haven't seen any changes to our conversion ratio on the so what you would call maybe run rate deals. And I think we are doing okay in terms of what we are doing on that front. Also, we are incentivizing our channels to get us more new logos. We have migration programs in place for competitive takeouts.

Speaker Change #120: Certainly first of all we haven't.

Speaker Change #121: Seen any changes to our conversion ratio on the what you would call it maybe run rate deals.

And I think the in terms of what we're doing on that front by the end of the run rate stuff. So we are incentivizing our channels to get us more new logos we have.

Speaker Change #122: We have Mike.

Speaker Change #122: <unk> programs in place where competitive take outs.

Speaker Change #122: We are of course companies like Cisco can help bring us more new logos there as well.

Rajiv Ramaswami: We are, of course, companies like Cisco can help bring us more new logos there as well. And then, in terms of larger deals, when you look at what we're trying to do there, to expedite the larger deals that we talked about, we have put together a cross-functional team for these types of large deals that include sales, finance, and product folks with executive sponsorship for pursuing these deals specifically. And we are quite familiar with the cycle of this product qualification, customer-specific requests that may come in for some of these larger wins, the vendor qualification process, and then, of course, commercial negotiations, right, all of these. So we do what we can under our control.

Speaker Change #122: And then in terms of a larger deal success. When you look at what we're trying to do there.

To expedite the larger deals that we talked about we are we have put together a cross functional team for these types of large deals.

Speaker Change #122: That includes sales finance and product folks with executive sponsorship for pursuing these deals specifically and.

Speaker Change #122: We are quite familiar with the cycle of this product qualification customer specific requests that may come in for.

Speaker Change #122: For some of these larger wins vendor qualification process and then of course commercial negotiations right all of these.

Rajiv Ramaswami: But at the same time, we also have to factor in the customer's timelines and process, as well, right, because that's going to be a gating item as well. Thanks, Rajiv. Well done on the quarter, and thank you. And one moment for our next question. And our next question comes from Ben Bollin from Cleveland Research Company. Your line is now open. Good afternoon, everyone.

Speaker Change #122: So we do what we can do under our control, but at the same time, we also have to factor in the customers' timelines and processes.

Speaker Change #122: Right, because thats going to be a gating item as well and some of these.

Speaker Change #123: Thanks, Rajeev well done on the quarter guys.

Thank you.

Speaker Change #124: Thank you.

Speaker Change #125: And one moment for our next question.

Speaker Change #126: And our next question comes from Ben Bolan from Cleveland Research Company. Your line is now open.

Benjamin James Bollin: Thanks for taking the question. Rajiv, I'm curious if you could elaborate a little bit more on how you feel enterprise investigations around their own internal AI efforts might be influencing their refresh activities, and their win opportunities. You mentioned data security and ransomware as priorities within that, but I'd be curious if you could expand on that and speak to any sequence of investments that you see across those customers. Yeah, I think there is a natural sequence of hardware refresh that is driven by typically aging of hardware on the one side, and then on the other side, new initiatives. And I think what you're talking about comes from AI.

Benjamin James Bollin: Good afternoon, everyone. Thanks for taking the question.

Speaker Change #128: Rajiv I'm curious if you could elaborate a little bit more on how you feel enterprise investigations around their own.

Speaker Change #128: Internal AI efforts might be influencing.

Speaker Change #128: Their refresh activities your win opportunities you mentioned data security and ransomware as priorities within that but curious if you could expand on that.

Speaker Change #128: Any sequence of investments that you see across those customers.

Rajiv: Yes, I think that it's a natural sequence of hardware refresh that is driven by typically aging of hardware on the one side.

Rajiv Ramaswami: AI is very much part of the new initiatives, Ben. So when it comes to the AI part, for enterprise AI, there's been a lot of talk about AI in the public cloud, and a lot of it has to do with training these large language models. But in enterprise AI, it has to be run where the data is, and a lot of that is going to be on-premises.

Rajiv: And then on the other side, New initiative, and I think what Youre talking about come from the AI.

Speaker Change #129: He was part of the new initiatives.

Benjamin James Bollin: Ben So so when it comes to the airport for Enterprise AI I mean, theres been a lot of talk about AI in the public cloud and a lot of it has to do with training of these large language models.

Speaker Change #130: No I mean enterprise AI that we run where the data is.

Speaker Change #130: A lot of that is going to be on Prem and in fact I think that's the reason why we announced our deputy in a box to Darko simplifying things as well as the partnerships that we announced last week at our next but most of our customers I would say are in the early phases of that journey.

Rajiv Ramaswami: And in fact, I think that's the reason why we announced our GPT in a Box 2.0, simplifying things, as well as the partnerships that we announced last week at.NEXT. But most of our customers, I would say, are in the early phases of that journey. A lot of them are doing proof of concepts and initial use cases to validate the gen-AI use cases that we've talked about, whether it be fraud detection, or customer support, or document search and summarization, or co-piloting. So they're still pretty early on that front.

Speaker Change #130: A lot of them are doing proof of concepts and initial use cases to validate the <unk> AI use cases that we've talked about.

Speaker Change #130: Whether it be fraud detection or customer support our documents so its a summarization our copilot Inc.

Speaker Change #130: This is pretty early on that front.

Rajiv Ramaswami: They're making, certainly, hardware investments, but I would say more for proof of concept and trying out, rather than volume production and deployments. And I think this will play out over time. They're going to go through these proofs of concepts, validate the business proposition, and then get into a production deployment scenario. That's great.

Speaker Change #130: Theyre, making suddenly hardware investments, but I would say more for proof of concept with triangle, rather than volume production and deployment and I think this will play out over time, they're going to go through these concepts.

Speaker Change #130: <unk> validate the business proposition.

Speaker Change #130: And then get into production deployment scenario.

Benjamin James Bollin: And as a follow-up, looking at the commentary around The Opportunity for Larger Deals. If you look at maybe more traditional deal sizes versus these larger deals, could you speak a little bit about who is involved and how it's different, and then any thoughts on the average evaluation duration between the two. That's it for me, thank you.

Speaker Change #131: That's great.

Speaker Change #131: Sure.

Speaker Change #131: Looking at the commentary around.

Speaker Change #131: The opportunity for larger deals if you look at.

Speaker Change #131: Maybe more traditional deal sizes versus these larger deals.

Speaker Change #132: Could you speak to a little bit about.

Speaker Change #132: Who is involved and how its different and then any thoughts on.

Speaker Change #133: The average evaluation duration between the two that's it for me. Thank you.

Rajiv Ramaswami: Yeah, I think on the smaller deals, it's more business as usual. I mean, our field reps are at the forefront of that opportunity with customers. And in very small, you know, a sector of the market, we have actually had the channel or channel partners take the lead on some of those opportunities. But in a lot of these cases, our reps are very much involved, and they're compensated in exactly the same way as they will be compensated for any other deal.

Speaker Change #134: Yes, I think on the smaller deals it's more business as usual I mean, our field reps out of the front of that opportunity with customers and in very small.

Speaker Change #134: Sector of the market we have actually.

Speaker Change #134: Had the channel our channel partners to take the lead.

Speaker Change #134: On some of those opportunities, but in a lot of these gives our reps are very much involved and they're compensated in exactly the same way as they will be compensated for any of the deals because for us new businesses, new business, whether it comes with large or small.

Rajiv Ramaswami: Because for us, new business is new business, whether it comes as large or small. And like I said, with respect to the conversion rate on the smaller deals, we haven't seen any real changes over the last several quarters. It's been roughly about the same.

Speaker Change #134: And.

Speaker Change #134: And like I said with respect to the commercial rate on the smaller deals we havent seen any real changes over the last several.

Rukmini Sivaraman: So we haven't seen any major changes on that front. Rukmini, is there anything that you'd like to add to this? Only on I think Ben's question about duration, I think it was how long they're taking that was part of the question. Ben, I think, you know, we talked about how these larger deals do tend to take. Thank you, and thank you. And one moment for our next question. And our next question comes from George Wang from Barclays. Your line is now open.

Speaker Change #134: Several quarters, it's been roughly about the same so we haven't seen any major changes on that front.

So is there anything that you'd like to add on this.

Speaker Change #135: Only on I think Ben's question about duration I think it's how long they're taking that was part of the question. Then I think you know we talked about how these larger deals do tend to take.

Speaker Change #135: Longer often because they're strategic or they just have more approvals.

Speaker Change #135: Things like that and we haven't kind of giving you a specific quantification of one versus the other we did give the example, though of this particular eight figure deal that we talked about which took approximately two years.

Speaker Change #135: To come to a halt so yeah. It is it does take longer than what you know what I think was referred to earlier I said about run rate business.

Speaker Change #136: Thank you.

Speaker Change #137: And thank you.

Speaker Change #138: And one moment our next question.

Speaker Change #139: And our next question comes from George Wang from Barclays. Your line is now open.

George Wang: Thanks for taking my question. Hey, Rajiv, do you have any updated thoughts on the repatriation trends? You know, increasingly, you mentioned that there have been some examples of a repatriation kind of private cloud with, you know, additional build out kind of in the hybrid cloud space. Just curious if you have any notable trends you have seen from the quarter. Yeah, George. I mean, every quarter, we see a handful of these where people, you know, are running something in the public cloud, and they might want to repatriate it back on premises.

George Wang: Thanks for taking my question, Hey, Hey, Rajiv do you have any updated thoughts on the repatriation trends.

Speaker Change #141: And increasingly you mentioned that there has been some examples of the repatriation kind of private cloud.

Speaker Change #141: Additional build out kind of in the hybrid cloud space. Just curious if you have any notable trends kind of you have seen from the quarter.

George Wang: We've certainly seen that with some of our customers. I wouldn't call it a major trend in terms of everybody trying to do that, but there are, you know, a few customers every quarter that we see doing that.

George Wang: Yes, George I mean I think.

Rajiv: We every quarter, we see a handful of these.

Rajiv: People are running something in the public cloud and they might wonder repatriated back on Prem.

Rajiv: We've certainly seen that with some of our customers I wouldn't call. It a major trend in terms of like everybody trying to do that but.

Rajiv: A few customers every quarter that we see.

Rajiv: Doing that one I would say is rather than looking at it from a reputation angle for us the bigger angle is the fact that.

Rajiv Ramaswami: What I would say is, rather than looking at it from a repatriation angle, for us, the bigger angle is the fact that, you know, since a vast majority of enterprise workloads are still running on premises in data centers. They're, you know, CIOs these days. The new reality for them is that the world is hybrid, and a lot of those workloads, they're gonna look at how to run them on modern platforms, how to run them in a hybrid cloud kind of model, and not necessarily take all those workloads and take them to the public cloud, which may have been the case five years ago.

Rajiv: Since a lot of vast majority of enterprise workloads are still running on Prem in data centers.

Rajiv: There are.

Speaker Change #142: CIL CSR.

Speaker Change #142: The new reality for them that the world is hybrid and a lot of those workloads, they're going to look at how to run them on modern platforms.

Speaker Change #142: To run them in a hybrid cloud model.

Speaker Change #142: And not necessarily take all those workloads and take them to the public cloud, which may have been the case five years ago. So perhaps this is more triggering a need for running modern applications modern modernizing their on Prem infrastructure running modern applications and that goes far even the newest of modern applications. Then AI is a similar example.

Rajiv Ramaswami: So perhaps, you know, this is more triggering a need for running modern applications, modern, you know, modernizing their on-prem infrastructure, running modern applications, and that goes for even the newest of modern applications. Gen AI is a similar example of that.

Speaker Change #142: Matt.

Rajiv Ramaswami: There will also be, in my view, a fair amount of Gen AI workloads also being deployed on-premises where the data is, and perhaps even at the edge where a lot of data is being generated. So that's more the trend, I would say, call-out, rather than a mass repayment ratio. Okay, thank you.

Matthew George Hedberg: There will be in my view a.

Matthew George Hedberg: A fair amount of Gen. AI workloads also being deployed on Prem read the data and perhaps even at the edge, where a lot of data is being generated.

Matthew George Hedberg: So that's more of a trend I would say call out rather than amongst repatriation.

Speaker Change #143: Okay. Thank you just a quick follow up just.

George Wang: Just a quick follow-up, just, you know, in terms of the incentives for the channel to attract new logos, kind of, you know, do you have anything notable to call out quarter to quarter or still kind of, you know, similar sort of trend you are sort of providing for the channel to kind of, you know, upsell and cross sell. Just curious if there are additional, you know, initiatives on the promo and kind of incentive front.

In terms of the incentives to a channel to attract new logos.

Speaker Change #143: Hello.

Speaker Change #144: Do you have or anything notable to call out.

Speaker Change #145: Quarter over quarter, all still kind of.

Speaker Change #145: Similar sort of trend you also are they providing to a channel to kind of.

Speaker Change #145: Upsell.

Speaker Change #145: And cross sell.

Speaker Change #145: Curious if would as traditionally.

Speaker Change #145: Yes.

Speaker Change #145: Initiatives on the on the promo on the incentive front.

George Wang: Yeah, I mean, we try to be somewhat neutral in terms of cloud versus on-prem. In fact, we have the same product and the same licensing, whether a customer chooses to deploy it on-prem or in the public cloud. With respect to the new logos, you know, we are fine. In fact, how will we get the new logos? It was interesting. We actually had a new logo this time.

Speaker Change #145: I mean, we try to be somewhat neutral in terms of.

Speaker Change #145: Cloud versus on Prem and in fact, we have the same product in the same licensing whether a customer chooses to deploy it.

Speaker Change #145: On prem or in the public cloud.

Speaker Change #145: With respect to new logos, we are fine in fact.

Speaker Change #145: Will we get the new logos.

Speaker Change #145: In fact, it is interesting we actually had a new logo this time.

Speaker Change #145: We can cover that at the earnings call, but it was actually an example of a customer who started with us in the public cloud.

Speaker Change #145: Before.

Speaker Change #145: And over time, they will deploy more on prem, but they're starting off with us in the public cloud and now that is not the norm I would say most of our customers that started out with us on Prem and then move to the public cloud, but with respect to incentives to our field and to our channel. It's all around new logos, which are ready to get it.

Speaker Change #146: Okay, great. Thank you.

Speaker Change #147: Thank you George.

Speaker Change #148: Thank you.

Speaker Change #147: Yes.

Speaker Change #149: And I'm showing no further questions. This concludes todays <unk> Q3 conference call. Thank you for participating you may now disconnect.

Speaker Change #149: Thank you.

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Rajiv Ramaswami: We didn't cover that in the earnings call, but it was actually an example of a customer who started with us in the public cloud before they, and over time, they would deploy more on-prem, but they're starting out with us in the public cloud, and now that is not the norm. I would say most of our customers have started out with us on-prem and then moved to the public cloud, but with respect to incentives for our field and to Okay, great. Thank you. Thank you, and thank you. And I'm showing no further questions.

Good day, and thank you for standing by and welcome to <unk> Q3, 2024 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Here, an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Rich Valera VP of Investor Relations at <unk>.

Operator: This concludes today's Nutanix Q3 conference call. Thank you for participating. You may now disconnect. Thank you. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Copyright © 2020 Mooji Media Ltd. All Rights Reserved.

Speaker Change #150: Good afternoon.

Operator: No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Good day, and thank you for standing by. Welcome to Nutanix's Q3 2024 Earnings Conference. At this time, all participants are in a listen-only mode.

Richard Valera: And welcome to today's conference call to discuss third quarter fiscal year 2024 financial results.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rich Valera, VP of Investor Relations at Nutanix. Good afternoon,

Speaker Change #151: Joining me today are chief Ramaswami, <unk>, as President and CEO Andrew.

Speaker Change #152: When you say Robin <unk> CFO.

Speaker Change #153: After the market closed today <unk> issued a press release announcing third quarter fiscal year 2024 financial results.

Speaker Change #153: I'd like to read the release please visit the press releases section of our IR website.

Speaker Change #154: During today's call management will make forward looking statements, including financial guidance.

Speaker Change #154: 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.

Speaker Change #154: For more detailed description of these and other risks and uncertainties. Please refer to our SEC filings, including our most recent annual report on Form 10-K, and our subsequent quarterly reports on Form 10-Q, 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.

Speaker Change #154: As a result, you should not rely on them as predictions of future events.

Richard Valera: Please note, unless otherwise specifically referenced, all financial measures we used on today's call, except for revenue, are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided, to the extent available, reconciliations of these non-GAAP financial measures to GAAP financial measures on our website and in our earnings press release. Nutanix will be participating in the Bank of America Global Technology Conference in San Francisco on June. We hope to see some of you there. Finally, our fourth quarter fiscal 2024 quiet period will begin on Wednesday, July. And with that, I'll turn the call over to Rajiv. Rajiv?

Speaker Change #154: Note unless otherwise specifically referenced all financial measures, we use on today's call except for revenue or.

Speaker Change #154: Expressed on a non-GAAP basis.

Speaker Change #154: When adjusted to exclude certain charges.

Speaker Change #154: We have provided to the extent available reconciliations of these non-GAAP financial measures to GAAP financial measures on our website and in our earnings press release.

Speaker Change #154: Mechanics will be participating in the bank of America Global Technology Conference in San Francisco on June four.

Speaker Change #154: We hope to see some of you there.

Speaker Change #154: Finally, our fourth quarter fiscal 2024 quiet period will begin.

Speaker Change #154: On Wednesday July 17.

Speaker Change #155: And with that I'll turn the call over to Rajiv.

Speaker Change #154: <unk>.

Thank you rich and good afternoon, everyone.

Rajiv: We delivered a solid third quarter.

Rajiv: With results that came in ahead of our guidance.

We continue to see steady demand for our solutions driven by businesses prioritizing that digital transformation and infrastructure modernization initiatives.

Rajiv: Looking to optimize their total cost of ownership or <unk>.

Rajiv: Taking a closer look at the third quarter.

Rajiv: We're happy to have exceeded all our guidance metrics.

Rajiv: We delivered quarterly revenue.

Rajiv: $525 million.

Rajiv: And grew our IRR, 24% year over year to 1.82 billion.

Rajiv: We also had another quarter of solid free cash flow generation.

Rajiv: Overall, our third quarter financial performance reflected continued disciplined execution.

Rajiv Ramaswami: Our largest wins in the quarter demonstrated the appeal of the Nutanix cloud platform to organizations that are looking to modernize and improve the efficiency of their data center footprint while managing through some of the disruption from recent industry M&A. Our largest new customer win of the quarter was an eight-figure ACV deal with a North American-based Fortune 50 financial services company that was looking to streamline and automate the deployment and management of their substantial fleet of databases. This customer purchased the Nutanix cloud platform with the Nutanix database service to automate all of their internal database deployment and management needs, while also modernizing the three-tier footprint previously used for running their database. This wind was substantially larger than our typical land wind and marked the culmination of an approximately two-year engagement.

Rajiv: Our largest wins in the quarter demonstrating the appeal of the <unk> cloud platform to organizations that are looking to modernize and improve the efficiency of the data center footprint.

Rajiv: While managing through some of the disruption from recent industry M&A.

Rajiv: Our largest new customer win of the quarter.

Rajiv: Wasn't eight figure HCV deal with a north American based Fortune 50 financial services company.

Rajiv: That was looking to streamline and automate the deployment and management of their substantial fleet of databases.

Rajiv: This customer, but if the mechanics to our platform.

Rajiv: <unk> database service.

Rajiv: To automate.

Rajiv: All of that internal database deployment and management needs.

While also modernizing the Tcf footprint previously used for running their database.

Rajiv: This win was substantially larger than our typical land win.

Rajiv: And Mark the culmination of an approximately two year engagement.

Rajiv Ramaswami: Another notable win in Q3 was a significant renewal and expansion with a North American-based Fortune 500 provider of consumer packaged goods. This customer, whose data center footprint had historically been split between Nutanix and a competitor, was looking to standardize their automation and self-service capabilities on a single platform. They decided to standardize on Nutanix's cloud platform, including our AHV hypervisor and Nutanix Cloud Management, to handle their self-service and automation needs. They also added Nutanix Unified Storage and Nutanix Database Service for their unstructured data management and database automation needs, respectively, going forward.

Rajiv: Another notable win in Q3.

Rajiv: The significant renewal and expansion with a north American based fortune 500 provider of consumer packaged goods.

Rajiv: This customer.

Rajiv: With data center footprint has historically been split between mechanics and a competitor.

Rajiv: Was looking to standardize their automation and self service capabilities on a single class.

Rajiv: They decided to standardize on mechanics third platform.

Rajiv: Including our <unk> hypervisor.

Rajiv: <unk> cloud management to handle their self service and automation needs.

Rajiv: They also added mechanic unified storage and tanks database service for their unstructured data management and database automation needs respectively.

Rajiv: Going forward there.

Rajiv Ramaswami: This customer plans on swapping out the competitive software in their existing footprint and also utilizing Nutanix Cloud Platform for all of their expansion. We see these wins as a testament to our ability to both land significant deals and expand within the largest companies. And we are encouraged by the substantial increase in the number of customers and partners engaging with us, including some of the world's largest companies. However, these larger opportunities tend to have longer sales cycles, can involve aggressive competitive response, and exhibit greater variability with respect to timing and outcome.

Rajiv: This customer plans are swapping out the competitive software in their existing footprint and also utilizing mechanics cloud platform for all of their expansion needs.

Rajiv: We see these wins as a testament to our ability to both land significantly.

Rajiv: And expand within the largest companies.

Rajiv: And we are encouraged by the substantial increase in the number of customers and partners engaging with us <unk>.

Rajiv: Including some of the world's largest companies.

Rajiv: However.

Rajiv: This larger opportunities tend to have longer sales cycles.

Rajiv: Ken and more aggressive competitive responses.

Rajiv: And exhibit greater variability.

Rajiv: With respect to timing and outcome.

Speaker Change #156: <unk> will provide more color on the impact of these dynamics.

Speaker Change #156: Last week, we held our annual <unk> conference in Barcelona, Spain.

Speaker Change #156: Where the excitement from the 4000 plus attendees was tangible.

At <unk>, we made a number of announcements demonstrating continued progress and plans on enhancing the functionality of the inorganic store platform.

Rajiv Ramaswami: This includes a new partnership with Hugging Face to provide access to the HuggingFace library of large language models for Nutanix customers, as well as an expanded partnership with NVIDIA that includes the planned integration of NVIDIA's Inference Microservices, or NIMS, into our automated enterprise AI solution. More broadly, we continue to see a high level of interest and additional wins with GPT in a box in Q3, including a win with a large India-based government agency looking to deploy Gen AI with fraud detection as the initial use. On the modern applications front, We announce the Nutanix Kubernetes Platform, or NKP, to simplify management of container-based modern applications using Kubernetes, on-premises and in any native public cloud service.

Speaker Change #156: And broadening our partnerships.

Speaker Change #156: Especially with respect to support modern applications and enterprise AI.

On the enterprise AI front.

Speaker Change #156: We announced <unk> in a box to Darko <unk>.

Speaker Change #156: It will deliver expanded GPU and large language model support.

Speaker Change #156: Automated configuration and management of modest influence endpoints for DNA applications.

Speaker Change #156: Simplified model management.

Speaker Change #156: And an expanded partner program.

Speaker Change #156: This includes a new partnership with hugging phase.

Speaker Change #156: To provide access to the hugging faced library of large language models fund mechanics customers.

Speaker Change #156: As well as an expanded partnership with Nvidia that include the planned integration.

Speaker Change #156: And media influence micro services our NIM.

Speaker Change #156: Into our automated enterprise AI solutions.

Speaker Change #156: More broadly we continue to see a high level of interest and additional wins with DPT in a box in Q3.

Including a win with a large EMEA based government agency that is looking to deploy danai with fraud detection at the initial use case.

Speaker Change #156: On the modern application front.

Speaker Change #156: We announced the new tanks kubernetes platform our NPP.

Speaker Change #156: To simplify management of container based modern applications using <unk> on.

Speaker Change #156: On premises.

Speaker Change #156: Any native public cloud service.

Rajiv Ramaswami: We also took initial steps in extending our data services for Kubernetes, or NDK, to cloud-native containerized environments. This will simplify the development of resilient, data-intensive modern applications in public cloud and allow customers to ultimately run them anywhere, in keeping with our Project Beacon vision. Finally, we announced the broadening of our partnership with Dell. While Nutanix software already works well with Dell hardware.

Speaker Change #156: We also took initial steps and extending our data services for kubernetes or indicate to cloud native containerized environments.

Speaker Change #156: This will simplify the development of resilient data had been some modern applications in public cloud.

Speaker Change #156: And allow customers to ultimately run them anywhere.

Speaker Change #156: In keeping with our project Beacon vision.

Speaker Change #156: Yeah.

Speaker Change #156: Finally, we announced a broadening of our partnership with depth.

Speaker Change #156: While the mechanic software already works well with Dell hardware.

Rajiv Ramaswami: We announced two new elements of our long-standing partnership. First, I'm going to sell a tightly integrated hyperconverged solution, combining the Nutanix Cloud Platform software with their PowerEdge server. This will provide our customers with the choice of procuring Nutanix's platform directly from them. We expect that this solution will be available later this calendar year. Second.

Speaker Change #156: We announced two new elements of our long standing partnership.

Speaker Change #156: First.

Speaker Change #156: Then theyre going to sell a tightly integrated hyper converged solution, combining the <unk> platform software.

Speaker Change #156: Dallas power it.

Speaker Change #156: This will provide our customers.

Speaker Change #157: But the Chinese are procuring new tenneco's platform directly from that.

Speaker Change #157: We expect that this solution will be available later this calendar year.

Second.

Speaker Change #157: We will together deliver the organic cloud platform powered by HP Hypervisor for compute.

Speaker Change #157: And therefore, our flex for storage.

Speaker Change #157: This will allow customers to reuse some of their existing IP based del <unk> storage hardware.

Speaker Change #157: Protecting their investment and giving them choice.

Speaker Change #157: We are in the development stage for this offering at this time and expect it to be available in calendar 2025.

Rajiv Ramaswami: Implementing the right hybrid IT operation, and implementing AI strategies. I see these results as playing to the strengths of the Nutanix cloud platform, which has built-in ransomware protection with our data lens capability. Enable hybrid multi-cloud operating model and has strong support for AI with our GPT-in-a-Box solution. Inclusing, I'm pleased with a solid Q3 result, ongoing innovation on our cloud platform, particularly with respect to its support for modern applications and generating VR, and on the progress we continue to make on partners. We remain focused on delighting our customers while driving sustainable, profitable growth. And with that, I'll hand it over to Rukmini Sivaraman.

Speaker Change #157: Now I'd like to comment on the recently published results.

Speaker Change #157: If our sixth annual mechanics Enterprise cloud index.

Speaker Change #157: A survey of 1500, it decision makers around the world.

Speaker Change #157: The top three priorities identified by respondents where data security and ransomware protection.

Speaker Change #157: Implementing the right hybrid IV operations.

Speaker Change #157: And implementing AI strategy.

Speaker Change #158: ICD is with US is playing to the strengths of the Nexstar platform.

Speaker Change #158: It is built in ransomware protection with our data led capability.

Speaker Change #158: Enables hybrid multi cloud operating models.

Speaker Change #158: And has strong support for AI with our <unk> in a box solution.

Speaker Change #158: In closing.

Speaker Change #158: I am pleased with our solid Q3 results.

Speaker Change #158: Our ongoing innovation on our cloud platform.

Speaker Change #158: Particularly with respect to a support for modern applications and deliver.

Speaker Change #158: And on the progress we continue to make on partnerships.

We remain focused on delighting, our customers, while driving sustainable profitable growth.

Speaker Change #159: And with that I'll hand, it over to <unk>.

Speaker Change #160: If any.

Rukmini Sivaraman: Thank you, Rajiv. I will first review our Q3 Fiscal 24 results, followed by guidance for Q4 Fiscal 24, and implied full year Fiscal Year 24 guidance. Results in Q3-24 came in above the high end of our range across all guided metrics. ACV billings in Q3 were $289 million, above the guided range of $265 to $275 million, representing year-over-year growth of 20%. Revenue in Q3 was $525 million, higher than the guided range of $510 to $520 million, representing a year-over-year growth rate of 17%. ARR at the end of Q3 was $1.82 billion, representing year-over-year growth of 24%.

Rajiv: Thank you Rajiv.

Speaker Change #161: I'll first review our Q3 fiscal 'twenty four result, followed by guidance for Q4 fiscal 'twenty four and the implied full year fiscal year 'twenty for guidance.

Rajiv: Results in Q3 24 came in above the high end of our range across all guided metrics.

Rajiv: Billings in Q3 were $289 million above the guided range of $265 million to $275 million representing year over year growth of 20%.

Rajiv: Revenue in Q3 was $525 million.

Rajiv: Higher than the guided range of $510 million to $520 million, representing a year over year growth rate of 17%.

Rajiv: <unk> at the end of Q3 was 1.82 billion representing year over year growth of 24%.

Rukmini Sivaraman: In Q3, we continue to see modestly elongated average sales cycles compared to historical levels. Average contract duration in Q3 was 3 years, 0.2 years higher than Q2. Non-GAAP growth margin in Q3 was 86.5%, higher than our guided range of approximately 85%. Non-GAAP operating margin in Q3 was 14%, higher than our guided range of 7.5% to 8.5%, largely due to 1. Lower operating expenses as a result of higher than expected non-recurring payments related to one of our partnership agreements and Timing of Hiring, and two, higher revenue and higher growth margin. Non-GAAP net income in Q3 was $85 million, or fully diluted EPS of 28 cents per share based on fully diluted weighted average shares outstanding of approximately 302 million shares.

Rajiv: In Q3, we continued to see modestly elongated average sales cycles compared to historical levels.

Rajiv: Average contract duration in Q3 was 3.2 <unk> higher than Q2.

Rajiv: non-GAAP gross margin in Q3 was 86, 5% higher than our guided range of approximately 85%.

Rajiv: non-GAAP operating margin in Q3 was 14% higher than our guided range of seven and a half to eight 5% largely due to one lower operating expenses as a result of higher than expected non recurring payments related to one of our partnership agreement.

Rajiv: And timing of hiring and to higher revenue and higher gross margin.

Rajiv: non-GAAP net income in Q3 was $85 million or fully diluted EPS of <unk> 28 per share based on fully diluted weighted average shares outstanding of approximately 302 million shares.

Rukmini Sivaraman: DSOs based on revenue and ending accounts receivable were 39 days in Q3. Free cash flow in Q3 was $78 million, representing a free cash flow margin of 15%. We ended Q3 with cash, cash equivalents, and short-term investments of $1.651 billion, up slightly from $1.644 billion at the end of Q2. We continued repurchasing shares in Q3 under the Share Repurchase Program previously authorized by our Board of Directors. We have repurchased about $106 million worth of shares year-to-date through Q3-24.

Rajiv: Dsos based on revenue and ending accounts receivable were 39 days in Q3.

Rajiv: Free cash flow in Q3 was $78 million.

Rajiv: Representing a free cash flow margin of 15%.

Rajiv: We ended Q3 with cash cash equivalents and short term investments of $1.651 billion up slightly from 164 4 billion at the end of Q2.

We continued repurchasing shares in Q3 under the share repurchase program previously authorized by our board of directors.

Rajiv: We have repurchased about $106 million worth of shares year to date through Q3 'twenty four.

Rajiv: As a reminder, our sustainable generation of free cash flow enabled us to transition to net share settlement to pay for employees tax liability on Odyssey vesting, starting in Q2 and going forward.

Rajiv: Our previous method of selling to cover.

Rajiv: We used $58 million of our cash in Q3 and $53 million in Q2 for a total of or $111 million of cash year to date for this purpose.

Rajiv: More information on the mechanics of net share settlement and its impact can be found in the appendix section of our earnings presentation found on our Investor Relations website.

Rajiv: This along with our share repurchase program will help us continue to manage dilution.

Rajiv: Moving to Q4 2004, our guidance for Q4 is as follows.

Rajiv: ACB billings of $295 million to $305 million.

Rajiv: Revenue of $530 million to $540 million.

Rajiv: non-GAAP gross margin of 85% to 86%.

Rajiv: non-GAAP operating margin of 9% to 10%.

Rajiv: And fully diluted shares outstanding of approximately 302 million shares.

Rukmini Sivaraman: The updated guidance for full year, fiscal year 24, is as follows: ACV Billing of $1.12 to $1.13 billion, representing a year over year growth of 18% at the midpoint of the range. Revenue of $2.13 to $2.14 billion, representing a year over year growth of 15% at the midpoint, a non-GAAP growth margin of approximately 86%, a non-GAF operating margin of approximately 15%, and free cash flow of $520 to $540 million, representing a free cash flow margin of 25% at the midterm.

Rajiv: The updated guidance for full year fiscal year 'twenty four is as follows.

Rajiv: ACB billings of one point to one $2 billion to $1.13 billion.

Rajiv: Representing a year over year growth of 18% at the midpoint of the range.

Rajiv: Revenue of 2.13 to one 4 billion, representing a year over year growth of 15% at the midpoint.

Rajiv: non-GAAP gross margin of approximately 86%.

Rajiv: non-GAAP operating margin of approximately 15%.

Rajiv: And free cash flow of $520 million to $548 million.

Rajiv: And being a free cash flow margin of 25% at the midpoint.

Rukmini Sivaraman: I will now provide some commentary regarding our updated fiscal year 24 guidance, specifically the following four points. First, we are seeing continued and significant new and expansion opportunities for our solution. However, we continue to see a higher mix of larger deals in our pipeline, which is driving greater variability in our new and expansion business. The number of opportunities greater than $1 million in ACV, in our pipeline, has grown at higher than 30% for each of the last three quarters compared to the corresponding quarters last, Relatedly, the dollar amount of pipeline from opportunities greater than $1 million in ACV has grown at well over 50% for each of the last three quarters compared to the corresponding quarters last, These larger opportunities often involve strategic decisions and C-suite approvals, causing them to take longer to close and to have greater variability in timing, outcome, and deal structure.

Speaker Change #162: I will now provide some commentary regarding our updated fiscal year 'twenty for guidance specifically the following four points.

Speaker Change #162: First we are seeing continued and significant new and expansion opportunities for our solutions.

Speaker Change #162: However, we continue to see a higher mix of larger deals in our pipeline, which is driving greater variability in our new and expansion business.

Speaker Change #162: The number of opportunities greater than $1 million in HCV and our pipeline has grown at higher than 30% for each of the last three quarters compared to the corresponding quarter last year.

Speaker Change #162: Relatedly the dollar amount of pipeline from opportunity is greater than $1 million in ACB has grown at well over 50% for each of the last three quarters compared to the corresponding quarter last year.

Speaker Change #162: These larger opportunities often involve strategic decisions and C suite approval, causing them to take longer to close and to have greater variability in timing outcome and deal structure.

Rukmini Sivaraman: And, as we mentioned previously, we have continued to see a modest elongation of average sales cycles relative to historical levels. Our fiscal year 24 new and expansion ACV and ARR performance year to date have been affected by these dynamics and have been below our initial expectations at the beginning of the fiscal year. We expect these dynamics to continue in Q4.

Speaker Change #162: And as we mentioned previously we have continued to see a modest elongation of average sales cycles relative to historic levels.

Speaker Change #162: Our fiscal year, 'twenty, four new and expansion ACB.

Speaker Change #162: And our performance year to date have been affected by these dynamics and have been below our initial expectations at the beginning of the fiscal year.

Speaker Change #162: We expect these dynamics to continue in Q4.

Speaker Change #162: As an example.

Speaker Change #163: For the eight figure ACB transaction in Q3 that Rajiv mentioned, we expect the billings and cash collection to be in Q4.

Speaker Change #164: Why is the associated subscription revenue is expected to be recognized over multiple years, starting in fiscal year 'twenty five.

Speaker Change #164: We anticipate similar variability and deal structures and longer sales cycles for some of the larger opportunities in our pipeline.

Speaker Change #164: Second.

Rukmini Sivaraman: The guidance assumes that our renewables business will continue to perform well in Q4. Third, the full-year guidance continues to assume that average contract duration will be flat to slightly lower compared to fiscal year 23, as renewals continue to grow as a percentage of our billing. Fourth, the updated full year free cash flow guidance includes the benefit of the eight-figure ATV transaction which was booked in Q3. In addition, the full year free cash flow guidance also assumes the impact of certain non-recurring benefits over the course of the year, including approximately $40 million of operating expenses, of which we expect to receive approximately $30 million of non-recurring cash payments related to one of our partnership agreements.

Speaker Change #164: The guidance assumes that our renewals business will continue to perform well in Q4.

Speaker Change #164: Third the full year guidance continues to assume that average contract duration will be flat to slightly lower compared to fiscal year 'twenty three as it in all its continue to grow as a percentage of our billing.

Speaker Change #164: Fourth the updated full year free cash flow guidance includes the benefit of the eight figure ACB transaction, which was booked in Q3.

Speaker Change #164: In addition, the full year free cash flow guidance also assumes the impact of certain nonrecurring benefit.

Speaker Change #164: Over the course of the year, including approximately $40 million of operating expenses.

Speaker Change #164: Which we expect to receive approximately $30 million of nonrecurring cash payments related to one of our partnership agreement.

Rukmini Sivaraman: In closing, we are pleased that our Q3 performance exceeded guidance across all metrics and that we continue to make significant progress aligned with our stated philosophy of sustainable, profitable growth. With that, operator, please open the line for questions. And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change #164: In closing we are pleased that our Q3 performance exceeded guidance across all metrics and to continue to make significant progress aligned with our stated philosophy of sustainable profitable growth.

Speaker Change #165: With that operator, please open the line for questions.

Speaker Change #166: And thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again and we please ask that you limit yourself to one question and one follow up again and ask one question and one follow up and one moment for your first question.

Operator: And we please ask that you limit yourself to one question and one follow-up. Again, that's one question and one follow-up and one minute for our first question. And our first question comes from Pinjalim Bora from J.P. Morgan. Your line is now open.

Speaker Change #167: And our first question comes from <unk> Bora from Jpmorgan. Your line is now open.

Pinjalim Bora: Oh, great. Hey, guys, congrats on the question. Thanks for taking the question. Rajiv, I have one question for you. I wanted to ask you about the decision to kind of extend AHV to support compute-only nodes. On the one hand, it seems like it could actually help you create an on-ramp to migrate workloads into the Nutanix HCI platform. But on the other hand, it could elongate the time for a customer to make that decision since AHV might increase the time they stay on their existing 3G architecture.

Oh, Great Hey, guys. Congrats on the question. Thanks for taking the question.

Speaker Change #167: Rajiv.

Speaker Change #168: One question for you.

Pinjalim Bora: So maybe we could talk about that, put some take there, and is there any incremental investment in that decision that we should be thinking about as we think about next year? Yeah, I think, excellent question, Pinjalim. We thought about this one long and hard.

Speaker Change #169: Mine to ask you about the decision to kind of extending <unk> to support computer only nodes on one hand, it seems like it could actually help you create an on ramp to migrate workloads into the <unk> platform.

Speaker Change #169: On the other hand could elongate the time for a customer to make that decision in CHP.

Speaker Change #169: It might increase the time be the stay on their existing <unk> architectures. So maybe.

Speaker Change #170: Talk about that.

Speaker Change #171: But can take.

Speaker Change #172: Are there and is there any incremental investment.

Speaker Change #172: And that decision that we should be thinking about as we as we think about next year.

Rajiv Ramaswami: Here's kind of the rationale for why we're doing this. One of the things we've talked about as customers migrate from legacy three-tier to HCI architecture is that it typically requires them to do a hardware refresh, right, get rid of their legacy storage arrays and some, you know, and their existing servers and move to an HCI configuration. And that can actually slow things down a bit in terms of our ability to get into an account because they have to wait for their hardware depreciation cycles typically before they buy new hardware. Now, the rationale for this announcement with Dell is that we are starting out by supporting AHV with PowerFlex, which is one of their storage platforms.

Speaker Change #173: Yes, I think excellent question pendulum, we thought about this one long and hot.

Speaker Change #174: He is kind of the rationale for why we're doing this one of the things we've talked about as customers migrate from legacy TTM to HCI architecture has added request them typically to do a hardware refresh.

Speaker Change #174: Their legacy storage arrays.

Speaker Change #174: And some and the existing servers and we will go ahead Ti configuration, then that actually can slow things down a bit in terms of our ability to get into an account.

Because they have to wait for their hardware depreciation cycles typically before they buy new hardware.

Speaker Change #174: Now the rationale with this announcement with Dell is we're starting at <unk> supporting EHP with power Flex, which is one of the <unk> platform now.

Rajiv Ramaswami: Now doing so allows us to get in the door, right, with existing customers who have made an investment in the storage array already without having to replay the storage array. And so it allows us faster entry into an account, not slower; it's going to be faster, right, with a portion of our portfolio. And we are still very much on that mission of converting our customers over time to this modern cloud HCI architecture, which creates a platform for the future.

Speaker Change #174: We are doing so allows us to get in the door with existing customers, who have made an investment in the storage array already.

Speaker Change #174: Without having to replace the storage area.

Speaker Change #174: And so it allows us faster entry into in a car not slower it's going to be faster right with a portion of our portfolio.

Speaker Change #174: And we are still very much on the admission of converting over time, our customers with a modern cloud architecture.

It creates a platform for the future. So on balance that gives us easier insertion into accounts, where they are not quite ready to go depreciate that hardware yet.

Rajiv Ramaswami: So on balance, this gives us easier insertion into accounts where they're not quite ready to go depreciate their hardware yet, allowing us to then, over time, convert them over to HCI. And so that's the rationale behind us supporting external storage. We are starting out with just IP storage only. And that was specifically with Dell PowerFlex at this time.

Speaker Change #174: Allowing us to then over time convert them over to <unk>.

Speaker Change #174: So thats the rationale behind us supporting external storage.

Speaker Change #174: We are starting out with just IP storage, only and that was specifically with delta or flex.

Rajiv Ramaswami: Right. And again, I think that's rational. Yeah, understood.

Speaker Change #175: At this time right.

Speaker Change #175: And again I think that's the rationale.

Rajiv Ramaswami: Any thoughts on the incremental investment that we should think about maybe going into next fiscal year? I think it's factored into our current run rate. By the way, on this, we already have our engineering teams, and the solution is in development currently, and it's included in our ongoing R&D experience. And this is one quick follow-up for Rukmini. Is it possible for me to understand kind of the size of this eight-figure deal that might be from a point of view of just free cash flow guidance that you have seems like a huge $100 million upside? If I if my numbers are correct, that I look good, Thank you, Pinjalim.

Speaker Change #176: Yeah understood and any thoughts on the incremental investment that we should think about maybe going into next fiscal year. I think it is factored into our current run rate by the way on this.

Speaker Change #176: We already have an engineering team centered solution is in development currently and is included in our ongoing R&D expenses.

Speaker Change #177: And just one quick follow up for <unk> is it possible to do.

Speaker Change #178: Do you understand kind of the size of this eight figure deal.

Speaker Change #179: That might be.

Speaker Change #180: My point of view of just the free.

Speaker Change #181: Free cash flow guidance.

Speaker Change #181: That you have seems like a huge $100 million upside if I. If my numbers are correct that I looked at.

Rukmini Sivaraman: So, you know, we're not commenting on the specific size of the deal beyond what we said in terms of eight-figure ACV. And I'll also remind folks that, you know, we do collect cash up front for all, even if it's a multi-year contract. And we alluded to the fact that this transaction came in with a longer contract duration than we had initially expected. The total TCV, actually the total contract value, was larger than we had expected, Pinjalim. And so, yeah, we're happy to be able to raise our free cash flow guide to the range that we did, 520 to 540. Got it, congratulations on the goal, and thank you.

Speaker Change #182: Thank you have a pendulum so we're not commenting on the specific size of the deal beyond what we said in terms of eight figure.

Speaker Change #183: And I'll also remind folks that we do collect cash upfront for all the multiyear.

Speaker Change #184: Our contract and we alluded to the fact that this transaction came in with a longer contract duration than we had initially expected. The total AC total PCB actually the total contract value was larger than than we had expected pendulum and so yeah, we're happy to be able to raise our free cash flow guide.

Speaker Change #184: But we did $525 million to $40 million for the full year.

Speaker Change #185: Got it congrats on the quarter. Thanks.

Speaker Change #186: Thank you and thank you.

Speaker Change #185: Yeah.

Operator: And one moment for our next question. And the next question comes from James Fish from Piper Sandler. Your line is now open. Hey guys, this is Quinton. I'm from James Fish.

And one moment our next question.

Speaker Change #187: And our next question comes from James Fish from Piper Sandler Your line is now open.

Quintin: Hey, guys. This is quintin on for James Thanks for taking my questions.

Quintin: Rajiv maybe for you first I would love to hear incremental color you have around the partnerships with Cisco obviously.

Quintin: Announced some deployment optionality is there but.

Quintin: How are your win rates there how have reps kind of adopted the selling of new tax platform.

Quintin: Any traction you can kind of further talk on would be great.

Rajiv Ramaswami: How have reps kind of adopted the selling of the Nutanix platform? And any traction you can further talk on would be great. Sure. So in Q3, we saw some good additional events for this new solution with Cisco, and we've seen good, encouraging progress with respect to Cisco's ability to bring in new logos for us. Also at.NEXT last week, we announced that we are certifying our AHV hypervisor to run on Cisco UCS servers. This will enable customers to repurpose their existing Cisco servers to run our software, connected to our storage-only nodes, again running our own software.

Quintin: Sure.

Speaker Change #188: So in Q3, we saw some good additional wins for this new solution with Cisco and we've seen good encouraging progress with respect to Cisco and the ability to bring in new logo for us.

Speaker Change #188: Also adopt next last week, we announced that we are certifying our <unk> hypervisor to run on fiscal Ucs servers.

Speaker Change #188: This will enable customers to repurpose their existing Cisco servers to run our software connected to our storage only notes right again running our own software.

Rajiv Ramaswami: So with respect to the contribution, we expect to see a growing contribution from Cisco in Q4 and, of course, into FY25. And certainly, we are encouraged by the partnership in terms of their reps, especially their specialist reps, because Cisco, again, has a very big sales force, but a lot of those sellers are also networking sellers. But they do have a specialist team, a sales team, coming in and focusing on data center sales, and those are the people who are more familiar with the Nutanix offering.

Speaker Change #188: With respect to the contribution we expect to see a growing contribution from fiscal in Q4.

Speaker Change #188: And of course into FY 'twenty five and.

Speaker Change #188: And thirdly, we are encouraged by the partnership in terms of their reps, especially as especially snack because Cisco again has a very big salesforce, but a lot of those centers are open networking sellers, but they do have a specialist team sales team coming out of focusing on data center sales and those are the people who are more familiar with the <unk> offering.

Rajiv Ramaswami: So we are overall encouraged by the contribution. The overall contribution for this year is small and modest, as we have said in the past, and we expect a bigger contribution into FY25. Yeah, that makes a lot of sense. And then maybe touching a bit on Pinjalim's question earlier, you know, after the AHV combination with Dell Storage, is there really anything from a feature or functionality standpoint that would limit a VMware customer from being able to move to AHV now that only the hypervisor has been enabled?

Speaker Change #188: So we don't overall increased by as a contribution the overall contribution for this year, a small modest SB said in the past and we expect a bigger contribution to FY 'twenty five.

Speaker Change #189: Yes that makes a lot of sense and then maybe touching a bit on <unk> question earlier.

Speaker Change #190: After the HB combination with Dell storage is there really anything from a feature functionality standpoint that would limit a vmware customer from being able to move to HPE now that kind of the Hypervisor Omi has been enabled or is it kind of.

Rajiv Ramaswami: Or is it kind of an optionality where this opens up all VMware customers to move over to Nutanix? Thank you. Another great question there, Quintin.

Speaker Change #190: Optionality, where this opens up all Vmware customers.

Speaker Change #191: Tim over to <unk>. Thank you again another great question. So so first of all I had.

Rajiv Ramaswami: So first of all, I want to say that, initially, we are only initially supporting one storage platform, and that is PowerFlex, okay? But the concept is about offering AHV standalone to work with third-party storage, right? Which is a big chunk of the install base out there, the legacy install base, which is, you know, separate virtualized servers connected to three-tier storage. Now, we are starting out with a very small footprint, to be clear, right?

Speaker Change #192: I wanted to say that first of all we are only initially supporting one storage platform and that is partly okay. But the concept is about offering EHP standalone to work with third party storage right. This is a big chunk of the installed base out there.

Speaker Change #192: Legacy installed base, which is separate virtualized servers connected to <unk> storage.

Speaker Change #192: We are starting out with a very small footprint to be clear we are not.

Rajiv Ramaswami: We are not, you know, we're only supporting one storage array, and it's an IP-based storage array. So it'll be, you know, I don't think we'll ever get to a point where we'll support every storage array that's out there on the planet.

Speaker Change #193: Yes, they are only supporting one storage array and it's an IP based storage right. So be it will be I don't think we will ever get to a point, where we'll support every storage array. That's out there on the planet that's not going to happen, we will start with <unk> flex and then over time incrementally add other IP based storage or not.

Rajiv Ramaswami: That's not going to happen. We will start with Dell PowerFlex and then, over time, incrementally add other IP-based storage arrays, right? Not five-channel storage.

Speaker Change #193: Non fibre channel storage. So I expect that this is something that we can get a broader and broader opportunity.

Rajiv Ramaswami: So, expect that this is something that we can get a broader and broader opportunity for scope over time, but it does open the door to supporting third-party stories. Thanks for your time. Thank you all, and we'll see you next moment for our next question. And our next question comes from Jason Adder from William and Blair. The line is now open. Yeah, thank you. Good afternoon, guys.

Speaker Change #193: Scope overtime.

Speaker Change #193: But it does open the door to supporting third party storage.

Speaker Change #194: Thank you all.

Speaker Change #195: And thank you.

Speaker Change #196: And one moment for our next question.

Speaker Change #197: And our next question comes from Jason <unk> from William Blair. Your line is now open.

Jason Noah Ader: Just to follow up on the first two questions for Rajiv on the standalone AHV deployment option with third-party storage. How are you planning on pricing AHV in those types of environments? I know it's just starting with Dell PowerFlex, But is it sort of, is it right to think about the pricing being similar to kind of an HCI solution? Yeah, I mean, Jason, again, as you can imagine, the whole reason for doing this is to provide an alternative solution for customers who are looking to reuse their existing storage but replace their hypervisor.

Jason Noah Ader: Yes. Thank you. Good afternoon, guys just to follow up on the first few questions for Rajiv on the Standalone HD deployment option, where third party storage.

Speaker Change #198: How are you planning on pricing HV and those kinds of environments I noticed just starting with Gulf power Flex.

Speaker Change #199: But is it sort of is it right to think about the pricing would be similar to kind of our ACI solution.

Speaker Change #200: Yes, I mean again as you can imagine the whole reason for doing this is to provide an alternative solution for customers, who are looking to reuse their existing storage.

Speaker Change #201: Replace the Hypervisor.

Rajiv Ramaswami: So, but we also want to think about this as an on-ramp to HCI, not just, you know, the standalone hypervisor being the end game in itself. And therefore, we will figure out what the appropriate pricing needs to be to achieve that outcome. So we haven't, uh, prices. The offering is still in development, won't be available until next year. So, uh, still early days for us, and we will monitor, uh, your customer feedback and, and make more decisions on this over time. Great. And then a follow-up for Rukmini.

Speaker Change #201: But we also want to think about this as an on ramp to <unk> not <unk>.

Speaker Change #201: The Standalone hypervisor being the end game in itself and therefore, we will.

Speaker Change #201: Figure out what the appropriate pricing needs to be to achieve that outcome. So we havent prices offering is still in development won't be available until next year. So still early days for us and we will monitor.

Speaker Change #201: Customer feedback and make more decisions on this or that.

Speaker Change #202: Okay, Great and then a follow up for community.

Speaker Change #203: I know you mentioned on the new and expansion business that it was below your expectations coming into the year because of the longer sales cycles.

Speaker Change #204: Could you comment on how the pipeline.

Speaker Change #205: Has fared relative to your expectations entering the year because it sounds like you gave some data points there it sounds like the pipeline is extremely strong.

Rukmini Sivaraman: Correct. I mean, I think we have a strong pipeline generation. And, and, you know, we gave you some qualification around the larger deal pipeline, which we did comment on last quarter as well. And the, the qualification I had in my script was that if you look at opportunities greater than 1 million in ACV, as a threshold in our pipeline, that number of deals has grown at higher than 30%, right, for the last three quarters, and the dollar amount of that pipeline from opportunities greater than 1 million has grown even faster at And so the pipeline is, is, is strong.

Jason: Thank you Jason correct, I mean, I think we have a strong pipeline generation and and you know we gave you some qualification around the larger deal pipeline, which we did comment on last quarter as well.

Jason: The qualitative I had in my script was that if you look at opportunities greater than $1 million in ACB as a threshold in our pipeline that number of deals is growing at higher than 30% tied for each of the last three quarters and the dollar amount of that pipeline from opportunities greater than $1 million has grown even faster at well over 50%.

Jason: And so the pipeline is strong.

Speaker Change #207: Strong I think what we're seeing and what the market is a bit of a dichotomy on back versus I think whats clothing and I'll, let Rajiv do you want to add more.

Rajiv Ramaswami: I think what we're seeing and what's in the market is a bit of a dichotomy between that and what's closing, and I'd let you know, Rajiv, do you want to add more? Yeah, I mean, to your point. We are seeing this dichotomy, you know; we've got this vast opportunity opening up to us on the one hand. And that's for sure.

Speaker Change #208: I mean, certainly to your point.

Speaker Change #209: We are seeing this dichotomy you in regards as lost opportunity opening up to us on the one hand.

Speaker Change #210: And that for sure but at the same time.

Speaker Change #211: Terms of the deals that we're closing in the near term right. I mean, this disease are taking longer these larger deals.

Rajiv Ramaswami: But at the same time, you know, in terms of the deals that we are closing in the near term, right, I mean, these deals are taking longer, these larger deals. So on the opportunity side, you know, I was at.NEXT last week, and it was amazing to see the substantial increase in the customers who are engaging with us. Including some of the world's largest companies and ones that we have won business with and who are willing to talk about it very publicly in terms of their modernization experience and their migration experience.

Speaker Change #211: On the opportunity side, either dark next last week and it was amazing to see the substantial increase in the customers who are engaging with us.

Speaker Change #211: Some of the world's largest companies and ones that we have one business that and who are willing to talk about it.

Speaker Change #211: They publicly in terms of their modernization experiences their migration experiences and at the same time, we're seeing an increased level of activity with our channel partner with our OEM partners are looking to engage deeper with us now.

Rajiv Ramaswami: And at the same time, we're seeing an increased level of activity with our channel partners, our OEM partners, all looking to engage deeper with us. But the engagements themselves, on the other side, have been taking longer than expected to close. And they've shown greater variability with respect to the timing and the outcome than we expected. Now, I think this is because of a higher mix of larger, more strategic opportunities, and, of course, some of which are influenced by this Broadcom acquisition. Now, with respect to this Broadcom opportunity, we have said, and we do expect that this will take time to play out for all the reasons we previously discussed. That includes three reasons.

Speaker Change #211: Now the engagement themselves on the other side I've been taking longer than expected to close.

And they've shown greater variability with respect to the timing and the outcome than we expected.

Speaker Change #211: I think this is because of a higher mix of larger more strategic opportunities and.

Speaker Change #211: Of course, some of which are influenced by the Broadcom acquisition.

Speaker Change #211: Now with respect to this does not com opportunity.

Speaker Change #211: We have said and we do expect that this will take time to play for other reasons. We previously discussed that includes three reasons first.

Rajiv Ramaswami: First, many VML customers have signed multi-year ELAs with VML prior to the acquisition, buying them time. Second, as we've talked about before, a lot of this installed base also requires a hardware refresh to run HCI. Although, you know, once we do get out the AHP, we start addressing a portion of this market as well. But also, I think the situation has been very dynamic recently. Number three, you know, we've seen Broadcom display a lot of flexibility with respect to their pricing and packaging changes, especially when they're faced with the probability of losing some of their larger customers or responding to pushback from the market and from the customer base. So those are some of the reasons why we've had some pressure on our recent new and expansion ACB performance. Thank you, and thank you.

Speaker Change #211: Many vms customers have signed multiyear elas with <unk>.

Speaker Change #211: Prior to the acquisition buying them time.

Speaker Change #211: Second as we've talked about before a lot of installed base also requires a hardware refresh to run his ci.

Speaker Change #211: Although once we do get out of the HBV started addressing a portion of this market.

Speaker Change #211: As well.

Speaker Change #211: But also I think the situation has been very dynamic recently number three.

Yes, we've seen broadcom display a lot of flexibility with respect to that pricing and packaging changes, especially when they are faced with the probability of losing some of their larger customers.

Speaker Change #211: Wanting to push back from the market and from the customer base.

Speaker Change #211: So those are some of the reasons why we've had compression on our recent new and expansion the ACB performance.

Speaker Change #212: Thank you.

Speaker Change #212: Okay.

Speaker Change #213: Thank you.

Speaker Change #214: And one moment for our next question.

Operator: And one moment for our next question. And our next question comes from Wamsi Mohan from Bank of America. Your line is now open.

Speaker Change #215: And our next question comes from <unk> Mohan from Bank of America. Your line is now open.

Wamsi Mohan: Yes, thank you so much. I'm giving you a commentary on the longer time to close some of these deals, but that you're saying will last into Q4. Would you say that changes any of your outlook also around 25?

Speaker Change #216: Yes. Thank you so much given your commentary on the longer time to close some of these deals but that you're saying the last into Q4.

Speaker Change #217: Would you say that changes any of your outlook also around 25, I mean, why should it not sort of extend beyond Q4.

Rukmini Sivaraman: I mean, why should it not sort of extend beyond Q4? That's my first question. I'll follow up. Yeah, thank you for that question, Wamsi. So, you know, to date this fiscal year, we've been outperforming our initial free cash flow expectations but have been below our initial expectations on new and expansion ACB and ARR, as you alluded to. While we're not commenting on fiscal year 25 or longer-term targets today, we remain committed to driving top-line growth and strong free cash flow generation, and we expect to provide our initial fiscal 25 guidance on our next earnings call, as we typically do. Okay, okay.

Speaker Change #217: This is my first question and I will follow up.

Speaker Change #218: Yes, thank you for that question.

Speaker Change #219: <unk>. So you know to date this fiscal year, we've been outperforming our initial free cash flow expectations, but have been below our initial expectations on new and expansion ACD and Iraq as you alluded to.

Speaker Change #219: While we're not commenting on fiscal year, 'twenty five or longer term targets today, we remain committed to driving top line growth and strong free cash flow generation and we expect to provide our initial fiscal 'twenty five guidance on our next earnings call as we typically do.

Speaker Change #220: Okay. Okay. Thanks for listening and I guess as a follow up I mean this this higher mix of larger deals Friday, you said like this being tracking pretty strongly now for three quarters.

Wamsi Mohan: I think Rajiv alluded to some of that. Or is there, you know, an incremental attach across your stack? And would you say that the demand environment has changed materially across the last three quarters? Thank you so much.

Speaker Change #221: What is driving the higher mix of the larger deals up more competitive traction I think rajeev alluded to some of that or is there incremental let Patrick Walsh your stack and would you say that the demand environment has changed materially across the last three quarters. Thank you so much.

Rajiv Ramaswami: I can take that. There are multiple reasons for that, Wamsi. First, of course, look. There is a larger set of market opportunities available to us at these larger accounts, and these larger accounts tend to be associated with larger deals. Number one.

Speaker Change #222: Maybe I can take that there's multiple reasons for that one.

Speaker Change #222: <unk>.

Speaker Change #223: So first of course look there is a larger set of market opportunities available to us at these larger accounts and these other constant to be associated with larger deals.

Rajiv Ramaswami: Number two, our platform has evolved to a point where now we can go after pretty much all the workloads that companies are running, which means we can target a broader opportunity set. Number three, of course, the competitive dynamics in terms of what's happening with Broadcom are stimulating a portion of this. And so these are the reasons why we are seeing more, more large deals in our pipeline. Okay, thank you so much, Rajiv. Thank you, and thank you.

Speaker Change #224: Number one and number two our platform has evolved to a point where now we can go after pretty much all the workloads that companies are running so.

Speaker Change #224: Which means we can go off a broader opportunity set.

Speaker Change #224: Number three of course, the competitive dynamics in terms of what's happening with Broadcom is stimulating a portion of this and so these are the reasons why we are seeing more and more large deals in our.

Speaker Change #224: And our pipeline.

Speaker Change #225: Okay. Thank you so much with you.

Speaker Change #226: Thank you.

Thank you.

Operator: And one moment for our next question, and our next question comes from Simon Leopold on behalf of Raymond Danes. Your line is now open.

Speaker Change #227: And one moment for our next question.

Speaker Change #228: And our next question comes from Simon Leopold from Raymond James Your line is now open.

Simon Matthew Leopold: Great. Thanks, I appreciate you taking the question here.

The things I wanted to follow up on was how your views have evolved regarding the opportunities to take business from Vmware versus your settlement say six months ago, and then I've got a quick follow up that I'll come back with.

Rajiv Ramaswami: I would say largely, You know, the opportunity is a multi-year opportunity, as we've been saying all along. It's not here and now in terms of closing deals. These things are going to take many years. We look at it as a multi-year tailwind for us, for all the reasons that we talked about, Simon. And I don't think that part of it has changed, right?

Speaker Change #229: Maybe I'll take that does start with many who can provide more color.

I would say largely.

Speaker Change #230: The opportunity is a multi year opportunity as we've been seeing all along it's not here now in terms of closing because these things are going to take many years that said, we look at it as a multiyear.

Speaker Change #230: Tailwind for us.

For all the reasons that we've talked about Simon and I don't think.

Speaker Change #230: That's part of it has changed right. It's been the same as we said right. This customer signed Elas. Therefore, it takes time.

Speaker Change #230: The hardware refresh cycles involved in the process.

Speaker Change #230: The only became that we've seen over the last.

Speaker Change #230: A couple of months in fact is that the situations with respect what Broadcom is doing is also evolving rapidly.

Speaker Change #230: Tried a bunch of things that are stepping back on some of the things that they've tried.

Speaker Change #230: The situation is quite dynamic on that front and these larger deals of course, taking longer also for us to close so the ones that are in the pipeline are taking for all these reasons that we talked about so I would say compared to the overall thesis about this being a multiyear opportunity hasn't really changed for us.

Speaker Change #230: In the short term I think what we're seeing is these larger deals are going to take more time and and.

Speaker Change #230: And Thats just a fact of life as we have to deal with the dynamics of all of the things that are going on right now.

I appreciate that and then maybe my follow up is tied into this is at least the anecdotes from my perspective seem like Broadcom is price hikes in bundling, we're bigger than I would have anticipated I don't know what you were expecting but they surprised me. So I'm wondering if there is.

Simon Matthew Leopold: So I'm wondering if there's some inflationary aspect that maybe it's a tailwind for Nutanix that gives you the ability to be more aggressive and potentially even raise prices up against the inflation coming from Broadcom. Thanks. Yeah, I think, first of all, I think clearly Broadcom is doing what they're doing in terms of the bundling and the subscription price increases, and so forth. Now, when we look at our pricing response there, we've always been competitively priced from the HCI architecture, right? A lot of the competitive or the installed base out there is legacy, right, which is a three-tier architecture that separates serverless storage.

Speaker Change #230: Some inflationary aspect that maybe it's a tailwind for new panics that gives you the ability to be more aggressive.

Speaker Change #230: And potentially even raise price up against the inflation coming from Broadcom.

Speaker Change #231: Yes, I think.

Speaker Change #232: First of all I think clearly broadcom is doing what.

Speaker Change #232: They are doing in terms of the bundling in the subscription price increases and so forth.

Speaker Change #232: Now when we look at our pricing response there.

Speaker Change #232: We've always been competitively priced from ACI architecture, right a lot of the.

The competitive or the installed base out there is legacy rate, which is three tier architecture.

Speaker Change #232: The service side within storage.

Speaker Change #232: And our philosophy has always been to make sure that our solution pricing is attractive from a history perspective as companies move from the legacy architecture to the modern Hei Victor and Thats still the underlying philosophy that drives our pricing and we price to value. We've always been a premium offering in the market and we pride ourselves on.

Rajiv Ramaswami: And our philosophy has always been to make sure that our solution pricing is attractive from a HCI perspective as companies move from the legacy architecture to the modern HCI architecture. And that's still the underlying philosophy that drives our pricing, and we price to value. We've always been a premium offering in the market, and we pride ourselves on being really simple to use, delighting our customers, but also offering prices based on value. So we will continue to do that, Simon.

On being really simple to use delighting our customers.

Speaker Change #232: But also pricing based on value. So we continue to do that assignment. So that part hasn't changed I think and we will continue to be agile in terms of responding to what we see is competitive.

Rajiv Ramaswami: So that part hasn't changed, I think, and we will continue to be agile in terms of responding to whatever we see as competitive situations in the market. The one thing I'd add to reiterate that, Simon, is that while Broadcom's effective list prices for many of their customers may have increased significantly, the actual prices, meaning the discount levels in the market, especially when they're sort of at risk of losing business or otherwise challenged, can, as you can imagine, will be lower than those list prices, and, as Rajiv said, remain quite dynamic. Yeah, and we've seen them respond aggressively when Thank you, and thank you.

Speaker Change #232: Situations in the market.

Speaker Change #232: The one thing that's very much to reiterate that Simon is that while that while broadcom is effective list prices for many of their customers may have increased significantly the actual prices, meaning the discount levels in the market, especially when they're sort of at risk of losing business or otherwise challenge.

Speaker Change #232: And as you can imagine will be lower than those list prices and as Rajeev said remained quite dynamic is what we're seeing in the market and.

Speaker Change #232: And we've seen them respond aggressively when they're faced with the threat of losing large customers.

Speaker Change #233: Thank you. Thank you Simon.

Speaker Change #233: Thank you.

Operator: And one moment for our next question. And our next question comes from Meta Marshall from Morgan Stanley. Your line is now open.

Speaker Change #234: And one moment our next question.

Speaker Change #234: Okay.

Speaker Change #235: And our next question comes from meta Marshall from Morgan Stanley. Your line is now open.

Meta A. Marshall: Great, thanks. A couple of questions. Maybe first, you know, you mentioned kind of starting with PowerFlex and may consider others.

Great. Thanks.

Meta A. Marshall: Couple of questions maybe first.

Meta A. Marshall: You mentioned kind of starting with powerful acts and May consider others, just wondering with the time.

Speaker Change #236: It's going to take to kind of build the solution for powerful ex wood that shrink as you added other.

Speaker Change #236: Other storage or just how to think about kind of adding an incremental or the time to add other incrementals and then as a second question.

Speaker Change #237: Rick maybe you didn't kind of mentioned or at least I missed if you did anything about early renewal dynamics this quarter.

I did miss it I apologize, but if you could just kind of restate, whether there were any dynamics there to be helpful. Thanks, I'll cover power Flex into committee will cover I think it will be done so on the pump execution of course, there is an initial development effort.

Rajiv Ramaswami: Just wondering with the time, you know, it's going to take to kind of build the solution for PowerFlex, would that shrink as you added other storage or just how to think about kind of adding incrementally or the time to add in other incrementals. And then as a second question, Rukmini, you didn't kind of mention, or at least I missed, if you did anything about early renewal dynamics this quarter. If I did miss it, apologies, but if you could just kind of restate whether there were any dynamics there to be noteful of, thanks.

Rajiv Ramaswami: I'll cover PowerFlex, and Rukmini will cover Renewables Media. So on the PowerFlex situation, of course, there is an initial development effort to take our hypervisor and make it standalone ready, right? We've never had that in the past because we've always sold our hypervisor as part of our HCI solution. And now, for the first time, we are disaggregating it.

Speaker Change #238: To take our Hypervisor and make it standalone ready right. We've never had that in the past because we've already solar hyper whether it's part of our ACI solution and now for the first time, we are disaggregated. It. So there is some development work.

Rajiv Ramaswami: So there is some development work required to do that, and we are doing it. And the first target is PowerFlex.

Speaker Change #238: To do that and we are doing that in the first.

Speaker Change #238: Target is par flex now once we do this as part of flex I expect that the additional effort to bring on other IP storage right clearly IC not fiber town IP storage will be incremental it won't we won't have to do all of this all again once we have the first storage I quantified but.

Rajiv Ramaswami: Now, once we do this with PowerFlex, I expect that the additional effort to bring on other IP storage will be incremental. Clearly, IP, not fiber channel, IP storage will be incremental. We won't have to do all of this over again. Once we have the first storage array qualified, with incremental work, we should be able to bring in more IP storage arrays into the mix.

Speaker Change #238: With incremental work, we should be able to bring in more IP storage arrays into.

Speaker Change #238: Into the mix.

Rukmini Sivaraman: And Meta, to your second question on renewals. So we have seen outperformance in our renewals business so far this fiscal year due to a combination of a few things. One is good discipline around renewals, economics, and pricing. The second is improved on-time renewal performance. And then third, some early and close-home renewals, which I think was your specific question. And so the benefit of this stronger performance has primarily been seen in ACV billing and free cash flow.

Speaker Change #239: And to your second question on the nose. So we have seen outperformance of our renewals business. So far this fiscal year due to a combination of a few things one is good discipline around than it was economics and pricing.

Speaker Change #239: <unk> improved on time performance.

Speaker Change #239: And then third is.

Speaker Change #239: Some early in <unk> I think was your specific question and so the benefit of this stronger performance is primarily been seen an ACB billings.

Speaker Change #239: And free cash flow and just as a reminder, this will have a modest benefit of revenue because revenue from early renewals specifically on the earlier northeast would only be recognized in the quarter in which they are deal. So yeah overall happy with the outperformance in renewals year to date.

Speaker Change #240: Great. Thank you.

Speaker Change #240: Yeah.

Speaker Change #241: And thank you.

Speaker Change #240: Okay.

Operator: And one moment for our next question. And our next question comes from Mike Cikos from Needham and Company. See you guys.

Speaker Change #242: And one moment for our next question.

Speaker Change #243: And our next question comes from Mike cycles from Needham and Needham <unk> Company.

Speaker Change #244: Your line is now how you guys think.

Michael Joseph Cikos: Thanks. Great, thank you for taking the questions here. I just wanted to come back to the large deals and thank you for the statistics, Rukmini, around that million dollar ACV plus cohort. Can you help us think about, given the greater variability for the timing of those deals? Has there been any change in philosophy regarding how management constructs its guidance?

Speaker Change #245: Great. Thank you for taking the questions here.

Speaker Change #246: Wanted to come back to the large deals and thank you for the statistics rukmini around that million dollars ACB plus cohort.

Speaker Change #247: Could you help us think about given the greater variability for the timing of those deals.

Speaker Change #248: Has there been any change in philosophy regarding how management construct its guidance.

Thank you Mike for that for that question. So I would say in general our our guidance philosophy hasn't changed.

Mike: Change Mike what we are trying to do is to.

Mike: Of course put more.

Mike: Create more visibility internally and put more scrutiny around how we view the opportunities in our pipeline and this is in partnership with our sales organization as they think about it.

These opportunities coming in how we qualify them and how can we think about just the quality of the pipeline. In addition to the quantity of the pipeline. We also as you can imagine my closely watch duration here right. How long the pipeline has been open and we'll continue to do so I think I would say we have as we've talked about on this call.

Rukmini Sivaraman: We also, as you can imagine, Mike, closely watch, you know, duration here, right, like how long the pipeline has been open, and we'll continue to do so. I think I would say, you know, we have, as we've talked about on these calls, closed some larger deals, you know, over the last few quarters, including the one we talked about, that Rajiv will do, and the figure ATV that we talked about. But we'll continue to sort of build more data points, right, as we do more of those.

Mike: Have closed some larger deals you know over the last few quarters, including the one we talked about at that time people are doing they figure ACB that we talked about.

Mike: But we'll continue to sort of build more data points, but as we as we do more of those so yes, I think trying to put more rigor into various properties. Both on the go to market side and on the on the finance side, but the philosophy in terms of how we approach.

Mike: Our guidance hasn't changed but suddenly not motor to guard being put into how we think about forecasting.

Speaker Change #249: Great and just to follow up as well I think at the end of your prepared remarks, I know you were citing some of the nonrecurring benefits in cash payments related to our partnership agreements.

Speaker Change #250: So first can you just run through those numbers again real quickly and then secondly.

Speaker Change #250: Just as a reminder, what are those payments in relation to with respect to those partnership agreements.

Mike: Yeah. So Mike what we said was that when I was talking about the full yard free cash flow guidance, we said that the opex. This year is expected to benefit by about $40 million.

Speaker Change #251: And cash flow by $30 million 30 million off that 40 because of these are non recurring cash payments, we don't expect them to the car.

Speaker Change #251: Beyond kind of this period and it's related to one of our partnership agreement, Mike and we're leaving it at that.

Rukmini Sivaraman: And it's related to one of our partnership agreements, Mike, and we're leaving it at that. So I'm not going to get more specific on what the payment is. But it is a 40 million benefit to OPEX this year. It is throughout the year.

Speaker Change #251: I don't I'm not going to get more specific on what the payment is but it is a $40 million benefit to opex. This year. It was throughout the year and it's I expect it to be of that 40 30 million will also be a free cash flow benefited this year. The only other maybe modeling point for you all is that $40 million of Opex that I alluded to them.

Rukmini Sivaraman: And it's expected to be off by 40, 30 million will also be a free cash flow benefit to this year. The only other maybe modeling point for you all is that 40 million of OPEX that I will return the benefit is sitting in the R&D line within OPEX. Got it.

The benefit is sitting in the R&D line within Opex for your reference.

Speaker Change #253: Got it okay. Thank you very much thank you Mike.

Speaker Change #252: Thank you.

Speaker Change #252: Yeah.

Operator: Okay. Thank you very much, Rukmini, and thank you. And one moment for our next question. And our next question comes from Matt Hedberg from RBC Capital Markets. Your line is now open.

Speaker Change #254: And one moment for our next question.

Speaker Change #255: And our next question comes from Matt Hedberg from RBC capital markets. Your line is now open.

Great. Thanks for taking my questions guys.

Matthew George Hedberg: I had a question theres been a lot of conversation here on the large deals and timing and sounds great that they are growing in size, but obviously you've noted that creates a fair amount of uncertainty there I'm sort of curious how are you doing anything to accelerate I would call. It more of the run rate business that might be more predictable I assume partners like Dell and Cisco could be driving that but are there. Other things you can do about maybe.

Matthew George Hedberg: <unk> offset the timing of larger deals.

Rajiv Ramaswami: Yeah, I think, certainly, first of all, we haven't seen any changes to our conversion ratio on the, so what you would call maybe run rate deals. And I think we, in terms of what we are doing on that front, by the run rate stuff, also, we are incentivizing our channels to get us more new logos. We have, we have migration programs in place for competitive takeouts.

Speaker Change #256: Yes, I think so.

Speaker Change #257: Certainly first of all we haven't.

Speaker Change #257: Seen any changes to our conversion ratio on the what you would call maybe run rate deals.

Speaker Change #257: And I think the in terms of what we're doing on that front by the end of the run rate stuff. So we are incentivizing our channels to get us more new logos we have.

Speaker Change #257: We have a.

Speaker Change #257: Migration programs in place for competitive take outs.

Speaker Change #257: We are of course companies like Cisco can help bring us more new logos there as well.

Rajiv Ramaswami: We are, of course, companies like Cisco can help bring us more new logos there as well. And then, in terms of larger deals, when you look at what we're trying to do there, to expedite the larger deals that we talked about, we are, we put together a cross-functional team for these types of large deals that include sales, finance, and product folks with executive sponsorship for pursuing these deals specifically. And we are quite familiar with the cycle of this product qualification, customer-specific requests that may come in for some of these larger wins, the vendor qualification process, and then, of course, commercial negotiations, right, all of these. So we do what we can under our control.

Speaker Change #257: And then in terms of larger deals itself. When you look at what we're trying to do there.

To expedite the larger deals that we talked about we are we have put together a cross functional team for these types of large deals that include sales finance and product folks with executive sponsorship for pursuing these deals specifically and.

Speaker Change #257: And we are quite familiar with the cycle of this product qualification customer specific requests that may come in.

For some of these larger wins vendor qualification process and then of course commercial negotiations right all of these.

Speaker Change #257: So we do what we can do under our control, but at the same time, we also have to factor in the customers' timelines and processes.

Speaker Change #257: Right, because thats going to be a gating item as well and some of these.

Speaker Change #258: Thanks, Rajeev well done on the quarter guys.

Speaker Change #259: Thank you.

Speaker Change #260: And thank you.

Speaker Change #261: And one moment for our next question.

Rajiv Ramaswami: But at the same time, we also have to factor in the customer's timelines and process, as well, right? Because that's going to be a gating item as well. Thanks, Rajiv. Well done on the quarter, and thank you. And one moment for our next question. And our next question comes from Ben Bollin from Cleveland Research Company. Your line is now open. Good afternoon, everyone.

And our next question comes from Ben Bolan from Cleveland Research Company. Your line is now open.

Benjamin James Bollin: Thanks for taking the question. Rajiv, I'm curious if you could elaborate a little bit more on how you feel enterprise investigations around their own internal AI efforts might be influencing their refresh activities, your win opportunities. You mentioned data security and ransomware as priorities within that, but curious if you could expand on that and speak to any sequence of investments that you see across those customers. Yeah, I think there is a natural sequence of hardware refresh that is driven by the typically aging of hardware on the one side, and then on the other side, new initiatives. And I think what you're talking about comes from AI.

Benjamin James Bollin: Good afternoon, everyone. Thanks for taking the question.

Speaker Change #262: Rajiv I'm curious if you could elaborate a little bit more on how you feel enterprise investigations around their own.

Speaker Change #262: Internal AI efforts might be influencing.

Speaker Change #262: Their refresh activities your win opportunity.

Speaker Change #263: <unk> data security and ransomware as priorities within that but curious if you could expand on that.

Speaker Change #264: Any sequence of investments that you see across those customers.

Speaker Change #265: Yes, I think that it's a natural sequence of hardware refresh that is driven by typically aging of hardware on the one side and then on the other side New initiative and I think what Youre talking about come from the AI.

Speaker Change #265: As part of the new initiatives.

Ben So so when it comes to the airport for Enterprise AI I mean, theres been a lot of talk about AI in the public cloud and a lot of it has to do with training of these large language models now and then.

Rajiv Ramaswami: Now, in enterprise AI, it has to be run where the data is, and a lot of that is going to be on-premises. And in fact, I think that's the reason why we announced GPT in a Box 2.0, simplifying things, as well as the partnerships that we announced last week at.NEXT. But most of our customers, I would say, are in the early phases of that journey. A lot of them are doing proof of concept and initial use cases to validate the general AI use cases that we've talked about, whether it be fraud detection or customer support or document search and summarization or co-piloting.

Speaker Change #265: So frankly, I think that we run where the data is.

Speaker Change #265: And a lot of that is going to be on Prem and in fact, I think thats. The reason why we announced our DP Dina box to Darko simplifying things as well as the partnerships that we announced last week at our next.

Speaker Change #265: But most of our customers I would say are in the early phases of that journey.

Speaker Change #265: Lot of them are doing proof of concept that initial use cases to validate the <unk> AI use cases that we've talked about.

Speaker Change #265: It would be fraud detection or customer support our documents such as amortization, our copilot Inc.

Rajiv Ramaswami: So they're still pretty early on that front. They're making hardware investments, but I would say more for proof of concept and trying out rather than volume production and deployments. And I think this will play out over time. They're going to go through these proofs of concepts, validate the business proposition, and then get into a production deployment scenario. That's great.

Speaker Change #265: So this is pretty early on that front.

Speaker Change #265: Theyre, making certainly hardware investments, but I would say more for proof of concept, where triangle rather than volume production and deployment and I think this will play out over time, they're going to go to these concepts proof of concept validate the business proposition and then get into a production deployment scenario.

Speaker Change #266: That's great.

Speaker Change #266: Sure.

Speaker Change #266: Looking at the commentary around.

Speaker Change #266: The opportunity for larger deals if you look at.

Speaker Change #266: Maybe more traditional deal sizes versus these larger deals.

Speaker Change #267: Could you speak to a little bit about.

Speaker Change #267: Who is involved and how its different and then any thoughts on.

Speaker Change #268: The average evaluation duration between the two that's it for me. Thank you.

Yes, I think on the smaller deals it's more business as usual I'll field reps out of the front of that opportunity with customers and in very small.

Sector of the market we have actually.

<unk> had the channel our channel partners to take the lead.

Speaker Change #268: On some of those opportunities, but in a lot of these gives our reps are very much involved and they're compensated in exactly the same way as they will be compensated for any of the deals because for us new businesses, new business, whether it comes with larger small.

Rajiv Ramaswami: Because for us, new business is new business, whether it comes in large or small. And, like I said, with respect to the conversion rate on the smaller deals, we haven't seen any real changes over the last several quarters. It's been roughly about the same, so we haven't seen any major changes on that front. Rukmini, is there anything that you'd like to add to this? Only on Ben's question about duration. I think just how long they're taking that was part of the question. Ben, I think, you know, we talked about how these larger deals do tend to take. Thank you, and thank you. And one moment for our next question, and our next question comes from George Wang from Barclays. Your line is now open.

Speaker Change #268: And.

Speaker Change #268: And like I said with respect to the commercial rate on the smaller deals we havent seen any real changes over the last.

Speaker Change #268: Several quarters, it's been roughly about the same so we haven't seen any major changes on that front.

Speaker Change #269: Look many is there anything that you'd like to add on this.

Speaker Change #270: Only on I think Ben's question about duration I think just how long they're taking that was part of the question. Then I think we talked about how these larger deals do tend to take.

Speaker Change #270: Longer often because they're strategic or they just have more approvals.

Speaker Change #270: Things like that and we haven't kind of giving you a specific quantification of one versus the other we didn't give the example, though of this particular eight figure deal that we talked about which took approximately two years.

Speaker Change #270: To come to a halt so yeah. It is it does take longer than what you know what I think was referred to earlier I said about run rate business.

Speaker Change #271: Thank you.

Speaker Change #270: <unk>.

Speaker Change #272: And thank you.

Speaker Change #273: And one moment our next question.

Speaker Change #274: And our next question comes from George Wang from Barclays. Your line is now open.

George Wang: Thanks for taking my question, Hey, Hey, Rajeev.

George Wang: Any updated thoughts on the repatriation trends.

Rajiv Ramaswami: And increasingly you mentioned that there has been some examples of the repatriation kind of private cloud.

Rajiv Ramaswami: Additional build out kind of the hybrid cloud space. Just curious if you have any notable trends kind of you have seen from the quarter.

Rajiv Ramaswami: Yeah, George. I mean, every quarter, we see a handful of these where people, you know, are running something in the public cloud, and they might want to repatriate it back on premises. We've certainly seen that with some of our customers. I wouldn't call it a major trend in terms of like everybody trying to do that. But there are, you know, a few customers every quarter that we see doing that. What I would say is, rather than looking at it from a repatriation angle, for us, the bigger angle is the fact that, since, you know, since a vast majority of enterprise workloads are still running on premises in data centers.

John: Yes, John I mean, I think we every quarter, we see a handful of these.

John: People are running something in the public cloud and they might wonder repatriated back on Prem.

John: We've certainly seen that with some of our customers I wouldn't call. It a major trend in terms of like everybody trying to do that but.

John: A few customers every quarter that we see.

John: Doing that one I would say is rather than looking at it from a reputation angle for us the bigger angle is the fact that for.

John: Since a lot of vast majority of enterprise workloads are still running on Prem in data centers.

Rajiv Ramaswami: They're, you know, CIOs these days. The new reality for them is that the world is hybrid, and a lot of those workloads, they're gonna look at how to run them on modern platforms, how to run them in a hybrid cloud kind of model, and not necessarily take all those workloads and take them to the public cloud, which may have been the case five years ago. So perhaps, you know, this is more triggering a need for running modern applications, modern, you know, modernizing their on-prem infrastructure, running modern applications, and that goes for even the newest of modern applications. Gen AI is a similar example of that.

John: There are.

Speaker Change #276: CIO CS ESR.

Speaker Change #276: The new reality for them that the world is hybrid and a lot of those workloads, they're going to look at how to run them on modern platform how to run them in a hybrid cloud kind of model.

And not necessarily take all those workloads and take them to the public cloud, which may have been the case five years ago. So perhaps this is more triggering a need for running modern applications modern modernizing their on Prem infrastructure running modern applications and that goes for even the U S are modern applications. Then AI is a similar example.

Speaker Change #276: Matt.

Rajiv Ramaswami: There will be, in my view, a fair amount of Gen AI workloads also being deployed on-prem where the data is, and perhaps even at the edge where a lot of data is being generated. So that's more the trend, I would say, to call out rather than a mass repatriation. Okay, thank you. Just a quick follow-up, just, you know, in terms of the incentives for the channel to attract new logos, kind of, you know, do you have anything notable to call out quarter to quarter or still kind of, you know, similar sort of trend you are sort of providing to the channel to kind of, you know, upsell and cross sell.

Speaker Change #276: There will be in my view a.

A fair amount of Gen. AI workloads also being deployed on Prem metadata and perhaps even at the edge, where a lot of data to be generated.

Speaker Change #276: So that's more of a trend I would say call out rather than amongst repatriation.

Speaker Change #277: Okay. Thank you just a quick follow up just.

Speaker Change #278: In terms of the incentives for the channel to attract new logos.

Speaker Change #277: Hello.

Speaker Change #279: Do you have anything notable to call out.

Speaker Change #280: Quarter over quarter, all steel carnival.

Speaker Change #280: Similar sort of trend.

Speaker Change #280: So they provide into the channel to kind of.

Speaker Change #280: Upsell.

Speaker Change #280: And cross sell.

Speaker Change #281: Curious if the ADESA. Additionally.

Rajiv Ramaswami: Just curious if there's additional, you know, initiatives on the promo and kind of incentive front. Yeah, I mean, we try to be somewhat neutral in terms of cloud versus on-prem. In fact, we have the same product and the same licensing, whether a customer chooses to deploy it on-premises or in the public cloud. With respect to new logos, you know, we are fine. In fact, how will we get the new logos?

Speaker Change #281: In the initiatives on the on the promo on the incentive front.

Rajiv Ramaswami: In fact, it was interesting, we actually had a new logo this time. We didn't cover that in the earnings call, but it was actually an example of a customer who started with us in the public cloud, before they and over time they will deploy more on-prem but they're starting out with us in the public cloud and now that is not the norm I would say most of our customers have started out with us on-prem and then move to the public cloud but with respect to incentives to our field and to our channel it's all around new logos whichever way they get, Okay, great.

Speaker Change #282: Yes, I mean, we try to be somewhat neutral in terms of.

Speaker Change #282: Cloud versus on Prem in fact, we have the same product in the same licensing whether a customer chooses to deploy it.

Speaker Change #282: On prem or in the public cloud.

Speaker Change #282: With respect to new logos, we are fine in fact.

Speaker Change #283: How will we get the new logos.

Speaker Change #283: In fact, it was interesting we actually had a new logo this time.

We didn't cover that in the earnings call, but it was actually an example of a customer who started with us in the public cloud.

Speaker Change #283: Before.

Speaker Change #283: And over time, they will deploy more on prem, but they're starting off with us in the public cloud.

Speaker Change #283: That is not the norm I would say most of our customers that started out with us on Prem and then move to the public cloud, but with respect to incentives to our field and to our channel. It's all around new logos, which are ready to get it.

Operator: Thank you, and thank you. And I'm showing no further questions. This concludes today's Nutanix Q3 conference call. Thank you for participating. You may now disconnect. Thank you.

Speaker Change #284: Okay, great. Thank you.

Speaker Change #285: Thank you George.

Thank you.

Speaker Change #285: Yes.

And I'm showing no further questions. This concludes todays <unk> Q3 conference call. Thank you for participating you may now disconnect.

Speaker Change #285: Thank you thank.

Thank you.

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