Q4 2025 Nutanix Inc Earnings Call

August 27, 2025

Operator: 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 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 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Rich Vara, Nutanix Vice President of Investor Relations. Please go ahead.

After the Speakers' presentation there'll be a question and answer session to ask a question. During the session you need to press Star one one of your telephone you will then hear an automated message advisor in your hand, it's right to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to turn the conference over to rich for our Utah.

Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to today's conference call to discuss <unk> fourth quarter and fiscal year 2025 financial results.

Richard Valera: Good afternoon, and welcome to today's conference call to discuss Nutanix's fourth quarter and fiscal year 2025 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 fourth quarter and fiscal year 2025 financial results. 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 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.

Joining me today are Rajiv Ramaswami, <unk>, as president and CEO and Rick many civil Robyn eugenics as CFO.

After the market closed today <unk> issued a press release announcing fourth quarter and fiscal year 2025 financial results. If you would 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 risks and uncertainties some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements.

For a more detailed description of these and other risks and uncertainties. Please refer to our 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.

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 forward-looking statements apply as of today, and we undertake no obligation to revise these statements after this call. As a result, you should not rely on them as predictions of future events. Please note, 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 IR website and in our earnings press release.

These forward looking statements apply as of today and we undertake no obligation to revise these statements. After this call.

As a result, you should not rely on them as predictions of future events.

Please note 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 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 IR website and in our earnings press release.

New tenants will be participating in the Goldman Sachs can Utica Opiate and technology conference in San Francisco on September eight and the Piper Sandler growth Frontiers conference in Nashville on September 10th.

Richard Valera: Nutanix will be participating in the Goldman Sachs Communicopia and Technology Conference in San Francisco on 8 September and the Piper Sandler Growth Frontiers Conference in Nashville on 10 September. We hope to see you at these events. We're also happy to announce that Nutanix will be holding an Investor Day on 7 April 2026, in Chicago in conjunction with our annual .NEXT customer event. So please mark your calendars if you're interested in attending. Finally, our first quarter fiscal 2026 quiet period will begin on Monday, 20 October. And with that, I'll turn the call over to Rajiv. Rajiv?

Hope to see you at these events.

We're also happy to announce that <unk> will be holding an investor day on April 7th 2026 in Chicago in conjunction with our annual Dot next customer event. So please mark your calendars, if youre interested in attending.

Finally, our first quarter fiscal 2026 quiet period will begin on Monday October 20th.

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

Thank you Rick and good afternoon, everyone.

Rajiv Ramaswami: Thank you, Rich, and good afternoon, everyone. Our fourth quarter was a solid finish to our 2025 fiscal year. In the fourth quarter, we are happy to have exceeded all of our guided metrics. We delivered quarterly revenue of $653 million, up 19% year over year, and saw another quarter of strong free cash flow generation. Our full year fiscal 2025 results demonstrated good progress on a number of fronts. Financially, we delivered solid top-line performance, including revenue of $2.54 billion, up 18% year over year, and ARR of $2.22 billion, which increased 17% year over year. We also saw strong new logo performance across all of our customer tiers, including the Global 2000, adding over 2,700 new customers, our highest in four years. And finally, we generated free cash flow of $750 million, an increase of 26% year over year, yielding a free cash flow margin of 30%.

Our fourth quarter was a solid finish to our 2020 fiscal year.

In the fourth quarter, we are happy to have exceeded all of our guided metrics.

We delivered quarterly revenue of $653 million.

Up 19% year over year.

And so another quarter of strong free cash flow generation.

Our full year fiscal 2025 vessels demand set a good progress on a number of fronts.

Financially, we delivered solid top line performance.

Including revenue of 2.54 billion.

Up 18% year over year.

And <unk> of $2 2 billion.

With increased 17% year over year.

We also saw strong new logo performance across all of our customer tier <unk>.

Including the global 2000.

Adding over 2700 new customers.

Our highest in four years.

And finally, we generated free cash flow of $750 million.

An increase of 26% year over year, yielding a free cash flow margin of 30%.

This drew a rule of 40 score of 48 for the fiscal year.

Rajiv Ramaswami: This drove a Rule of 40 score of 48 for the fiscal year, our second year in a row above 40. In FY25, we also saw tangible progress on the product and partnership fronts. We enhanced the GenAI capabilities of our platform with the release of GPT-in-a-Box 2.0 and delivered an enhanced version of Nutanix Enterprise AI that includes a deeper integration with NVIDIA AI Enterprise. We also extended the hybrid multi-cloud capabilities of our platform by adding support for Google Cloud, which is now in public preview. Finally, we made progress on a strategic decision to enable customers to utilize their existing external storage hardware. The Nutanix Cloud Platform now supports both HCI and external storage. We delivered our first version of this new capability, supporting Dell PowerFlex. We also announced a new partnership with Pure Storage to support their flash array.

Our second year in a row above 40.

In FY 'twenty five.

We also saw tangible progress on the product and partnership.

We enhanced the <unk> capabilities of our platform with the release of DPT in bulk to dugald.

And then alert and enhanced Watson of mechanics enterprise AI that include a deeper integration with Nvidia AI enterprise.

We also extended the hybrid multi cloud capabilities of our platform by adding support for Google Cloud, which is now in public purview.

Finally, we made progress on our strategic position to enable customers to utilize that existing external storage hardware.

The <unk> platform now supports both ACR and external storage.

And we deliver our first version of this new capability supporting del powerfully.

We also announced a new partnership with pure storage.

To support that flash array.

This offering recently entered early access.

Rajiv Ramaswami: This offering recently entered early access and remains on track to be generally available by the end of this calendar year. We achieved important industry recognition in the last year, including being named a leader in the 2024 Gartner Magic Quadrant for distributed hybrid infrastructure. Last month, we were recognized as a challenger in the 2025 Gartner Magic Quadrant for container management and as a leader in the Forrester Wave multi-cloud container platforms Q3 2025. Our most significant wins in the quarter demonstrated the appeal of the Nutanix Cloud Platform to organizations that are looking for a trusted long-term partner in the wake of industry M&A and to those looking for a platform to seamlessly run both traditional and modern applications. We also saw some initial successes with our cloud platform that supports Dell PowerFlex.

It remains on track to be generally available by the end of this calendar year.

We achieved important industry recognition in the last year include.

Including being named a leader in the 'twenty 'twenty four Gartner magic quadrant for distributed hybrid infrastructure.

Last month, we were recognized as a challenger in the 2025, Gartner Magic quadrant for container management.

And as a leader in the Forrester wave multi cloud container platforms Q3 2025.

Our most significant wins in the quarter demonstrated the appeal of the <unk> platform to organizations that are looking for a trusted long term partner in the wake of industry M&A.

And to those looking for a platform to seamlessly run both traditional and modern applications.

We also saw some initial successes with our cloud platform that support Dell classics.

One is a significant win in Q4 was financed informatic, our FY <unk>.

Rajiv Ramaswami: One of our significant wins in Q4 was with Finanz Informatik, or FI, the digitalization partner and central IT service provider for Germany's Savings Banks Finance Group, serving around 50 million customers in Germany. This is a great example of a win that was motivated by a customer's desire for a trusted long-term partner. As part of our strategic collaboration, FI plans to migrate their Windows and Linux workloads to the Nutanix platform over the next two years. In our joint press release, FI noted that their decision-making criteria for choosing Nutanix included the security, availability, and cost-effectiveness of the solution, as well as a partnership based on trust, intensive exchange, and active participation on their part. We are grateful for FI's trust in us and look forward to a long and productive partnership.

The digitalization partner and Central service provider for Germany's savings Bank financial group.

<unk> around 50 million customers in Germany.

This is a great example of a win that was motivated by our customers' desire for a trusted long term partner.

As part of our strategic collaboration.

<unk> plans to migrate their windows and Linux workloads presented tax platform over the next two years.

In our joint press release.

I noted that their decision, making criteria for <unk>, Inc.

Included the security availability and cost effectiveness of the solution.

As well as a partnership based on trust intensive exchange and active participation on desktop.

We are grateful for FY trust in us and look forward to a long and productive partnership.

Another one of our most significant deals in the quarter, while the full stack expansion with a global provider of financial services.

Rajiv Ramaswami: Another one of our most significant deals in the quarter was a full-stack expansion with a global provider of financial services. This customer was looking to make their private cloud more secure and cost-effective with increased automation, standardization, and simplification, and wanted a platform to run their modern applications. They significantly increased their commitment to Nutanix, both expanding their footprint and adopting additional elements of our cloud platform, including Nutanix Cloud Manager, Nutanix Kubernetes Platform to run their modern applications, Nutanix Unified Storage for their unstructured data management needs, and our Data Lens security offering. This quarter, we also saw our first wins for our cloud platform supporting Dell PowerFlex. This included deals with two North American-based Global 2000 companies, one a financial services provider and one a medical equipment provider.

This customer was looking to make their private cloud more secure and cost effective.

With increased automation standardization and simplification.

And what are the platform to run their modern applications.

This significantly increased their commitment to inorganic.

Expanding their footprint and adopting additional elements of our cloud platform.

<unk> <unk> cloud manager.

No panic kubernetes platform to run their modern applications.

<unk> unified storage for their unstructured data management needs.

And our data lands security offering.

This quarter. We also saw our first wins for our cloud platform supporting that is powered flex.

This included deals with two North American base Global 2000 companies.

A financial services provider and want a medical equipment provider.

In both cases, the customers who are looking to modernize their private cloud infrastructure, while managing potential risks associated with industry M&A, but wanted to preserve their existing investments and external storage.

Rajiv Ramaswami: In both cases, the customers were looking to modernize their private cloud infrastructure while managing potential risks associated with industry M&A but wanted to preserve their existing investments in external storage. They both adopted the Nutanix Cloud Platform with support for Dell PowerFlex, enabling them to achieve these objectives. While it's still early days with this new offering, we are encouraged by these initial wins and the broader level of customer interest. In closing, I am pleased with our solid Q4 and fiscal 2025 results and the progress we continue to make on multiple fronts, including our financial model, our partnerships, and our ongoing innovation across our cloud platform, including modern applications and AI. We also remain focused on capitalizing on a multi-year opportunity to gain share in the face of recent industry disruption and are encouraged by our early successes, including some of the wins I just highlighted.

They both adopted the new tax code platform with support for that bottleneck.

Enabling them to achieve these objectives.

While it's still early days with this new offering.

We're encouraged by these initial wins and the broader level of customer interest.

In closing I am pleased with our solid Q4 and fiscal 2025 vessels.

And the progress we continue to make on multiple fronts.

Including our financial model our partnership.

And our ongoing innovation across our platform, including modern applications and AI.

We also remain focused on capitalizing on a multi year opportunity to gain share in the face of recent industry disruption.

And are encouraged by our early success.

Including some of the wins I just highlighted.

Finally, I would like to express my sincere gratitude to our investors customers and partners for their fast enough.

Rajiv Ramaswami: Finally, I would like to express my sincere gratitude to our investors, customers, and partners for their trust in us and to our employees for their hard work that led to these results. And with that, I'll hand it over to Rukmini Sivaraman. Rukmini?

And to our employees for their hard work that led to these hotels.

And with that I'll hand, it over to <unk>.

For many.

Thank you Rajiv and thank you everyone for joining us today.

Operator: Thank you, Rajiv, and thank you, everyone, for joining us today. I will first discuss our Q4 2025 results, followed by full fiscal year 2025 results, Q1 2026 guidance, and finally our initial fiscal year 2026 guidance. Results in Q4 2025 were above the high end of our guidance range across all guided metrics. In Q4 2025, we reported quarterly revenue of $653 million, higher than the guided range of $635 to $645 million, representing a year-over-year growth rate of 19%. ARR at the end of Q4 2025 was $2.223 billion, representing year-over-year growth of 17%. NRR, or net dollar-based retention rate, at the end of Q4 2025 was 108%. In Q4 2025, average contract duration was 3.2 years, slightly higher than our expectations, and up slightly quarter over quarter due to a few transactions of longer than average duration. Non-GAAP gross margin in Q4 2025 was 88.3%.

Rukmini Sivaraman: Thank you, Rajiv, and thank you, everyone, for joining us today. I will first discuss our Q4 2025 results, followed by full fiscal year 2025 results, Q1 2026 guidance, and finally our initial fiscal year 2026 guidance. Results in Q4 2025 were above the high end of our guidance range across all guided metrics. In Q4 2025, we reported quarterly revenue of $653 million, higher than the guided range of $635 to $645 million, representing a year-over-year growth rate of 19%. ARR at the end of Q4 2025 was $2.223 billion, representing year-over-year growth of 17%. NRR, or net dollar-based retention rate, at the end of Q4 2025 was 108%. In Q4 2025, average contract duration was 3.2 years, slightly higher than our expectations, and up slightly quarter over quarter due to a few transactions of longer than average duration. Non-GAAP gross margin in Q4 2025 was 88.3%.

I will first discuss our Q4 2005 results followed by full fiscal year 2005 results Q1, 'twenty six guidance and finally, our initial fiscal year 2006 guidance.

Results in Q4 25 were above the high end of our guidance range across all guided metrics.

In Q4, we reported quarterly revenue of $653 million higher than the guided range of $635 million to $645 million, representing a year over year growth rate of 19%.

<unk> at the end of Q4 was $2.2 billion to $3 billion, representing year over year growth of 17%.

And our net dollar based retention rate at the end of Q4 was 108%.

In Q4 average contract duration was three two years slightly higher than our expectations and up slightly quarter over quarter due to a few transactions have longer than average duration.

non-GAAP gross margin in Q4 was 88, 3%.

non-GAAP operating margin in Q4 was 18% higher than our guided range of 15, five to 16, 5% due to higher gross margins and lower operating expenses than expected.

Operator: Non-GAAP operating margin in Q4 was 18%, higher than our guided range of 15.5 to 16.5% due to higher gross margins and lower operating expenses than expected. Non-GAAP net income in Q4 was $109 million, or fully diluted EPS of $0.37 per share, based on fully diluted weighted average shares outstanding of approximately 297 million shares. GAAP net income and fully diluted GAAP EPS in Q4 were $39 million and $0.13 per share, respectively. Free cash flow in Q4 was $208 million, representing a free cash flow margin of 32%. Moving to the balance sheet, we ended Q4 with cash, cash equivalents, and short-term investments of $1.993 billion, up from $1.882 billion at the end of Q3.

Rukmini Sivaraman: Non-GAAP operating margin in Q4 was 18%, higher than our guided range of 15.5 to 16.5% due to higher gross margins and lower operating expenses than expected. Non-GAAP net income in Q4 was $109 million, or fully diluted EPS of $0.37 per share, based on fully diluted weighted average shares outstanding of approximately 297 million shares. GAAP net income and fully diluted GAAP EPS in Q4 were $39 million and $0.13 per share, respectively. Free cash flow in Q4 was $208 million, representing a free cash flow margin of 32%. Moving to the balance sheet, we ended Q4 with cash, cash equivalents, and short-term investments of $1.993 billion, up from $1.882 billion at the end of Q3.

non-GAAP net income in Q4 was $109 million.

Our fully diluted EPS of <unk> 37 per share.

Based on fully diluted weighted average shares outstanding of approximately 297 million shares.

GAAP net income and fully diluted GAAP EPS in Q4 were $39 million.13 per share respectively.

Free cash flow in Q4 was $208 million.

Representing a free cash flow margin of 32%.

Moving to the balance sheet, we ended Q4 with cash cash equivalents and short term investments of one point to 99 3 billion.

Up from 188 2 billion at the end of Q3.

Moving to capital allocation in Q4, we repurchased $50 million worth of common stock under our existing share repurchase authorization and used about $44 million of cash to retire shares related to our employee's tax liability for that quarterly RFU vesting.

Operator: Moving to capital allocation, in Q4, we repurchased $50 million worth of common stock under our existing share repurchase authorization and used about $44 million of cash to retire shares related to our employees' tax liability for their quarterly RSU vesting. Both of these helped to manage share dilution. Moving to a summary of our results for the full fiscal year 2025. Fiscal year 2025 revenue was $2.538 billion, higher than the most recent guidance of $2.52 to $2.53 billion, and representing a year-over-year growth rate of 18%. Fiscal year 2025 ending ARR, as mentioned earlier, was $2.223 billion, representing year-over-year growth of 17%. We continue to see strength in landing new customers, and we are grateful for the over 2,700 customers who joined our platform this year.

Rukmini Sivaraman: Moving to capital allocation, in Q4, we repurchased $50 million worth of common stock under our existing share repurchase authorization and used about $44 million of cash to retire shares related to our employees' tax liability for their quarterly RSU vesting. Both of these helped to manage share dilution. Moving to a summary of our results for the full fiscal year 2025. Fiscal year 2025 revenue was $2.538 billion, higher than the most recent guidance of $2.52 to $2.53 billion, and representing a year-over-year growth rate of 18%. Fiscal year 2025 ending ARR, as mentioned earlier, was $2.223 billion, representing year-over-year growth of 17%. We continue to see strength in landing new customers, and we are grateful for the over 2,700 customers who joined our platform this year.

Both of these helped to manage share dilution.

Moving to so many of our results for the full fiscal year of 2025.

Fiscal year 'twenty five revenue was 2.538 billion higher than the most recent guidance of 252 to 253 billion and representing a year over year growth rate of 18%.

Fiscal year 'twenty five ending AAR as mentioned earlier was 222 3 billion.

Representing year over year growth of 17%.

We continue to see strength in landing new customers and we are grateful for the over 2700 customers who joined our platform this year.

This included organizations of various sizes and across several industry verticals and included over 50 Global 2000 accounts, a meaningful increase year over year.

Operator: This included organizations of various sizes and across several industry verticals and included over 50 Global 2000 accounts, a meaningful increase year over year. In fiscal year 2025, we saw a nice increase in the number of million-dollar-plus land and expand ACV transactions, more than a 60% increase in fiscal year 2025 relative to fiscal year 2024, while still remaining a minority of our overall land and expand ACV. For the full year, average contract duration was 3.1 years, higher than last year's average contract duration of 3 years and higher than our expectations. Non-GAAP gross margin in fiscal year 2025 was 88.1%, a year-over-year increase of 140 basis points, and which is among industry-leading software gross margins. As mentioned in prior calls, gross margins could move around slightly depending on the mix of professional services revenue in a given period.

Rukmini Sivaraman: This included organizations of various sizes and across several industry verticals and included over 50 Global 2000 accounts, a meaningful increase year over year. In fiscal year 2025, we saw a nice increase in the number of million-dollar-plus land and expand ACV transactions, more than a 60% increase in fiscal year 2025 relative to fiscal year 2024, while still remaining a minority of our overall land and expand ACV. For the full year, average contract duration was 3.1 years, higher than last year's average contract duration of 3 years and higher than our expectations. Non-GAAP gross margin in fiscal year 2025 was 88.1%, a year-over-year increase of 140 basis points, and which is among industry-leading software gross margins. As mentioned in prior calls, gross margins could move around slightly depending on the mix of professional services revenue in a given period.

In fiscal year 'twenty five we saw a nice increase in the number of million dollar plus land and expand ACB transactions.

More than a 60% increase in fiscal year 'twenty five relative to fiscal year 'twenty four while still remaining a minority of our overall land and expand ACB.

Okay.

For the full year average contract duration was three one years higher than last year's average contract duration of three years and higher than our expectations.

non-GAAP gross margin in fiscal year 'twenty five was 88, 1% a year over year increase of 140 basis points, and which is among industry leading software gross margins.

I've mentioned in prior calls gross margins could move around slightly depending on the mix of professional services revenue in a given period.

non-GAAP operating margin in fiscal year 'twenty, five was 21, 1% higher than our most recent guidance of approximately 25% and a year over year increase of approximately five percentage points.

Operator: Non-GAAP operating margin in fiscal year 25 was 21.1%, higher than our most recent guidance of approximately 20.5% and a year-over-year increase of approximately 5 percentage points. Non-GAAP net income in fiscal year 25 was $476 million, or fully diluted EPS of $0.62 per share, based on fully diluted weighted average shares outstanding of approximately 294 million shares. GAAP net income and fully diluted GAAP EPS in fiscal year 25 were $188 million and $0.65 per share, respectively, representing our first full year of positive GAAP net income. Free cash flow in fiscal year 25 was $750 million, representing a free cash flow margin of 30%. In fiscal year 25, our Rule of 40 score, defined as revenue growth rate plus free cash flow margin, was a healthy 48%, reflecting our continual focus on sustainable, profitable growth, driving durable top-line growth with improving bottom-line margins.

Rukmini Sivaraman: Non-GAAP operating margin in fiscal year 25 was 21.1%, higher than our most recent guidance of approximately 20.5% and a year-over-year increase of approximately 5 percentage points. Non-GAAP net income in fiscal year 25 was $476 million, or fully diluted EPS of $0.62 per share, based on fully diluted weighted average shares outstanding of approximately 294 million shares. GAAP net income and fully diluted GAAP EPS in fiscal year 25 were $188 million and $0.65 per share, respectively, representing our first full year of positive GAAP net income. Free cash flow in fiscal year 25 was $750 million, representing a free cash flow margin of 30%. In fiscal year 25, our Rule of 40 score, defined as revenue growth rate plus free cash flow margin, was a healthy 48%, reflecting our continual focus on sustainable, profitable growth, driving durable top-line growth with improving bottom-line margins.

non-GAAP net income in fiscal year, 'twenty, five with $476 million or fully diluted EPS of 162 cents per share based on fully diluted weighted average shares outstanding of approximately 294 million shares.

GAAP net income and fully diluted GAAP EPS in fiscal year, 'twenty 511 hundred $88 million.65 per share respectively, representing our first full year of positive GAAP net income.

Free cash flow in fiscal year, 'twenty, five was $750 million, representing a free cash flow margin of 30%.

In fiscal year 'twenty five odd rule of 40 score defined as revenue growth rate plus free cash flow margin was a healthy 48%.

<unk>, our continued focus on sustainable profitable growth.

Driving durable top line growth with improving bottom line margins.

In fiscal year 'twenty, five we strengthened our balance sheet with the net proceeds from the issuance of $862 5 million in convertible debt and enhanced our financial flexibility with our inaugural $500 million revolving credit facility.

Operator: In fiscal year 25, we strengthened our balance sheet with the net proceeds from the issuance of $862.5 million in convertible debt and enhanced our financial flexibility with our inaugural $500 million revolving credit facility. Moving to guidance, our Q1 26 guidance is as follows: revenue of $670 to $680 million, non-GAAP operating margin of 19.5 to 20.5%, fully diluted weighted average shares outstanding of approximately 296 million shares. Moving to the full year, our initial fiscal year 26 guidance is as follows: revenue of $2.9 to $2.94 billion, representing a year-over-year growth rate of 15% at the midpoint of the range; non-GAAP operating margin of 21 to 22%, an increase from fiscal year 25 at the midpoint; free cash flow of $790 to $830 million, representing a free cash flow margin of 27.7% at the midpoint.

Rukmini Sivaraman: In fiscal year 25, we strengthened our balance sheet with the net proceeds from the issuance of $862.5 million in convertible debt and enhanced our financial flexibility with our inaugural $500 million revolving credit facility. Moving to guidance, our Q1 26 guidance is as follows: revenue of $670 to $680 million, non-GAAP operating margin of 19.5 to 20.5%, fully diluted weighted average shares outstanding of approximately 296 million shares. Moving to the full year, our initial fiscal year 26 guidance is as follows: revenue of $2.9 to $2.94 billion, representing a year-over-year growth rate of 15% at the midpoint of the range; non-GAAP operating margin of 21 to 22%, an increase from fiscal year 25 at the midpoint; free cash flow of $790 to $830 million, representing a free cash flow margin of 27.7% at the midpoint.

Moving to guidance, our Q1 'twenty six guidance is as follows.

Revenue of $670 million to $680 million.

non-GAAP operating margin of 19, 5% to 25%.

Fully diluted weighted average shares outstanding of approximately 296 million shares.

Moving to the full year, our initial fiscal year 2006 guidance is as follows.

Revenue of 2.9 to 294 billion.

Representing a year over year growth rate of 15% at the midpoint of the range.

non-GAAP operating margin of 21% to 22% an increase from fiscal year 'twenty five at the midpoint.

Free cash flow of 792 $830 million, representing a free cash flow margin of 27, 7% at the midpoint.

I will now provide several points of commentary regarding our fiscal year 'twenty six guidance.

Operator: I will now provide several points of commentary regarding our fiscal year 2026 guidance. One, we expect to continue landing new customers onto our platform at a rate of approximately mid- to high-3 digits of new logos a quarter in fiscal year 2026. We also expect some continued uncertainty in the overall macro environment, including in areas such as US federal government spending and with regard to currency fluctuations. Two, we expect the renewals ACV cohort, or the available-to-renew pool, in fiscal year 2026 to grow year-over-year, but at a slower pace than in fiscal year 2025 as the overall renewals base gets larger over time. Three, the guidance assumes a slight year-over-year decline in aggregate average contract duration because we saw some larger contracts with longer-than-average duration in fiscal year 2025 that may not recur in fiscal year 2026.

Rukmini Sivaraman: I will now provide several points of commentary regarding our fiscal year 2026 guidance. One, we expect to continue landing new customers onto our platform at a rate of approximately mid- to high-3 digits of new logos a quarter in fiscal year 2026. We also expect some continued uncertainty in the overall macro environment, including in areas such as US federal government spending and with regard to currency fluctuations. Two, we expect the renewals ACV cohort, or the available-to-renew pool, in fiscal year 2026 to grow year-over-year, but at a slower pace than in fiscal year 2025 as the overall renewals base gets larger over time. Three, the guidance assumes a slight year-over-year decline in aggregate average contract duration because we saw some larger contracts with longer-than-average duration in fiscal year 2025 that may not recur in fiscal year 2026.

One we expect to continue landing new customers onto our platform at a rate of approximately mid to high three digits of new logos, a quarter and fiscal year 2006.

We also expect some continued uncertainty in the overall macro environment, including in areas such as U S Federal government spending and with regard to currency fluctuations.

We.

<unk>, the renewals ACB cohort or the available to the new pool in fiscal year 'twenty six to grow year over year, but at a slower pace that in fiscal year 'twenty five as the overall renewals base gets larger over time.

Three the guidance assumes a slight year over year decline in aggregate average contract duration, because we saw some larger contracts with longer than average duration in fiscal year 'twenty five that may not recur in fiscal year 'twenty six.

Four as we have discussed previously the vast majority of our customers have licenses provision upfront and also pay us multiple years of cash upfront upon purchase.

Operator: 4, as we have discussed previously, the vast majority of our customers have licenses provisioned upfront and also pay us multiple years of cash upfront upon purchase. In certain cases, typically larger transactions, we may provision licenses over a period of time rather than all upfront and/or collect cash over time rather than all upfront. Such situations may impact timing of revenue and cash collection and are factored into the guidance we provided. 5, as Rajiv mentioned, in Q4, we saw our first customer transactions for our cloud platform supporting Dell PowerFlex. We expect this solution to have a small but growing contribution to fiscal year 2026 revenue. We also expect the land and expand ACV contributions from our partners such as Cisco and Dell to grow year-over-year into fiscal year 2026.

Rukmini Sivaraman: 4, as we have discussed previously, the vast majority of our customers have licenses provisioned upfront and also pay us multiple years of cash upfront upon purchase. In certain cases, typically larger transactions, we may provision licenses over a period of time rather than all upfront and/or collect cash over time rather than all upfront. Such situations may impact timing of revenue and cash collection and are factored into the guidance we provided. 5, as Rajiv mentioned, in Q4, we saw our first customer transactions for our cloud platform supporting Dell PowerFlex. We expect this solution to have a small but growing contribution to fiscal year 2026 revenue. We also expect the land and expand ACV contributions from our partners such as Cisco and Dell to grow year-over-year into fiscal year 2026.

In certain cases, typically larger transactions, we made provision licenses over a period of time rather than all upfront.

And or collect cash over time, rather than all upfront.

Situations may impact timing of revenue and cash collection and are factored into the guidance we provided.

Five.

Rajiv mentioned in Q4, we saw our first customer transactions for our cloud platform supporting Delek power flex.

We expect this solution to have a small but growing contribution to fiscal year 'twenty six revenue.

We also expect the land and expand ACD contribution from our partners, such as Cisco and Dell to grow year over year into fiscal year 'twenty six.

Six one.

With regard to operating expenses. In addition to the annualized run rate of employees. We hired during the course of fiscal year 'twenty five that we have discussed in prior calls we have some delayed hiring from fiscal year, 'twenty, five, which we expect to be approximately $25 million in expenses in fiscal year 2006.

Operator: Six, with regard to operating expenses, in addition to the annualized run rate of employees we hired during the course of fiscal year 2025 that we have discussed in prior calls, we have some delayed hiring from fiscal year 2025, which we expect to be approximately $25 million in expenses in fiscal year 2026. Additionally, in prior earnings calls, we have also referenced some non-recurring partner payments, which are accounted for as contra expense in the R&D line. These payments are expected to start to taper off in fiscal year 2026, and we expect this to cause an approximately $10 to $15 million headwind to operating expenses in fiscal year 2026. A couple of other notes as we start a new fiscal year.

Rukmini Sivaraman: Six, with regard to operating expenses, in addition to the annualized run rate of employees we hired during the course of fiscal year 2025 that we have discussed in prior calls, we have some delayed hiring from fiscal year 2025, which we expect to be approximately $25 million in expenses in fiscal year 2026. Additionally, in prior earnings calls, we have also referenced some non-recurring partner payments, which are accounted for as contra expense in the R&D line. These payments are expected to start to taper off in fiscal year 2026, and we expect this to cause an approximately $10 to $15 million headwind to operating expenses in fiscal year 2026. A couple of other notes as we start a new fiscal year.

Additionally in prior earnings calls we have also referenced some nonrecurring partner payments, which are accounted for as contra expense in the R&D line.

These payments are expected to start to taper off in fiscal year 'twenty six and we expect this to cause an approximately $10 million to $15 million headwind to operating expenses in fiscal year 2006.

A couple of other notes as we start our new fiscal year.

Starting next quarter that is Q1 'twenty six we are proactively updating our methodology for calculating IRR on a prospective basis to align it more closely with the timing of when licenses are made available to customers.

Operator: Starting next quarter, that is Q1 2026, we are proactively updating our methodology for calculating ARR on a prospective basis to align it more closely with the timing of when licenses are made available to customers. NRR will also align with this updated methodology going forward. While this change will take effect next quarter, we have provided an illustrative historical table in the appendix of our earnings presentation that shows what ARR and NRR would have been under the new methodology for the relevant historical periods for comparison purposes. The table shows that ARR in any given period would have deferred by no more than 2% under the new methodology. We believe it was important to make this change at the start of a new fiscal year, and as it is possible, we see more large customers looking for deferred license provisioning over time.

Rukmini Sivaraman: Starting next quarter, that is Q1 2026, we are proactively updating our methodology for calculating ARR on a prospective basis to align it more closely with the timing of when licenses are made available to customers. NRR will also align with this updated methodology going forward. While this change will take effect next quarter, we have provided an illustrative historical table in the appendix of our earnings presentation that shows what ARR and NRR would have been under the new methodology for the relevant historical periods for comparison purposes. The table shows that ARR in any given period would have deferred by no more than 2% under the new methodology. We believe it was important to make this change at the start of a new fiscal year, and as it is possible, we see more large customers looking for deferred license provisioning over time.

And our will also align with this updated methodology going forward.

While this change will take effect next quarter, we have provided an illustrative historical table in the appendix of our earnings presentation that shows what <unk> and <unk> would have been under the new methodology for the relevant historical periods for comparison purposes.

The table shows that <unk> in any given period would have deferred by no more than 2% under the new methodology.

We believe it was important to make this change at the start of a new fiscal year and as it is possible, we see more large customers looking for deferred license provisioning overtime.

And finally from a capital allocation perspective, we announced today that our board of directors has approved a $350 million increase to our existing share repurchase authorization.

Operator: And finally, from a capital allocation perspective, we announced today that our board of directors has approved a $350 million increase to our existing share repurchase authorization, which is in addition to the $111 million remaining under the prior authorization as of 31 July 2025. There is no expiration date for these authorizations, and we intend to continue repurchasing shares over time to manage share count dilution. In closing, we are pleased with our performance in fiscal year 2025, exceeding the high end of the guidance across all guided metrics. We look forward to continued progress in fiscal year 2026. With that, operator, please open the line for questions. Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. You'll hear the automated message advising your hand is raised.

Rukmini Sivaraman: And finally, from a capital allocation perspective, we announced today that our board of directors has approved a $350 million increase to our existing share repurchase authorization, which is in addition to the $111 million remaining under the prior authorization as of 31 July 2025. There is no expiration date for these authorizations, and we intend to continue repurchasing shares over time to manage share count dilution. In closing, we are pleased with our performance in fiscal year 2025, exceeding the high end of the guidance across all guided metrics. We look forward to continued progress in fiscal year 2026. With that, operator, please open the line for questions.

This is in addition to the $111 million remaining under the prior authorization as of July 31 2025.

There is no exploration date for these authorizations and we intend to continue repurchasing shares over time to manage share count dilution.

In closing we are pleased with our performance in fiscal year 'twenty five exceeding the high end of the guidance across all guided metrics. We look forward to continued progress in fiscal year 2006.

With that operator, please open the line for questions.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone you'll hit that automated message. If I was in your hand is raised we also ask that due to time restraints. Please limit yourself to one question and one follow up as well as wait for your name and company to be announced before proceeding with your question one moment, while we compile the Q&A roster.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. You'll hear the automated message advising your hand is raised.

Operator: We also ask that due to time restraints, please limit yourself to one question and one follow-up, as well as wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. The first question today is coming from the line of Jason Adler of William Blair. Your line is open.

And the first question today is coming from the line of Jason Adler of William Blair. Your line is open.

Yeah. Thank you.

Can you talk about the.

Richard Valera: Yeah. Thank you. Can you talk about the Finanz Informatik and just the size of the deal? And I don't know, any other kind of opportunities like that out there? Is this kind of a one-off, or do you feel like there's others that you have in the hopper that you'll be able to talk about over the next year or so?

Jason Adler: Yeah. Thank you. Can you talk about the Finanz Informatik and just the size of the deal? And I don't know, any other kind of opportunities like that out there? Is this kind of a one-off, or do you feel like there's others that you have in the hopper that you'll be able to talk about over the next year or so?

If I win and just the size of the deal.

And I don't know of any other kind of.

Opportunities like that out there or is this kind of a one off or do you feel like there's others.

That you have in the Hopper that you can tell youll be able to talk about over the next year or so.

Yes, Hi, Jason.

Yes.

Rajiv Ramaswami: Yeah. Hi, Jason. Rajiv here. So FI, if you look at the dynamics in Germany, the German population is about 83 million, and FI has about 50 million customers, right, who bank with the German savings banks. And FI provides the IT infrastructure for all those banks in a central manner. And so for us, this was quite a significant win, a very large-sized win as they're looking to migrate from their existing infrastructure onto Nutanix. And it's a very long-term partnership. It's an example of a significant deal. We haven't quantified the size of the deal, but you can imagine that it's a significant multi-year deal. Now, at any point in time, I mean, Rukmini talked about the fact that over the last year, we added 15 new Global 2000 customers. So those are the larger end of the customer base.

So if.

If you look at the.

The dynamics in Germany.

The German population is about $80 million in about 15, FY has about 16 million customers, who bank with the German savings banks and a five provides the it infrastructure for all those banks and the central manner.

And so for US this was a quite a significant.

When.

Fairly large than that theyre looking to migrate.

From their existing infrastructure onto mechanics, and it's a very long term partnerships.

It's an example of a significant deal we haven't quantified the size of the deal, but you can imagine that I'd say its a significant multi year deal.

Now at any point in time, I mean look when you talked about the fact that.

Over the last year, we added 15, new global 2000 customers. So those are the larger end of the customer base and at any point in time, we have visa visa the pipeline, but larger deals tend to be a bit more unpredictable in terms of when and how they're going to turn out.

Rajiv Ramaswami: And at any point in time, we have deals like these in the pipeline. But larger deals tend to be a bit more unpredictable in terms of when and how they're going to turn out. So certainly, I mean, we have interest from all ends of the spectrum, and there are other customers with larger deals. But again, it's hard to predict how and when these will come out. But FI was a very good example of what we would consider to be a very marquee win for us in Germany.

So certainly I mean, we have interest from all into the spectrum there are yes.

The customers with right.

Neither these but again, it's hard to predict how and when this will come out but <unk> was a very good example of what we would consider to be a really marquee win for us in Germany.

Okay, Great and then one quick one for community.

Richard Valera: Okay. Great. And then one quick one for Rukmini. NRR was down a couple of points sequentially. And just maybe you can give us some explanation for that.

Jason Adler: Okay. Great. And then one quick one for Rukmini. NRR was down a couple of points sequentially. And just maybe you can give us some explanation for that.

MLR was down a couple of points sequentially and just maybe you can give.

Give us some some explanation for that.

Sure Hi, Jason.

So on the NR question, we remain focused on driving an expansion of business with incremental investments in customer success to help drive retention and expansion. In addition to the continued focus that we've had on our expansion vectors, namely portfolio attach and workload expansion.

Rukmini Sivaraman: Sure. Hi, Jason. So on the NRR question, we remain focused on driving our expansion business with incremental investments and customer success to help drive retention and expansion, in addition to the continued focus that we've had on our expansion vectors, namely portfolio attach and workload expansion. One other point to make on this is that our NRR and net new ARR, actually, I know your question was on NRR, Jason, but both NRR and net new ARR in any given quarter can be affected by the net impact of ARR contributions from deals that are booked in prior quarters and are credited in the current quarter and ARR that's booked in the current quarter but deferred to future periods. And so there's a net effect there. And in Q4, this dynamic was a net headwind to both our NRR and to net new ARR.

One other point to make on this is that R&R add net new at all actually I know your question was on NRI, Jason, but both NR or add net new at all in any given quarter.

Can be affected by the net impact of Anr contributions from deals that are booked in prior quarters and our.

But it did in the current quarter and that are that's booked in the current quarter, but deferred to future periods.

And so there's a net effect of that and in Q4. This dynamic was a net headwind.

With that and not ours and to net new Anr.

And so we expect that such variations could continue going forward.

Rukmini Sivaraman: And so we expect that such variations could continue going forward. Two other points I'll make. One is that we've seen the average deal size of our new logos increasing over the last few years, which can also potentially be a headwind for the growth rate of expansion within those customers because their initial deal size has been larger than it has been historically for us. And then the last point is around more of a numerical kind of law of large numbers point, which is that as ARR has grown every quarter for us, the ACV dollars required to offset a point of churn increases, even at the same churn percentage, which could make it increasingly challenging to achieve the same NRR over time. So a few different dynamics there. And because of those, NRR could still move around somewhat from quarter to quarter, Jason.

Yeah.

Two other points I'll make one is that we've seen the average deal size of our new logos increasing over the last few years, which can also potentially be a headwind for the growth rate of expansion within those customers because that initial deal size has been larger than it has been historically for us.

And then the last point is around a more of a numerical kind of law of large numbers point, which is that as they are has grown every quarter for us the ACD dollars required to offset a point of churn increases even at the same churn percentage, which could make it increasingly challenging to achieve the same eight IRR overtime.

So if there were different dynamics, there and because of those and I could still move around somewhat from quarter to quarter Jason.

Thank you good luck. Thank you.

Richard Valera: Thank you. Good luck.

Jason Adler: Thank you. Good luck.

Thank you.

Rukmini Sivaraman: Thank you.

And our next question will be coming from the line of meta Marshall of Morgan Stanley. Your line is open.

Operator: Thank you. And our next question will be coming from the line of Meta Marshall of Morgan Stanley. Your line is open.

Great. Thanks.

And congrats on the quarter I guess, just as you have.

Meta Marshall: Great. Thanks. And congrats on the quarter. I guess just as you kind of have a start seeing some of these Dell PowerFlex deals, if you could just give a sense of how we should think of those customers kind of in relation to kind of the more traditional Nutanix customers. And just as we could kind of get any visibility into what the customers looking at Pure Storage's early access are like versus maybe the Dell PowerFlex customers. And maybe just as a second question, understanding you were kind of talking about more conservatism on the public sector within the guide, but just any kind of more updated commentary on what you were seeing with the federal government. Thanks.

Have a start seeing some of these Dell power flex deals if you could just give a sense of how.

How we should think of those customers kind of in relation to kind of the the more traditional new tax customers and just as.

We could kind of get any visibility into what the customer is looking at pure storage is early access are like versus maybe the Dell power flex customers and <unk>.

Maybe just as a second question you know understanding you were kind of talking about more conservatism on the public sector with them a guide, but just any kind of more updated commentary on what you're seeing with the federal government. Thanks.

Yes, maybe I'll take the I'll give you some color on this matter.

Rajiv Ramaswami: Yeah. Maybe I'll give you some color on this, Meta. Dell PowerFlex is what I would consider to be a solution for the top end of the pyramid. Their customers tend to be relatively small customer base, but at the very top of the pyramid in terms of big companies. And you saw that the first two wins that we had were both Global 2000 customers, very large customers. And so the customer base tends to be concentrated. These tend to be large customers, and they have significant deployments in their estate. And so for us, it's an opportunity for us to land in these accounts and then expand over time. And I was quite happy that we were able to land in two of these fairly quickly after we actually got the product out in the last quarter. So I do expect that the PowerFlex business will continue.

That bar flex is a what I would consider it to be.

Our solution for the top end of the pyramid their customers tend to be relatively small customer base, but at the very top of the pyramid in terms of the big companies and you saw that the first two wins that we had with both global 2000 customers very large customers.

And so the customer base tends to be concentrated these tend to be large customers and they have significant deployments in devastated so for us it's a new opportunity for us to land in these accounts and then expand over time.

And I was quite happy that we were able to land into these.

Fairly quickly after we actually got the product out.

The last quarter. So I do expect that the positive business will continue we will get more wins over the ear.

Rajiv Ramaswami: We will get more wins over the year. With Pure, of course, their footprint is a bit broader than PowerFlex out there. It's still early days for us because the solution is not out there. We are in early access now. What that means is that there'll be a handful of customers who will have access, and they'll be testing our beta code. And we expect the solution to be available at the end of the calendar year. So we could potentially see some small amounts of revenue from that over the next back half of the year. And so both solutions, I think, will be relatively small this year but having a growing contribution over time to our 26 revenue and beyond.

With pure of course, the footprint is a bit broader than power flex out there still.

Still early days for us because our tradition is not out there we are in early access now.

What that means is that there'll be a handful of customers, who will have access and there'll be testing or beta court and we expect to be.

Solution to be available at the end of the calendar year. So we could potentially see some small amounts of revenue from that over the next.

So back half of the year.

And so both solutions I think will be relatively small this year, but having a growing contribution overtime throughout FY 2017 and beyond.

And I take the question on the U S fed.

Rukmini Sivaraman: I'll take the question on the US Fed. Meta, with respect to the US Fed business, while we had a good fourth quarter for US Fed, some of the personnel changes and the additional reviews that we have seen in the US Fed seem to continue and have resulted in longer deal cycles and some increased variability overall in that particular vertical for us. However, as we've said before, we remain optimistic on the opportunity for that business to benefit from our platform's focus on modernization and lowering TCO overall. As a reminder, we don't report US Federal as a percent of our business, but we'd said previously that over the last few fiscal years, the US Fed specifically has been 10% or less of our annual revenue with seasonal strength in fiscal Q1, which, of course, is the Fed's fiscal year end.

So <unk> with respect to the U S fed business.

While we had a good fourth quarter for you said some of the personnel changes and additional reviews that we have seen in the U S. Fed seem to continue and have resulted in longer deal cycles, and some increased variability overall in that particular vertical for us.

However, as we've said before we remain optimistic on the opportunity for that business to benefit from our platform focus on modernization.

And Ah lowering Tc overall.

And as a reminder, we don't report the U S federal as a percent of our business, but we had said previously that over the last few fiscal years fed has been the U S. Fed specifically has been 10% or less of our annual revenue with seasonal strength in the fiscal Q1, which of course is the fed's fiscal year end.

And we have factored in all of this and some of the overall uncertainty into our Q1 and overall fiscal year 'twenty six guidance.

Rukmini Sivaraman: We have factored in all of this, in some of the overall uncertainty, into our Q1 and overall fiscal year 2026 guidance.

Great. Thank you.

Okay.

Thank you one moment please.

Meta Marshall: Great. Thank you.

Rukmini Sivaraman: Thanks, Meta.

Operator: Thank you. One moment, please. Our next question will be coming from the line of Matt Martino of Goldman Sachs. Your line is open.

Our next question will be coming from the line of Matt Martino of Goldman Sachs. Your line is open.

Yes. Thanks for taking my question guys. Two for me if I could rajeev for Ya GPT at a box has been on the market for about two years now you introduced some new capabilities that next 25, I'm curious where you think we are in terms of enterprise AI maturity and whether we're getting closer to an inflection point that can start to benefit in your tonics and then rock Mimi for you it.

Matt Martino: Yeah. Thanks for taking my question, guys. Two from me, if I could. Rajiv, for you, GPT-in-a-Box has been in the market for about two years now. You introduced some new capabilities at NEXT25. I'm curious where you think we are in terms of enterprise AI maturity and whether we're getting closer to an inflection point that can start to benefit Nutanix. And then, Rukmini, for you, it sounds like there are some revenue timing dynamics associated with some of these larger deals that Nutanix is landing. Can you help us understand how you may be de-risking the multi-year deal activation piece and how much visibility you have into this dynamic heading into 2026? Thanks.

Like there are some revenue timing dynamics associated with some of these larger deals that <unk> lending can you help us understand how you may be de risking the multiyear deal activation piece and how much visibility you have into this dynamic heading into 'twenty six.

Yes, and Matt welcome to our conference call I believe the first one with us.

Rajiv Ramaswami: Yeah. Matt, welcome to our conference call here. I believe this is your first one with us. So, on GPT-in-a-Box 2.0, the 2.0 version became generally available this year. It also included a component called Nutanix Enterprise AI, NAI, which can be deployed with GPT-in-a-Box or just standalone as well on top of native cloud substrates. I would say enterprise maturity is still pretty early. A lot of people, I think, are trying it now. We have a few initial set of customers going into production with good use cases. It's still early days. Having this notion of turnkey inference endpoints is what's driving the interest right now. But then that, over time, will move to more agentic use cases. We've seen some good use cases in the market.

And so on <unk> in a box through Darko.

So the gradual erosion became generally available.

<unk>.

And it also included a component called Identics enterprise, AI, and AI, which can be deployed with GPT and above are the standalone as well on top of cloud native cloud such states.

I would say enterprise maturity, it's still early.

Yeah.

A lot of people I think China is now, but I think and we have a few initial set of customers going into production that could use cases.

Early days, having this notion of turnkey influence endpoints.

What's driving the interest right now, but then that over time will move to more agency <unk>.

Use cases.

So we've seen some good use cases.

The market.

Looking at this for fraud detection for money laundering pattern detection.

Rajiv Ramaswami: People are looking at this for fraud detection, for money laundering, pattern detection, for, of course, the classic use cases of support and summarization of documents and content. Those types of use cases are what we see wherever private data is needed, where they want to run on data that needs to be secured in a private way. So I would say we are in the early innings of AI inferencing adoption in the enterprise. And so I think a lot more to come now. Are we at an inflection point? I think it's moving pretty quickly, I would say. But I would say over the next couple of years, I think we certainly would expect to be seeing some inflection points. But I would say at this point, it's still early days.

Florida for the classic use cases of support and summarization of documents and content.

Types of use cases, and what we see better private data is needed where they want to run on data.

That needs to be secured in a private way.

So I would say given the early innings of.

AI influencing adoption in the enterprise.

And so I think a lot more to come now are we at an inflection point.

Thank God.

Pretty quickly I received but.

I would say over the next couple of years I think we certainly would expect to see some inflection point, but I would say at this point, it's still early days.

Sure.

And Matt to your question on revenue timing and visibility I think thats part of your question Max I'd say, we do see customers, who want us to give them licenses over a period of time versus all upfront.

Rukmini Sivaraman: Matt, to your question on revenue timing and visibility, I think was part of your question, Matt. So I would say we do see customers who want us to give them licenses over a period of time versus all upfront. These tend to be larger transactions because the customer has made a large commitment in many cases and is looking to deploy it over time. And we are, of course, very happy to make that available to them in that fashion. And I think to your question, so we, of course, going into any fiscal year so going into fiscal year 2026 now, we have visibility into the transactions that we've done that are scheduled to go out or where we believe the customer is going to be looking for those licenses in 2026.

Tend to be larger transactions because the customer has made a large commitment in many cases and they're looking to deploy it over time and we're of course very happy to make that.

To make that available to them in that fashion and I think to your question. So we of course going into any fiscal year, so going into fiscal year 'twenty. Six now we have visibility into the transactions that we've done that are scheduled to go out or where we believe the customer is going to be looking for those licenses in 2006, and we've made some assumptions about.

Rukmini Sivaraman: And we've made some assumptions, Matt, about the bookings that we will commit where customers will commit in 2026 but may have future deployment dates. So we have some assumptions built into that. And we feel comfortable that all of that is embedded into the guidance that we provided you today.

About the bookings that we will commit where customers will commit in 'twenty six but may have future deployment dates. So we have some assumptions built into that and we feel comfortable that all of that is embedded into the guidance that we provided you today. Thanks.

Thanks, guys I appreciate the warm welcome.

Thank you Matt.

Matt Martino: Thanks, guys. Appreciate the warm welcome.

Thank you.

Rukmini Sivaraman: Thank you, Matt.

And our next question will be coming from the line of Jim Fish with Piper Sandler Your line is open.

Operator: Thank you. Our next question will be coming from the line of Jim Fish of Piper Sandler. Your line is open.

Hey, guys.

On the guidance it seems to imply an acceleration beyond the quarter beyond fiscal Q1 here can you just give us some of the puts and takes on the fiscal 2006 guidance, we think more about new ACB growth versus that available to renew with the installed base or essentially how youre thinking about net retention rate.

Jim Fish: Hey, guys. I'm the guide, Rukmini. It seems to imply an acceleration beyond the quarter, beyond fiscal Q1 here. Can you just give us some of the puts and takes on the fiscal 2026 guide as we think more about new ACV growth versus that available to renew with the installed base or essentially how you're thinking about net retention rate? And obviously, we've always talked about ARR as kind of the metric you guys want to point us to. As we think about the annual year, is there a way, how should we think about the sort of ARR exiting this year?

Obviously, we've always talked about <unk> packaged metric you guys, one point or two as we think about the annual year is there a way.

How should we think about the sort of MLR exiting this year.

Thank you Jim So a few things that are I'll try to address so first on <unk>.

Rukmini Sivaraman: Thank you, Jim. So a few things that I'll try to address. So first, on renewals cohort, as I said in the prepared remarks, it is growing year-over-year but at a slower pace relative to what we saw in fiscal year 2025, for example, right? So it is growing year-over-year. The reason we called it out was because it is at a slower pace, it does impact revenue. And as you know, Jim, ARR is more of a stock metric, whereas revenue is slow, right? So while that impacts revenue, ARR only gets credit when that ARR actually grows, right? Renewal is almost sort of in the base of the ARR. So ARR can only grow either when we have more land and expand or price increases on renewals and things like that, right?

Renewals cohort as we as I said in the prepared remarks, it is growing year over year, but at a slower pace relative to what we saw in fiscal year 'twenty. Five for example, right. So it is growing year over and you are the reason we called it out was because it is at a slower pace. It does impact revenue and as you know.

Jim.

<unk> is more of a stock metric, whereas revenue was Florida, while that impacts revenue and I don't really gets cut it when that are they are not actually grows right theres I don't know its almost sort of in the base of they are so I can only grow either when we have more land and expand or price increases on renewals and things like that.

So there's sort of a flow versus a stock metric different there between revenue and they are our we don't guide to <unk>, Jim So I'm not going to be able to give you a sort of a specific answer on how to think about aortic expectations for the yard other than kind of the things you've alluded to here, where some of these timing of deals and so on.

Rukmini Sivaraman: So there's sort of a flow versus a stock metric difference there between revenue and ARR. We don't guide to ARR, Jim. So I'm not going to be able to give you sort of a specific answer on how to think about ARR expectations for the year other than kind of the things we've alluded to here, where some of these timing of deals and so on can move ARR around from period to period as we go through the year. And then similarly for NRR, right, some similar dynamics there in terms of timing but also the new logo point I made, where we have seen that we're landing the new logos at a larger deal size than before, which could mean that potentially future expansion for those particular customers can be lower. So yeah, so a few puts and takes there, Jim.

Can move around from period to period as we go through as we go through the year and then similarly for NR alright, some similar dynamics that in terms of timing.

Timing, but also the new logo point I made where we have we have seen that we're landing the new logos at a larger deal size than before which could mean that potential future expansion for those particular customers can be lower so yes, a few puts and takes that are.

Jim and I leave it there because we're not quantifying them, particularly our expectation for the full year.

Rukmini Sivaraman: I'll leave it there because we are not quantifying a particular ARR expectation for the full year.

Yes, so maybe then on the larger transactions because it seems like we're all trying to figure this out.

Jim Fish: Yeah. So maybe then on the larger transactions because it seems like we're all trying to figure this out, you're commenting about larger transactions looking for deferrals. You've told us that you consider the strategy of more annual billings, let's say, as opposed to multi-year billings. Is it that you're seeing large eight-figure type deals like you did last year now in the pipeline more and more? Or is it going to be more the kind of strength of the seven-figure type deals and beyond that you're getting from sort of that competitive disruption? Thanks.

Youre, commenting about larger transactions looking for deferrals, you've told US that you would consider the strategy of more annual billings, let's say as opposed to multiyear billings.

Is it that youre seeing large eight figure type deals like you did last year now in the pipeline more and more or is it going to be more of the kind of strength of the seven figure type deals and beyond is that youre getting from sort of that competitive disruption. Thanks.

Thank you Jim I think we would just leave it as large deals Jim are there.

Rukmini Sivaraman: Thank you, Jim. I think we would just leave it as large deals, Jim. Are there deals in both of those categories that you mentioned? Yes. And our intention is to continue to do more of those over time. What I would not want to do is get too granular on is it seven-figure or eight-figure, right? I think we're referring to. Look, there've been. We've continued to close more of these large deals over time. I gave one statistic around the million-plus-dollar land and expand ACV deals that has increased nicely in the number of those that we closed in 2025 relative to 2024. And so our intention is to continue to do more of those. And the pipeline there continues to be good as we enter fiscal year 2026.

And both of those categories that you mentioned, yes, and our intention is to continue to do more of those over time I, what I would not want to do is to get too granular oriented seven figure it out right I think waterflood antelope they've been we've continued to close more of these large deals over time I gave one statistic around a million plus dollar a land and expand ATB deal.

That has increased nicely in the number of those that we closed in 2005 I look at the 24 and so our intention is to continue to do more of those in the pipeline that continues to be continues to be good as we enter fiscal year 'twenty.

Thank you and the next question will be coming from the line of Matt Hedberg.

Operator: Thank you. The next question will be coming from the line of Matt Hedberg of RBC.

Okay.

Hey, guys. This is tim or non for Matt Hedberg.

Simran Biswal: Hey, guys. This is Simran Biswal for Matt Hedberg. Just thinking more on a macro level for a second, could you dig a bit deeper into the demand trends that you're seeing and what you're incorporating into guidance?

Thinking more on a macro level for a second could you dig a bit deeper into the demand trends that you're seeing and what youre incorporating into guidance.

Yes, I'll give you a high level.

Can talk about the guidance here.

Rajiv Ramaswami: Yeah. I'll give you a high-level view. And Rukmini, you can talk about the guidance here, Simran. So the overall macro, it's fairly still dynamic. It's evolving. I mean, there's also recent and potential actions with the new administration. And then another part of the macro is the commentary that Rukmini gave on the US federal business, right? So we had a good fourth quarter there. But still, lots of changes there. And some additional reviews, of course, means longer deal cycles and some variability. But again, I think I would say we feel optimistic about the longer-term view of the fact that we have a platform that can be very helpful for modernization of the IT infrastructure in a lot of these government organizations. Now, in terms of the macro itself, I mean, we have factored in some macro uncertainty into our updated outlook.

So the overall macro.

It's fairly dynamic is evolving.

I mean, there is also recent envelope potential actions with the new administration.

And then another part of the macro with the commentary you gave on the federal U S. Federal business sites. So we had a good fourth quarter there.

But still lots of changes there and some additions of abuse of course that means longer lead cycles and some variability.

But again I think I would say, we feel optimistic about the longer term view of like the fact that we have a platform that can be very helpful.

For modernization of the infrastructure in a lot of these government organizations.

Now in terms of the macro itself I mean, we have factored in some macro uncertainty and to updated outlook, but we are seeing pretty solid demand for our solutions as well.

Rajiv Ramaswami: But we are seeing pretty solid demand for our solutions as well. Rukmini, do you want to talk about our guide?

When you do you want to talk about our guidance.

I think you've covered it rajeev, we've factored all of that into the guidance we provided.

Rukmini Sivaraman: I think you covered it, Rajiv. We've factored all of that into the guidance we provided.

Okay.

Okay, Great and then just one more so realizing that Vmware replacement opportunity continues to be a multiyear journey.

Rajiv Ramaswami: Okay.

Simran Biswal: Okay. Great. And then just one more. So realizing the VMware replacement opportunity continues to be a multi-year journey, can you walk us through how much of the opportunity remains and what you're assuming for share shift throughout fiscal year 2026?

Can you walk us through how much of the opportunity remains and it's what you're assuming for share shifts throughout fiscal year 'twenty six.

Yes, so some of that I think the vast majority of the opportunities still in front of us and if you were to characterize this as a month evenings baseball game I would probably say we ended the second innings at this point.

Rajiv Ramaswami: Yeah. So Simran, I think the vast majority of the opportunity is still in front of us. If you were to characterize this as a multi-innings baseball game, I'd probably say we're in the second innings at this point. And there's still a lot of customers out there with VMware. And it's going to take time in terms of these migrations. I mean, the fact that we've added 2,700 customers over the last year is a good sign that there are people moving. But there's 200,000 customers out there for VMware. So there's still a lot to go through here. And it's going to take time. And for the bigger customers, it's going to take even longer. So we've done a fair number of migrations and completed them for customers ranging anywhere.

And there is still a lot of customers out there.

But with the advent and it's going to take time in terms of these migrations. We are seeing I mean, the fact that we've added 20.

700 customers over the last year is a good sign that there are people moving.

But there's 200000 customers out there for Vmware.

So there's still a lot to go through here and it's going to take time and for the bigger customers its going to take even longer. So we've done a fair number of migrations and completed them for customers ranging in any way. If you want to look at the sizing of that environment say from 20000 course to maybe even 60 70000 core.

Rajiv Ramaswami: If you were to look at the sizing of their environment, say, from 20,000 cores to maybe even 60,000, 70,000 cores, those types of customers, which I would call they can be medium to large enterprises. Those types of migrations, we've actually done some. Now, the real big ones out there, I think, will take a long time to migrate. And so the smaller you are, the faster it is to migrate. The longer you are the bigger you are, the longer it's going to take. So I would still say we've got a lot of runway still in front of us. And it's going to be a gradual multi-year journey.

Those type of customers, which I would call it can be medium to large enterprises those types of my visions, we have actually done some.

Now the real big ones out there and I think it will take a long time to migrate.

And so the smaller you are.

Faster just to migrate along with the bigger you are the longer it's going to take so I would still say, we've got a lot of runway still in front of us and it's going to be a gradual multiyear journey.

Great. Thanks, guys.

Thank you.

Simran Biswal: Great. Thanks, guys.

Thank you.

Rukmini Sivaraman: Thank you.

And the next question will be coming from the line of Snake I'm.

Operator: Thank you. And the next question will be coming from the line of Samik, excuse me, Mike Cikos of Needham. Please go ahead.

Excuse me, Mike Chico's of Needham. Please go ahead.

Hey, guys. Thanks for taking the questions here and I know.

Mike Cikos: Hey, guys. Thanks for taking the questions here. And I know PowerFlex is getting a decent amount of attention. So I'll tap into that for a second. But great to hear on these two initial wins with these large Global 2000 customers. Quite frankly, it's earlier than I had expected on my side. But I wanted to temperature-check it. What were you guys anticipating as far as wins with PowerFlex? And can you give us some more granularity as far as how these deals came together? Were they led by Nutanix? Were they led by Dell? Was it a co-marketing effort? Anything on that front would be incremental. And then I have a follow-up.

Power power flex is getting a decent amount of attention so I'll tap into that for a second but.

Great to hear on these two initial wins with these.

Large global 2000 customers.

Quite frankly, it's earlier than I had expected on my side, but I wanted to a temperature check it.

What are you guys anticipating as far as <unk>.

Wins with power Flex and can you give us some more granularity as far as how these deals came together.

Where they led by new tenants, where they live by Dell was it a co marketing effort.

Anything on that front would be incremental and then I have a follow up yes, I would say, Mike we were actually pleasantly surprised that how quickly we were able to land these customers.

Rajiv Ramaswami: Yeah. I would say, Mike, we were actually pleasantly surprised at how quickly we were able to land these customers. You should also assume that these customers also were interested early on. They participated in our early access program. So they've been kicking the tires on this for a bit. But it is usually these types of customers are also fairly conservative. And they typically tend to wait. They don't go all in on the first release. They wait for the next release and a couple of releases down before they go. So we were very happy to have secured these deals in Q4. So to your point, I think it came in a bit earlier than we had anticipated. And then there's a PowerFlex base. Like I said, it's concentrated at the top of the pyramid. These are large customers.

You should also assume that these customers also interested early on that participated in our early access program. So <unk> be kicking the tires on this sort of width.

But it is usually the separate customers are also fairly conservative and they typically tend to wait they don't go all in on the press release the rates for the next release in a couple of releases down before they go. So we were very happy to have secure these deals in Q4.

So to your point I think.

It came in a bit earlier than we had anticipated.

And then there is a prospect base that said like I said, it's constantly the top of the pyramid. These are large customers.

With all of these I think there is a very collaborative relationship with Delta we have any dedicate engaged in these accounts with these customers.

Rajiv Ramaswami: With all of these, I think there's a very collaborative relationship with Dell. So we are very directly engaged in these accounts with these customers. They need solid support that we provide directly. And Dell has been a very collaborative partner in these accounts. And I expect that to continue as we look at these other big customers.

They need a solid support that we provide directly and then it's been a very collaborative partner in these accounts and I expect that to continue as we look at these other big customers.

Thank you for that and then I guess my follow up Farooq Meaney, I know that Theres, a couple of different moving pieces here.

Mike Cikos: Thank you for that. I guess my follow-up for Rukmini. I know that there's a couple of different moving pieces here on the average contract duration, in addition to, and thank you for all the assumptions on the guide. But if I look at the average contract duration specifically, Q4 was slightly higher than what you guys had anticipated. We're talking about this upcoming year where average contract duration is expected to see a slight decline. Is there any way you can help us conceptualize what that impact to revenue is as a result of these movements around the average contract duration?

The average contract duration in addition to and thank you for all the assumptions on the guide, but if I look at the average contract duration specifically.

Q4 was slightly higher than what you guys had anticipated we're talking about this upcoming year, where average contract duration is expected to see a slight decline.

Is there any way you can help us conceptualize what that impact to revenue is as a result of these movements around the average contract duration.

Yeah, Hi, Mike So on contract duration in the short term our average contract duration can vary based on the mix of business in a given quarter and for example could be elevated by a few.

Rukmini Sivaraman: Yeah. Hi, Mike. So on contract duration, in the short term, our average contract duration can vary based on the mix of business in a given quarter and, for example, could be elevated by a few larger and longer-than-average duration contracts. And so you're seeing some of that, Mike. And the reason we called it out is because what's assumed going forward for fiscal year 2026 is that we expect the duration year-over-year to be down slightly, which, as you know, does impact our revenue because the license portion of revenue we do take upfront. And that is impacted by or affected by contract duration. We're not quantifying that because there's lots of moving pieces, Mike. But that's one of the things we did want to call out in terms of thinking about 2026 revenue versus 2025.

Larger and longer than average duration contract.

And so you're seeing some of that Mike and the reason we called it out is because that's what's assumed going forward.

<unk> six is that we expect the duration you're on your to be down slightly which as you know does impact our revenue because the license portion of revenue, we do take upfront and that is impacted by are affected by the by contract duration, we're not quantifying that because theres a lots of models.

Mike, but that's one of the things we did want to call out in terms of thinking about 26 revenue versus 25, but one other dynamic that you've also discussed in prior calls is that overtime, we could see some compression of duration as renewals continue to increase as a percentage of billings because of renewals tend to have no what average contract duration relative to London.

Rukmini Sivaraman: The one other dynamic that we've also discussed in prior calls is that over time, we could see some compression of duration as renewals continue to increase as a percentage of billings because renewals tend to have lower average contract duration relative to land and expand. So a couple of moving pieces there, one on these sort of maybe we have a few larger contracts that are longer than average versus this impact of renewals. We put all that and factored all of that in kind of conveying that for 2026, we expect the total average contract duration to be down slightly, which does have somewhat of an impact on that revenue line.

So you know a couple of moving pieces there one on the instead of maybe we have a few larger contracts that are longer than average versus this impact of renewals.

Given we put all of that and factored all of that in and kind of conveying that for 26, we expect total average contract duration to be down slightly which does have somewhat of an impact on that revenue line.

Understood. Thank you guys. Thank you Mike.

Mike Cikos: Understood. Thank you, guys.

Thank you one moment for the next question.

Rukmini Sivaraman: Thank you, Mike.

Operator: Thank you. One moment for the next question. The next question will be coming from the line of Samik Chatterjee of J.P. Morgan. Your line is open.

And the next question will be coming from the line up for me <unk> of J P. Morgan Your line is open.

Hi, Thanks for taking my questions here, maybe just on a couple of fronts. I believe you expanded your platform on the Google cloud in the summer or so if you can just give us an update on how the customer engagement has been on that front and on the pure storage partnership I think the last sort of update you gave was you would see something.

Samik Chatterjee: Yep. Hi. Thanks for taking my questions here. Maybe just on a couple of fronts, I believe you expanded your platform on Google Cloud in the summer. So if you can just give us an update on how the customer engagement has been on that front. And on the Pure Storage partnership, I think the last sort of update you gave was we would see something available by the end of the year. Anything more specific that you can share in terms of timing on that front? And then I have a quick follow-up for Rukmini, please. Thank you.

Lindy by the end of the yield anything more specific that you can share in terms of timing on that front and then I have a quick follow up for many please thank you.

Chemicals are welcome. This is your first call as well.

Rajiv Ramaswami: Yeah. Hey, Samik. Also, welcome. I know this is your first call as well. And let me start with Pure and then Google Cloud. So Pure, again, I think we are an early access customer starting to kick the tires on a beta version. And then I think we are on track. We set end of calendar year for the GA release, generally available release. And we are on track to deliver that. And for Pure, there is a broad base of customers that Pure has. And many of them, I think, are interested over time in terms of exploring alternative platforms which our offering provides. So I expect that, again, as we get into the second half of this fiscal year, we will be able to tell you more about how that offering is coming along.

And.

Let me, let me start with the.

And then Google cloud.

And again I think we had an early access.

Customer starting to kick the tires on a beta version.

And then I think we are on track, we said into calendar year for the <unk>.

Only available to lease and we are on track to deliver that.

And procure that has a broad base of customers that you have and many of them I think.

And just said all time in terms of exploring alternative platforms.

Which are offering provides.

So I expect that.

Again, as we get into the second half of this fiscal year than we were.

We'll be able to tell you more about all of that how that offering is coming along on Google cloud.

The fair amount of initial interest from customers, who have chosen global Google as their cloud provider typically the larger ones tend to pick one or two meaningful provider that suddenly.

Rajiv Ramaswami: On Google Cloud, we had a fair amount of initial interest from customers who have chosen Google as their cloud provider. I mean, typically, these larger ones tend to pick one or two main cloud providers. Certainly, Google has been on that list after AWS and Azure for us for a while. So now that we are in what we call public preview, what that means is that early customers can have access to this offering. We do have people kicking the tires.

Bill has been on that list after AWS and Azure for us for a while.

So now that we are in what we call public preview what that means is that early customers can have access to this offering and we do have been kicking the tires and again I think once it generally available.

Rajiv Ramaswami: And again, I think once it's generally available, again, we hope that towards the end of the year, and it's also dependent on Google's bare metal being available in the regions that we need to be offering our software on top of, then I think we should be able to give you some more color in terms of the actual adoption and how things are going.

We hope that towards the end of the year.

And it's also dependent on google's bare metal being available in the regions that we need to be offering our software on top up then I think we should be able to give you. Some more color in terms of the actual adoption and how things are going.

Got it alright, thank you for that and let me just a quick follow up on the cash flow, maybe if you could dive into it seems like the cash flow for the your came in came in a bit better than you initially thought and what I am trying to sort of <unk>.

Samik Chatterjee: Got it. Got it. Thank you for that. And Rukmini, just a quick follow-up on the cash flow. Maybe if you could dive into it. It seems like the cash flow for the year came in a bit better than you initially thought. And when I'm trying to sort of square to your cash flow guide for fiscal 2026, my math indicates operating income going up by about $90 million or so. And it looks like that would generally put cash flow at the higher end of your guide if not for other offsetting factors. If you can just walk through what the moving pieces there. Thank you.

Where to your cash flow guide for fiscal 'twenty six.

My math indicates operating income going up by about 90 million or so.

It looks like that would generally put cash flow at the higher end of your guide if not for other offsetting factors. If you can just walk through.

Moving pieces there. Thank you.

Yes, I can make a welcome from me as well so on the free cash flow that we're happy with the performance in Q4, and then fiscal year 'twenty five 750 minutes for.

Rukmini Sivaraman: Yes. Hi, Samik. Welcome from me as well. So on the free cash flow, yeah, we're happy with the performance in Q4 and in fiscal year 2025, $750 million of free cash flow. And so really happy with that performance. And I think when you think about next year, as you think about fiscal year 2026 and the guide there, I think the dynamic around contract duration does also impact free cash flow because our standard practice is to collect multiple years of cash upfront. And customers will often use CapEx budgets to purchase our software because we are infrastructure software. And often, they may be purchasing hardware as well. And so duration can have an impact on free cash flow as well. And as I said earlier in response to another question, we expect duration in the aggregate to go down year-over-year into fiscal year 2026.

The cash flow.

And so really happy with that performance and I think there's when you think about next year or do you think about fiscal year 'twenty six and the guide that.

I think the dynamic around contract duration does also impact free cash flow because our standard practice is to collect multiple years of cash upfront and customers will often use capex budgets.

Just to purchase our software because we our infrastructure software and often they may be purchasing hardware as well.

So.

Duration does have can have an impact on free cash flow as well and as I said earlier in answer to your response to another question that we expect duration in the aggregate to go down year over year into fiscal year 'twenty.

Got it okay. Thank you thanks for taking my questions. Thank you Tony.

Samik Chatterjee: No. Got it. Clear. Thank you. Thanks for taking my questions.

Thank you.

Rukmini Sivaraman: Thank you, Samik.

And the next question will come from the line of <unk> Mohan of Bank of America Your line of Philippines.

Operator: Thank you. And the next question will come from the line of Wamsi Mohan of Bank of America. Your line is open.

Hi, Thanks for taking my questions. It's rupal filling in for <unk> I have two questions first one for Rukmini on margins.

Ruplu Bhattacharya: Hi. Thanks for taking my questions. It's Ruplu filling in for Wamsi. I have two questions. First one for Rukmini on margins. If you look at the midpoint of fiscal '26 guidance, 21.5%, that implies only 40 bips of improvement year-over-year, which would be the lowest in any year so far. Can you help us segment that into how much of that is from tariffs, how much is because you have more employees now, more SG&A, and the other factors that you mentioned? I think you said $30 million or so of other issues. So can you help us segment that? And is there any conservatism factored into this?

If you look at the midpoint of fiscal 2006 guidance 21, 5% that implies only 40 bps of improvement year on year, which would be the lowest in Europe. So far.

Can you help us segment that into how much of that is from tariffs. How much is because you have more employees now more SG&A and the other factors that you mentioned I think you said $30 million or so of other issues. So can you help us segment that and is there any conservatism factored into this.

Pedro Pablo Thanks for that question, so you're correct that at the midpoint of the guide and 26% slightly above what we reported for fiscal year 2025, one thing I called out in my prepared remarks was some delayed hiring that we have and that we intend to keep.

Rukmini Sivaraman: Hi, Ruplu. Thanks for that question. So you're correct that at the midpoint of the guide, 2026 is slightly above what we reported for fiscal year 2025. One thing I called out in my prepared remarks was some delayed hiring that we have and that we intend to catch up in fiscal year 2026. I said that's about $25 million in fiscal year 2026. It could have been depending on when those folks might have been hired in 2025, right? Those numbers can move around. But to give you an order of magnitude or a sense of what that amount is like in terms of delayed hiring that we have going into next year. The other headwind I called out were these non-recurring part-time payments, which we do expect to taper off in fiscal year 2026.

That shop in fiscal year, 'twenty, six and I said, that's about 25 million in fiscal year 'twenty six it could have been depending on when those folks might've been hired and twenty-five read those numbers can move around but to give you an order of magnitude or sense of what that.

Amount. This is it's like in terms of delayed hiring that we have going into next year.

Other headwind I called out were these nonrecurring partner payments, which we do expect to taper off in fiscal year, 'twenty, six and that could potentially be a headwind of another 10 to 15 million as I said in the in the prepared remarks, and then there are of course all of the folks that we've hired in fiscal year 'twenty favorite Blue and we've talked about the investments and where we're <unk>.

Rukmini Sivaraman: That could potentially be a headwind of another $10 to 15 million, as I said in the prepared remarks. And then there are, of course, all of the folks that we've hired in fiscal year 2025, Ruplu. And we've talked about the investments and where we're making them. And I'm happy to summarize that in sales and marketing, for example, where we wanted to hire a few more reps to get to our target rep headcount and associated people to support that rep. And we came very close on that, actually, to hitting our target by the end of fiscal year 2025. So those folks will all be annualized in fiscal year 2026, as you know, right, because they weren't here for the full year in 2025. But they will be in 2026.

Making them and I'm happy to summarize that in sales and marketing for example, where we've wanted to hire a few more reps to get to our target Rep head count and associated people to support that rapid we came very close on that actually to hitting our target by the end of our fiscal.

625, so those folks will all be annualized in fiscal year 2006, as you know that because they they won't be out for the full year and 25, but they will be in 2006. So those are all some of the things that I sort of call out when you think about margin going into the into next year relative to fiscal year 'twenty five and then in terms of.

Rukmini Sivaraman: So those are all some of the things that I sort of call out when you think about margin going into next year relative to fiscal year 2025. And then in terms of is there conservatism baked in there, I would say, look, our guidance philosophy in general hasn't changed, Ruplu, in that we try to give you our best and reasonable estimate of how the year will play out at this point in time. And so that's a similar approach we've taken this year as well.

Is there conservatism baked in there I would say look our guidance philosophy in general hasn't changed although fluid that we tried to give you our best a reasonable estimate of how the year would play out at this at this point in time and so that's the sum of the approach we've taken this year as well.

Okay. Thanks for that Rukmini for my follow up I'd like to ask a question on <unk> and I know you don't guide specific IRR, but just as you mentioned there are different factors that impact that and one is of course land, which is new logos.

Ruplu Bhattacharya: Okay. Thanks for that, Rukmini. For my follow-up, I'd like to ask a question on ERR. I know you don't guide specific ERR. But just as you mentioned, there are different factors that impact that. One is, of course, land, which is new logos. Nutanix is going to face a tough year-over-year compare because fiscal 2025 was so strong on that front. Then there's expand, which we can kind of infer from NRR. You said pricing also. So maybe I'd like to ask, how is the pricing environment? Do you see maybe pricing as a lever you can use that you can raise prices on? Maybe, Rajiv, you can use this to gain some share from VMware. On NRR, how should we think about how high NRR can go? How should we think about expansion?

<unk> is going to face a tough year on year compare because fiscal 'twenty five was so strong on that front.

Then there is the expand which we can kind of infer from NR and then you said pricing also so maybe I'd like to ask how is the pricing environment do you see maybe pricing is a lever you can use.

That you can raise prices on and maybe Rajiv you can use this to gain some share from Vmware and then on like.

How should we think about what how high NRI can go and how should we think about expansion. So I guess net what I'm trying to ask is of these three factors where do you have the most confidence and how should we think about this.

Ruplu Bhattacharya: So I guess net, what I'm trying to ask is, of these three factors, where do you have the most confidence? And how should we think about this expansion versus pricing versus the new logo expansion? Thank you.

This expansion versus pricing versus.

Versus this.

The new new logo expansion. Thank you.

Thank you Rocco there was a lot in there let me try to unpack that and Rajiv you're welcome to add as well.

Rukmini Sivaraman: Thank you, Ruplu. There was a lot in there. Let me try to unpack that. And Rajiv, you're welcome to add as well. So you're right, Ruplu, that if you think of the main components of an increase in ARR, it's those three things, right? So one is, of course, we need to make sure we're retaining the ARR base that we do have and doing as much of that as we can. And if you set that aside, then you have expansion with existing customers, landing new customers onto the platform, and potential price increases with the existing customers as well, right? So I would say, look, I think we're happy with the land performance. We've talked about the 2,700+ new logos that joined our platform in fiscal year 2025. And I gave you a sense of roughly what we expect that to be in fiscal year 2026.

So youre right to plough that you know if you think of the.

The main components of an increase in a R. R.

Those three things right. One is of course, we need to make sure we're attaining.

At our base that we do have and doing as much of that as we can and you can set that aside then you have expansion with existing customers landing new customers onto the platform and and potential price increases with existing customers as well. So I would say look I think we're happy with the land performance we've talked about.

The 2700, plus new logos, that's where that joined our platform in fiscal year 'twenty five and I gave you a sense of roughly what we expect that to be in fiscal year 'twenty six.

I think we've touched on expansion one of the earlier questions around and not ours, which is that there are some mechanical ins and outs that including the fact that new logos coming in at a higher initial deal size could impact that percentage of expansion in the future because the initial purchase has been higher than it's been.

Rukmini Sivaraman: I think we touched on expansion, one of the earlier questions around NRR, which is that there's some mechanical ins and outs there, including the fact that new logos coming in at a higher initial deal size could impact that percentage of expansion in the future because the initial purchase has been higher than it used to be. Cost. So there's some dynamics there around NRR. Of course, we have continued focus on some of the expansion initiatives that they have going on. But NRR could move around from period to period going forward. Then on pricing, our approach has been that on a renewal, look, we want to make sure that our customers love the platform and want to renew with us. So historically, we've had more inflation-type pricing increases on renewal.

And so there's some dynamics that I don't in Iran. And we of course, we are continued focus on some of the expansion initiatives that they have going on but in our could move around from peer to peer going forward and then on pricing. Our approach has been that on our renewals look we want to make sure that our customers love the platform and want to renew with us and so they start.

Likely we've had more inflation type pricing increases on renewal.

And of course, it depends on what else that customer is doing with us or Theyre also expanding right like what is the overall picture of that particular account and then I would say in terms of competitive frankly, I think thats part of your question that remains quite dynamic and Rajiv I don't know if you want to comment on that as we think about pricing relative to the competition, yes, I mean I think.

Rukmini Sivaraman: Of course, it depends on what else that customer is doing with us. Are they also expanding, right? What is the overall picture of that particular account? Then I will say in terms of competitive pricing, which I think was part of your question, that remains quite dynamic. Rajiv, I don't know if you want to comment on that as we think about pricing relative to the competition.

Kind of working very much depends on the kind of customer or the volume of course, we have volume based pricing for very large deals with lots of volume the pricing is lower.

Rajiv Ramaswami: Yeah. I mean, I think it kind of, I think, very much depends on the kind of customer, the volume. Of course, we have volume-based pricing for very large deals. With lots of volume, the pricing is lower. As a matter of fact, we did also, even for this year, take up our list pricing, as Rukmini pointed out, only on an inflation kind of in line with inflation type of basis. So we also think, for example, having our external storage offering can give us some pricing advantages, right, because we don't have to necessarily try and we can potentially achieve somewhat of a lower price point but get in the door without compromising an upsell into the rest of our portfolio. So there are levers here that we will, of course, attach.

As a matter of fact, we did also even for this year take up on our list pricing.

Look when you pointed out earlier and inflation kind of.

In line with inflation type of basis so.

We also think for example, having a.

External storage offering can give us some pricing as monthly decide because we don't have to necessarily try and.

We can potentially see somewhat of a lower price point, but getting the door without compromising and upsell into the rest of our portfolio.

So they don't leave us here that we will of course at that and then the portfolio attach which will cause a more portfolio based ask more.

Rajiv Ramaswami: Then there's portfolio attach, which, of course, the more portfolio we attach, the more our ASPs go up. We have seen an increase in ASPs of our deals in terms of total size of the deals. The individual pricing elements vary very much depending on the situation.

RFP screw up.

<unk> seen an increase in ASP.

All four deals.

In terms of the total of the size of the deals and the individual pricing.

Element vary very much depending on the situation.

Okay. Thank you for all the details appreciate it.

Ruplu Bhattacharya: Okay. Thank you for all the details. Appreciate it.

Thank you and the next question will be coming from the line of Victor Chu of Raymond James Your line is open.

Operator: Thank you. And the next question will be coming from the line of Victor Chiu of Raymond James. Your line is open.

Hey, guys. This is victor in for Simon Simon Leopold.

Victor Chiu: Hey, guys. This is Victor in for Simon Leopold. I just wanted to follow up on the Pure partnership. Can you remind us which elements Nutanix provides? Is it primarily the hypervisor for compute? And I guess also, what competitive opportunities does the combined solution target strategically, I guess?

Just wanted to follow up on the pure partnership can you remind us which elements.

<unk> provides is it primarily the hypervisor for compute and I guess also what competitive opportunities does the combined solution target strategically I guess, yeah, hi, Ritu. So it's so yes, if you look at them to panic sell platform today has a hypervisor.

Rajiv Ramaswami: Yeah. Hi, Victor. So yeah, if you look at the Nutanix Cloud Platform today, it has a hypervisor. It has networking. It has operations and cost management. It has some security built in. It also does unified storage. And when we look at the platform with Pure Storage, the part that's not there is the HCI storage, right? Everything else about the platform is still very much there. We have the hypervisor. We have the networking. We have the security. We have the operations management. All of that is sold together with Pure Storage, right, except the storage is now Pure Storage as opposed to ours. And so that is the portfolio. Now again, for a lot of these customers, they're connecting Pure Storage to servers running VMware. And so these customers are looking to replace that VMware option with a Nutanix option, right?

Networking is has operations and cost management and.

Security built and it also has a unified storage.

And when we look at the <unk>.

Platform with.

The part that's not that is a <unk> storage everything is about the platform is still very much that we have the hypervisor. We have the networking we have a security operations management all of that is so together with pure right, except the story I just know pure storage as opposed to us.

So that is that as the portfolio again for a lot of these customers.

Connecting fewer stories to servers running Vmware.

And so these customers are looking to replace that Vms option with.

With any kind of assumption, that's not opportunity there in terms of getting into those accounts.

Rajiv Ramaswami: That's our opportunity there in terms of getting into those accounts. And they want to preserve their Pure hardware, right? They've invested in the Pure architecture, the Pure Storage. They want to keep that at least for some period of time. And therefore, we can then essentially do a software change on their servers to be able to allow them to use Nutanix instead of VMware in those deployments.

And they want to preserve their pure hardware.

Investments appear architecture, the pure storage they want to keep that at least for some period of time and therefore, we can then essentially to our software.

Change on their service to be able to allow them to your synthetics and sort of the amount of those.

In those deployments.

Okay got it great makes a lot and then just along those lines.

Victor Chiu: Okay. Got it. Great. That makes a lot of sense. And just along those lines, Broadcom issued cease and desist letters in May, I think, to customers that were using VMware without paying for support. Does that specifically open up any incremental opportunities? Or is that just kind of consistent and par for the course with their overall kind of recent competitive posture?

Broadcom issued.

But they should see some business lenders in May I think the customers.

We're using Vmware without.

You pay for support.

That specifically.

Rob.

Yeah.

Open up any incremental opportunities or is that just kind of consistent and apart from of course with their overall kind of.

Competitive I mean again I think.

Most customers running mission critical applications will want to make sure that they're.

Rajiv Ramaswami: Yeah. I mean, again, I think most customers running mission-critical applications would want to make sure that their deployments are supported, right? So, most customers don't run unsupported in these types of mission-critical deployments. So I don't think that's changing the picture that much.

<unk> deployments has supported right. So so.

Typically most customers don't run unsupported in DCF and mission critical.

<unk>, So I don't think thats changing the picture that much.

Great. Thank you.

Yes.

Thank you and the next question will be coming from the line.

Victor Chiu: Great. Thank you.

Operator: Thank you. And the next question will be coming from the line of Brandon Nispel of KBCM. Your line is open.

Brandon.

<unk> of KBC Ann Your line is open.

Great. Thank.

Thank you for taking the question.

Brandon Nispel: Great. Thank you for taking the question. I guess my question's for Rukmini, mainly just to follow up on margins. I mean, just doing some math, it seems to imply operating expenses are $1.9 billion. You called out a couple of one-timers in terms of accelerating headcount and partner contributions. But OPEX, excluding that, is up quite a bit. And it looks like your contribution margins from an operating income perspective are, it looks like implied is just 24%, which is much lower than it's been. So what are you spending sort of the rest of the money on? Are you guys maybe changing some channel payments or comp for employee base? Just trying to understand why OPEX would be up so materially and contribution margins would be down so materially implied by the guidance. Thanks.

I guess my questions for <unk>.

Mainly just to follow up on margins I mean, just doing the math it seems to imply.

Operating expenses are $1 9 billion you called out a couple of.

One timers in terms of accelerating head count and partner contribution, but opex, excluding that up quite a bit and it looks like your contribution margins from an operating income perspective bar. It looks like implied is just 24% which is much lower than it's been so what are you spending sort of the rest of the money on.

Yes.

Maybe changing some channeled payments or.

Comp for employee base, just trying to understand why opex would be up so materially contribution margins would be down so materially.

Implied by the guidance thanks.

Yeah, Hi, Hi, Brandon So a few quite a few thoughts on fiscal 'twenty six.

Rukmini Sivaraman: Yeah. Hi, Brandon. So a few, I think, thoughts on fiscal year 2026 OpEx. So one, like I said, the one-time items that I called out in my prepared remarks, I won't repeat because I feel like we've covered that in enough detail already. In terms of other things, there is the run rate of the folks that we've hired for this year in fiscal year 2025, getting over to 2026, is a meaningful chunk of that because a lot of that hiring did happen later in the year and so was the second half of the year. So those folks are all being annualized, going into fiscal year 2026. We have, of course, raises that we give for employees that is factored in there. And then in terms of incremental investments, there's some that we've baked in there, Brandon.

Opex. So one like I said, the one time items that I called out in my prepared remarks, I wont repeat because I feel like we've covered that in enough detail already.

In terms of the other things that is the run rate of the folks that we've hired but this year in fiscal year 'twenty five getting over 26 is a meaningful chunk of that because a lot of that hiring did happened later in the yard and towards the second half of the yards. Those folks are all being analyzed annualized going into fiscal year 'twenty six we.

Have a of course raises that we give for our employees that is factor in there and then in terms of incremental investments. There's a there's some that we've baked in there a brand and it's not a time in the Grand scheme of things or even an incremental amount. It it's still a minority it's more around areas around R&D and innovation that we've said we've continued.

Rukmini Sivaraman: It's not a ton in the grand scheme of things or even in the incremental amount. It's still a minority. It's more around areas around R&D and innovation that we've said we'd continue to innovate in areas like the support of external storage, in areas like our Kubernetes platform, NKP, where we're seeing a lot of interest. We think it's important that we continue to invest incrementally in those areas. Then some in sales and marketing as well around areas where we think there is more opportunity for us to get that return. Like I said, we came very close to hitting our target rep headcount at the end of fiscal year 2025. So there's maybe a little more we have to do there. That's not a huge amount.

Innovate in areas like the.

Supportive external storage in areas like our kubernetes platform <unk>, where we're seeing a lot of interest and we think it's important that we continue to invest incrementally in those areas.

Then some in sales and marketing as well.

Around areas, where we think that is more opportunity for us to get that like I said, we came very close to hitting our target rep headcount in AR at the end of fiscal year 'twenty five and so there's going to be a little more we have to do that but that's not a huge huge amount and then.

Investments in areas like.

Rukmini Sivaraman: And then investments in areas like IAEs where we're going to add a few more inside folks, some adjustments to our portfolio, things like that. So incrementally, it's still a small amount that is being added over and above some of the delayed hiring that we had in fiscal year 2025 going into 2026.

I as are we going to add a few more inside folks some adjustments to our portfolio or things like that so incrementally it's still a small amount.

That is.

Being added over and above from the delayed hiring that we had in fiscal 'twenty five going into 2006.

Thank you for taking the question.

Victor Chiu: Thank you for taking the question.

Brandon Nispel: Thank you for taking the question.

Thank you Brandon.

Thank you and this does conclude today's conference call. Thank you. So much for joining you may all disconnect have a great evening.

Rukmini Sivaraman: Thank you, Brandon.

Operator: Thank you. And this does conclude today's conference call. Thank you so much for joining. You may all disconnect. Have a great evening.

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