Published: 2025-03-06 00:00:00 ET

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended January 31, 2025

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File Number: 001-37883

 

NUTANIX, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		27-0989767
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

1740 Technology Drive, Suite 150

San Jose, CA 95110

(Address of principal executive offices, including zip code)

 

(408) 216-8360

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Class A Common Stock, $0.000025 par value per share		NTNX		Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer		☒	Accelerated Filer		☐
Non-accelerated Filer		☐	Smaller Reporting Company		☐
			Emerging Growth Company		☐

 

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 28, 2025, the registrant had 266,662,470 shares of Class A common stock, $0.000025 par value per share, outstanding.

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TABLE OF CONTENTS

			PAGE
PART I.		FINANCIAL INFORMATION
	Item 1	Financial Statements (Unaudited)	6
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	51
	Item 4	Controls and Procedures	52
PART II.		OTHER INFORMATION
	Item 1	Legal Proceedings	53
	Item 1A	Risk Factors	53
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	56
	Item 3	Defaults Upon Senior Securities	56
	Item 4	Mine Safety Disclosures	56
	Item 5	Other Information	56
	Item 6	Exhibits	56
EXHIBIT INDEX			57
SIGNATURES			58

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express and implied forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which statements involve substantial risks and uncertainties. Other than statements of historical fact, all statements contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "plan," "intend," "could," "would," "expect," or words or expressions of similar substance or the negative thereof, that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. Forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:

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We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs in light of the information currently available to us. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2024. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or will occur. The forward-looking statements in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation, and expressly disclaim any obligation, to update, alter or otherwise revise or publicly release the results of any revision to these forward-looking statements to reflect new information or the occurrence of unanticipated or subsequent events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

	Page
Condensed Consolidated Balance Sheets as of July 31, 2024 and January 31, 2025	7
Condensed Consolidated Statements of Operations for the Three and Six Months Ended January 31, 2024 and 2025	8
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended January 31, 2024 and 2025	9
Condensed Consolidated Statements of Stockholders' Deficit for the Three and Six Months Ended January 31, 2024 and 2025	10
Condensed Consolidated Statements of Cash Flows for the Six Months Ended January 31, 2024 and 2025	12
Notes to Condensed Consolidated Financial Statements	13
Note 1: Overview and Basis of Presentation	13
Note 2: Revenue, Deferred Revenue and Deferred Commissions	15
Note 3: Fair Value Measurements	17
Note 4: Balance Sheet Components	19
Note 5: Convertible Senior Notes	21
Note 6: Leases	25
Note 7: Commitments and Contingencies	27
Note 8: Stockholders' Equity	27
Note 9: Equity Incentive Plans	28
Note 10: Income Taxes	30
Note 11: Net Income (Loss) Per Share	30
Note 12: Segment Information	31
Note 13: Subsequent Event	31

 

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NUTANIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		As of
		July 31, 2024				January 31, 2025
		(in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents		$	655,270			$	1,072,161
Short-term investments			339,072				670,686
Accounts receivable, net of allowances of $772 and $1,558, respectively			229,796				327,294
Deferred commissions—current			159,849				153,330
Prepaid expenses and other current assets			97,307				111,923
Total current assets			1,481,294				2,335,394
Property and equipment, net			136,180				138,753
Operating lease right-of-use assets			109,133				112,051
Deferred commissions—non-current			198,962				184,904
Intangible assets, net			5,153				3,443
Goodwill			185,235				185,235
Other assets—non-current			27,961				29,210
Total assets		$	2,143,918			$	2,988,990
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable		$	45,066			$	45,903
Accrued compensation and benefits			195,602				203,040
Accrued expenses and other current liabilities			24,967				22,428
Deferred revenue—current			954,543				1,024,364
Operating lease liabilities—current			24,163				21,819
Total current liabilities			1,244,341				1,317,554
Deferred revenue—non-current			918,163				995,173
Operating lease liabilities—non-current			90,359				93,828
Convertible senior notes, net			570,073				1,341,388
Other liabilities—non-current			49,130				48,721
Total liabilities			2,872,066				3,796,664
Commitments and contingencies (Note 7)
Stockholders’ deficit:
Common stock, par value of $0.000025 per share—1,000,000 Class    A shares authorized as of July 31, 2024 and January 31, 2025;    265,181 and 266,637 Class A shares issued and outstanding as of    July 31, 2024 and January 31, 2025, respectively			7				7
Additional paid-in capital			4,118,898				4,120,529
Accumulated other comprehensive income			146				404
Accumulated deficit			(4,847,199	)			(4,928,614	)
Total stockholders’ deficit			(728,148	)			(807,674	)
Total liabilities and stockholders’ deficit		$	2,143,918			$	2,988,990

 

 

See the accompanying notes to condensed consolidated financial statements.

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NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended January 31,								Six Months Ended January 31,
		2024				2025				2024				2025
		(in thousands, except per share data)
Revenue:
Product		$	299,660			$	354,187			$	546,582			$	656,106
Support, entitlements and other services			265,573				300,534				529,705				589,571
Total revenue			565,233				654,721				1,076,287				1,245,677
Cost of revenue:
Product			9,402				8,823				19,636				17,193
Support, entitlements and other services			72,154				76,465				143,879				150,765
Total cost of revenue			81,556				85,288				163,515				167,958
Gross profit			483,677				569,433				912,772				1,077,719
Operating expenses:
Sales and marketing			236,702				261,382				472,025				514,783
Research and development			160,401				182,785				312,376				356,744
General and administrative			49,529				59,828				97,032				113,504
Total operating expenses			446,632				503,995				881,433				985,031
Income from operations			37,045				65,438				31,339				92,688
Other income (expense), net			2,096				(355	)			(3,179	)			9,218
Income before provision for income taxes			39,141				65,083				28,160				101,906
Provision for income taxes			6,346				8,656				11,218				15,553
Net income		$	32,795			$	56,427			$	16,942			$	86,353
Net income per share attributable to Class A    common stockholders, basic		$	0.13			$	0.21			$	0.07			$	0.32
Net income per share attributable to Class A    common stockholders, diluted		$	0.12			$	0.19			$	0.09			$	0.30
Weighted average shares used in computing net    income per share attributable to Class A    common stockholders, basic			243,853				267,138				242,667				266,842
Weighted average shares used in computing net    income per share attributable to Class A    common stockholders, diluted			298,540				293,351				294,851				291,086

 

 

See the accompanying notes to condensed consolidated financial statements.

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NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

		Three Months Ended January 31,								Six Months Ended January 31,
		2024				2025				2024				2025
		(in thousands)
Net income		$	32,795			$	56,427			$	16,942			$	86,353
Other comprehensive income (loss), net of tax:
Change in unrealized gain on available-for-sale    securities, net of tax			5,254				(155	)			6,050				258
Comprehensive income		$	38,049			$	56,272			$	22,992			$	86,611

 

 

See the accompanying notes to condensed consolidated financial statements.

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NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

 

		Six Months Ended January 31, 2024
		Common Stock								Additional Paid-In				Accumulated Other Comprehensive				Accumulated				Total Stockholders’
		Shares				Amount				Capital				(Loss) Income				Deficit				Deficit
		(in thousands)
Balance - July 31, 2023			239,607			$	6			$	3,930,668			$	(5,171	)		$	(4,632,922	)		$	(707,419	)
Issuance of common stock through employee equity    incentive plans			3,274				—				547				—				—				547
Issuance of common stock from ESPP purchase			653				—				13,233				—				—				13,233
Repurchase and retirement of common stock			(482	)			—				(7,774	)			—				(9,739	)			(17,513	)
Stock-based compensation			—				—				83,998				—				—				83,998
Other comprehensive income			—				—				—				796				—				796
Net loss			—				—				—				—				(15,853	)			(15,853	)
Balance - October 31, 2023			243,052				6				4,020,672				(4,375	)			(4,658,514	)			(642,211	)
Issuance of common stock through employee equity    incentive plans			3,689				—				1,370				—				—				1,370
Shares withheld related to net share settlement of   equity awards			(1,148	)			—				(53,180	)			—				—				(53,180	)
Repurchase and retirement of common stock			(934	)			—				(15,052	)			—				(26,627	)			(41,679	)
Stock-based compensation			—				—				85,969				—				—				85,969
Other comprehensive income			—				—				—				5,254				—				5,254
Net income			—				—				—				—				32,795				32,795
Balance - January 31, 2024			244,659			$	6			$	4,039,779			$	879			$	(4,652,346	)		$	(611,682	)

 

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		Six Months Ended January 31, 2025
		Common Stock								Additional Paid-In				Accumulated Other Comprehensive				Accumulated				Total Stockholders’
		Shares				Amount				Capital				Income				Deficit				Deficit
		(in thousands)
Balance - July 31, 2024			265,181			$	7			$	4,118,898			$	146			$	(4,847,199	)		$	(728,148	)
Issuance of common stock through employee equity    incentive plans			3,621				—				747				—				—				747
Issuance of common stock from ESPP purchase			811				—				27,365				—				—				27,365
Shares withheld related to net share settlement of   equity awards			(1,428	)			—				(84,248	)			—				—				(84,248	)
Repurchase and retirement of common stock			(340	)			—				(5,569	)			—				(14,531	)			(20,100	)
Stock-based compensation			—				—				88,749				—				—				88,749
Other comprehensive income			—				—				—				413				—				413
Net income			—				—				—				—				29,926				29,926
Balance - October 31, 2024			267,845				7				4,145,942				559				(4,831,804	)			(685,296	)
Issuance of common stock through employee equity    incentive plans			2,841				—				1,187				—				—				1,187
Shares withheld related to net share settlement of   equity awards			(962	)			—				(63,592	)			—				—				(63,592	)
Repurchase and retirement of common stock			(3,087	)			—				(46,763	)			—				(153,237	)			(200,000	)
Induced conversion of the 2027 Notes			—				—				(9,673	)			—				—				(9,673	)
Stock-based compensation			—				—				93,428				—				—				93,428
Other comprehensive loss			—				—				—				(155	)			—				(155	)
Net income			—				—				—				—				56,427				56,427
Balance - January 31, 2025			266,637			$	7			$	4,120,529			$	404			$	(4,928,614	)		$	(807,674	)

 

 

See the accompanying notes to condensed consolidated financial statements.

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NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Six Months Ended January 31,
		2024				2025
		(in thousands)
Cash flows from operating activities:
Net income		$	16,942			$	86,353
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			36,389				36,427
Stock-based compensation			169,967				182,177
Amortization of debt discount and issuance costs			22,300				1,185
Operating lease cost, net of accretion			16,046				13,962
Non-cash interest expense			10,064				—
Inducement expense from partial repurchase of the 2027 Notes			—				11,347
Other			(8,859	)			(2,130	)
Changes in operating assets and liabilities:
Accounts receivable, net			(19,662	)			(72,745	)
Deferred commissions			4,830				20,577
Prepaid expenses and other assets			40,575				(5,833	)
Accounts payable			8,695				(334	)
Accrued compensation and benefits			34,158				7,792
Accrued expenses and other liabilities			(86,009	)			(1,680	)
Operating leases, net			(14,884	)			(15,754	)
Deferred revenue			101,329				122,077
Net cash provided by operating activities			331,881				383,421
Cash flows from investing activities:
Maturities of investments			429,219				162,139
Purchases of investments			(455,254	)			(493,156	)
Payments for acquisitions, net of cash acquired			(4,500	)			—
Purchases of property and equipment			(36,784	)			(44,438	)
Net cash used in investing activities			(67,319	)			(375,455	)
Cash flows from financing activities:
Proceeds from sales of shares through employee equity incentive plans			15,153				29,300
Taxes paid related to net share settlement of equity awards			(53,180	)			(148,194	)
Proceeds from the issuance of convertible notes, net of issuance costs			—				848,010
Payment of third-party debt issuance costs			—				(2,771	)
Partial repurchase of the 2027 Notes			—				(95,453	)
Repurchases of common stock			(59,192	)			(220,100	)
Payment of finance lease obligations			(1,758	)			(1,945	)
Net cash (used in) provided by financing activities			(98,977	)			408,847
Net increase in cash, cash equivalents and restricted cash		$	165,585			$	416,813
Cash, cash equivalents and restricted cash—beginning of period			515,771				655,662
Cash, cash equivalents and restricted cash—end of period		$	681,356			$	1,072,475
Restricted cash (1)			2,110				314
Cash and cash equivalents—end of period		$	679,246			$	1,072,161
Supplemental disclosures of cash flow information:
Cash paid for income taxes		$	14,168			$	19,283
Supplemental disclosures of non-cash investing and    financing information:
Purchases of property and equipment included in accounts payable    and accrued and other liabilities		$	1,648			$	1,601
Unpaid taxes related to net share settlement of equity awards included    in accrued expenses and other liabilities		$	—			$	11,460

 

 

See the accompanying notes to condensed consolidated financial statements.

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The income tax provisions of $6.3 million and $11.2 million for the three and six months ended January 31, 2024, respectively, and $8.7 million and $15.6 million for the three and six months ended January 31, 2025, respectively, primarily consisted of foreign taxes on our international operations and U.S. federal and state income taxes. We continue to maintain a full valuation allowance for our U.S. Federal and state deferred tax assets and a partial valuation allowance related to certain foreign net operating losses.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and notes thereto and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024 filed on September 19, 2024. The last day of our fiscal year is July 31. Our fiscal quarters end on October 31, January 31, April 30 and July 31. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2024 and in Part II, Item 1A of this Quarterly Report on Form 10-Q. See also "Special Note Regarding Forward-Looking Statements" above.

Overview

Nutanix, Inc. ("we," "us," "our," or "Nutanix") is a global leader in cloud software, offering organizations a single platform for running applications and managing data, anywhere. Our vision is to make hybrid multicloud deployments simple and free customers to focus on achieving their business outcomes. Our mission is to delight customers with an open hybrid multicloud platform with rich data services to run and manage any application, anywhere.

Our Nutanix Cloud Platform is designed to enable organizations to build a hybrid multicloud infrastructure, providing a consistent cloud operating model with a single platform for running applications and managing data in core data centers, at the edge, and in public clouds, all while supporting a variety of hypervisors and container platforms. Nutanix Cloud Platform supports a wide variety of workloads with varied compute, storage, and network requirements, including business-critical applications, data platforms (including SQL and NoSQL databases and business intelligence applications), general-purpose workloads (including system infrastructure, networking, and security), end-user computing and virtual desktop infrastructure services, enterprise artificial intelligence ("AI") workloads (including machine learning and generative AI workloads), and cloud native applications (including modern, containerized applications).

Our business is organized into a single operating and reportable segment. We operate a subscription-based business model, meaning one in which our products, including associated support and entitlement arrangements, are sold with a defined duration.

Our platform typically includes one or more years of support and entitlements, which provides customers with the right to software upgrades and enhancements as well as technical support. Purchases of term-based licenses and SaaS subscriptions have support and entitlements included within the subscription fees and are not sold separately. Purchases of non-portable software are typically accompanied by the purchase of separate support and entitlements.

We had a broad and diverse base of over 27,000 end customers as of January 31, 2025, including approximately 1,070 Global 2000 enterprises. We define the number of end customers as the number of end customers for which we have received an order by the last day of the period, excluding partners to which we have sold products for their own demonstration purposes. A single organization or customer may represent multiple end customers for separate divisions, segments or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers.

Our solutions are primarily sold through our channel partners or original equipment manufacturers ("OEMs") and delivered directly to our end customers. We have end customers across a broad range of industries, such as automotive, consumer goods, education, energy, financial services, healthcare, manufacturing, media, public sector, retail, technology, and telecommunications. We also sell to service providers, who utilize our platform to provide a variety of cloud-based services to their customers.

We continue to invest in the profitable growth of our business over the long run, including the development of our solutions and investing in sales and marketing to capitalize on our market opportunities, while improving our operating cash flow performance by focusing on creating operational efficiencies throughout our organization, including go-to-market efficiencies, particularly by generating leverage through partnerships. By maintaining this balance, we believe that we can sustain profitable growth.

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Key Financial and Performance Metrics

We monitor the following key financial and performance metrics:

 

		As of and for the
		Three Months Ended January 31,								Six Months Ended January 31,
		2024				2025				2024				2025
		(in thousands, except percentages and end customer count)
Total revenue		$	565,233			$	654,721			$	1,076,287			$	1,245,677
Year-over-year percentage increase			16.2	%			15.8	%			17.0	%			15.7	%
Total billings		$	616,483			$	776,358			$	1,177,616			$	1,367,754
Annual recurring revenue ("ARR")		$	1,737,364			$	2,059,506			$	1,737,364			$	2,059,506
Gross profit		$	483,677			$	569,433			$	912,772			$	1,077,719
Non-GAAP gross profit		$	493,306			$	578,337			$	932,556			$	1,095,422
Gross margin			85.6	%			87.0	%			84.8	%			86.5	%
Non-GAAP gross margin			87.3	%			88.3	%			86.6	%			87.9	%
Operating expenses		$	446,632			$	503,995			$	881,433			$	985,031
Non-GAAP operating expenses		$	369,428			$	417,048			$	729,192			$	815,912
Operating income		$	37,045			$	65,438			$	31,339			$	92,688
Non-GAAP operating income		$	123,878			$	161,289			$	203,364			$	279,510
Operating margin			6.6	%			10.0	%			2.9	%			7.4	%
Non-GAAP operating margin			21.9	%			24.6	%			18.9	%			22.4	%
Net cash provided by operating activities		$	186,408			$	221,670			$	331,881			$	383,421
Free cash flow		$	162,644			$	187,063			$	295,097			$	338,983
Total end customers (1)			25,370				27,870				25,370				27,870

 

Disaggregation of Revenue and Billings

The following table depicts the disaggregation of revenue and billings by type, consistent with how we evaluate our financial performance:

 

		Three Months Ended January 31,								Six Months Ended January 31,
		2024				2025				2024				2025
		(in thousands)
Disaggregation of revenue:
Subscription revenue		$	531,983			$	624,418			$	1,011,461			$	1,185,114
Professional services revenue			25,008				28,030				47,843				55,315
Other non-subscription product revenue			8,242				2,273				16,983				5,248
Total revenue		$	565,233			$	654,721			$	1,076,287			$	1,245,677
Disaggregation of billings:
Subscription billings		$	572,759			$	733,737			$	1,101,673			$	1,298,029
Professional services billings			35,482				40,348				58,960				64,477
Other non-subscription product billings			8,242				2,273				16,983				5,248
Total billings		$	616,483			$	776,358			$	1,177,616			$	1,367,754

 

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Subscription revenue — Subscription revenue includes any performance obligation which has a defined term and is generated from the sales of software entitlement and support subscriptions, subscription software licenses and cloud-based SaaS offerings.

Professional services revenue — We also sell professional services with our products. We recognize revenue related to professional services as they are performed.

Other non-subscription product revenue — Other non-subscription product revenue includes approximately $7.0 million and $15.2 million of non-portable software revenue for the three and six months ended January 31, 2024, respectively, $0.5 million and $2.3 million of non-portable software revenue for the three and six months ended January 31, 2025, respectively, $1.2 million and $1.8 million of hardware revenue for the three and six months ended January 31, 2024, respectively, and $1.8 million and $2.9 million of hardware revenue for the three and six months ended January 31, 2025, respectively.

Non-GAAP Financial Measures and Key Performance Measures

We regularly monitor total billings, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, free cash flow, and total end customers, which are non-GAAP financial measures and key performance measures, to help us evaluate our growth and operational efficiencies, measure our performance, identify trends in our sales activity and establish our budgets. We evaluate these measures because they:

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Total billings is a performance measure which we believe provides useful information to our management and investors, as it represents the dollar value under binding purchase orders received and billed during a given period. ARR is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the top-line growth of our subscription business because it takes into account variability in term lengths. Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin are performance measures which we believe provide useful information to investors, as they provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures, such as stock-based compensation expense, that may not be indicative of our ongoing core business operating results. Free cash flow is a performance measure that we believe provides useful information to management and investors about the amount of cash generated by the business after capital expenditures. We use these non-GAAP financial and key performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

Total billings, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, and free cash flow have limitations as analytical tools and they should not be considered in isolation or as substitutes for analysis of our results as reported under generally accepted accounting principles ("GAAP") in the United States. Total billings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, and free cash flow are not substitutes for total revenue, gross profit, gross margin, operating expenses, operating income (loss), operating margin, or net cash provided by (used in) operating activities, respectively. There is no GAAP measure that is comparable to ARR, so we have not reconciled ARR numbers included in this Quarterly Report on Form 10-Q to any GAAP measure. In addition, other companies, including companies in our industry, may calculate non-GAAP financial measures and key performance measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures and key performance measures as tools for comparison. We urge you to review the reconciliation of our non-GAAP financial measures and key performance measures to the most directly comparable GAAP financial measures included below and not to rely on any single financial measure to evaluate our business.

We calculate our non-GAAP financial and key performance measures as follows:

Total billings — We calculate total billings by taking the change in deferred revenue less the change in unbilled accounts receivable between the start and end of the period and adding that to total revenue recognized in the same period.

ARR — We calculate ARR as the sum of annual contract value ("ACV") for all subscription contracts in effect as of the end of the period. For the purposes of this calculation, we assume that the contract term begins on the date a contract is booked, unless the terms of such contract prevent us from fulfilling our obligations until a later period, and irrespective of the periods in which we would recognize revenue for such contract. ARR excludes all life-of-device contracts. We define ACV as the total annualized value of a contract, excluding amounts related to professional services and hardware. We calculate the total annualized value for a contract by dividing the total value of the contract by the number of years in the term of such contract.

Non-GAAP gross profit and Non-GAAP gross margin — We calculate non-GAAP gross margin as non-GAAP gross profit divided by total revenue. We define non-GAAP gross profit as gross profit adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, and costs associated with certain other non-recurring transactions. Our presentation of non-GAAP gross profit and non-GAAP gross margin should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of these non-GAAP financial measures.

Non-GAAP operating expenses — We define non-GAAP operating expenses as total operating expenses adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, litigation settlement accruals and legal fees related to certain non-ordinary course litigation matters, and costs associated with certain other non-recurring transactions. Our presentation of non-GAAP operating expenses should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of this non-GAAP financial measure.

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Non-GAAP operating income and Non-GAAP operating margin — We calculate non-GAAP operating margin as non-GAAP operating income divided by total revenue. We define non-GAAP operating income as operating income (loss) adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, litigation settlement accruals and legal fees related to certain non-ordinary course litigation matters, and costs associated with certain other non-recurring transactions. Our presentation of non-GAAP operating income and non-GAAP operating margin should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of these non-GAAP financial measures.

Free cash flow — We calculate free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment, which measures our ability to generate cash from our business operations after our capital expenditures.

Total end customers — We define the number of end customers as the number of end customers for which we have received an order by the last day of the period, excluding partners to which we have sold products for their own demonstration purposes. A single organization or customer may represent multiple end customers for separate divisions, segments, or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers.

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The following table presents a reconciliation of total billings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, and free cash flow to the most directly comparable GAAP financial measures, for each of the periods indicated:

 

		Three Months Ended January 31,								Six Months Ended January 31,
		2024				2025				2024				2025
		(in thousands, except percentages)
Total revenue		$	565,233			$	654,721			$	1,076,287			$	1,245,677
Change in deferred revenue			51,250				121,637				101,329				122,077
Total billings (non-GAAP)		$	616,483			$	776,358			$	1,177,616			$	1,367,754
Gross profit		$	483,677			$	569,433			$	912,772			$	1,077,719
Stock-based compensation			8,880				8,137				17,924				16,169
Amortization of intangible assets			749				767				1,860				1,534
Non-GAAP gross profit		$	493,306			$	578,337			$	932,556			$	1,095,422
Gross margin			85.6	%			87.0	%			84.8	%			86.5	%
Stock-based compensation			1.6	%			1.2	%			1.6	%			1.3	%
Amortization of intangible assets			0.1	%			0.1	%			0.2	%			0.1	%
Non-GAAP gross margin			87.3	%			88.3	%			86.6	%			87.9	%
Operating expenses		$	446,632			$	503,995			$	881,433			$	985,031
Stock-based compensation			(77,089	)			(85,291	)			(152,043	)			(166,008	)
Amortization of intangible assets			(82	)			(88	)			(119	)			(176	)
Restructuring (charges) reversals			194				—				194				—
Litigation settlement accrual and legal fees			(2	)			(1,568	)			(48	)			(2,935	)
Other			(225	)			—				(225	)			—
Non-GAAP operating expenses		$	369,428			$	417,048			$	729,192			$	815,912
Operating income		$	37,045			$	65,438			$	31,339			$	92,688
Stock-based compensation			85,969				93,428				169,967				182,177
Amortization of intangible assets			831				855				1,979				1,710
Restructuring charges (reversals)			(194	)			—				(194	)			—
Litigation settlement accrual and legal fees			2				1,568				48				2,935
Other			225				—				225				—
Non-GAAP operating income		$	123,878			$	161,289			$	203,364			$	279,510
Operating margin			6.6	%			10.0	%			2.9	%			7.4	%
Stock-based compensation			15.2	%			14.3	%			15.8	%			14.7	%
Amortization of intangible assets			0.1	%			0.1	%			0.2	%			0.1	%
Restructuring charges (reversals)			—				—				—				—
Litigation settlement accrual and legal fees			—				0.2	%			—				0.2	%
Other			—				—				—				—
Non-GAAP operating margin			21.9	%			24.6	%			18.9	%			22.4	%
Net cash provided by operating activities		$	186,408			$	221,670			$	331,881			$	383,421
Purchases of property and equipment			(23,764	)			(34,607	)			(36,784	)			(44,438	)
Free cash flow (non-GAAP)		$	162,644			$	187,063			$	295,097			$	338,983

 

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Factors Affecting Our Performance

We believe that our future success will depend on many factors, including those described below. While these areas present significant opportunity, they also present risks that we must manage to achieve successful results. See the section titled "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2024 and the section titled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q for details. If we are unable to address these challenges, our business and operating results could be materially and adversely affected.

Investment in Profitable Growth

We continue to invest in our growth over the long run, while improving our operating cash flow performance by focusing on creating operational efficiencies throughout our organization, including go-to-market efficiencies, particularly by generating leverage through partnerships. By maintaining this balance, we believe we can sustain profitable growth.

Investment in Sales and Marketing – Our ability to drive top-line growth depends, in large part, on our ability to capitalize on our market opportunity, including our ability to recruit, train and retain sufficient numbers of ramped sales personnel to support our growth. As part of our investment in our growth over the long run, we plan to invest in sales and marketing, including investing in our sales and marketing teams and continuing our focus on opportunities with major accounts, large deals, and commercial accounts, as well as other sales and marketing initiatives to increase our pipeline growth. As we continue to recruit additional sales representatives, it will take time to train and ramp them to full productivity. As a result, we expect that our overall sales and marketing expense will increase in the near term. We estimate, based on past experience, that our average sales team members typically become fully ramped up around the start of their fourth quarter of employment with us, and as our newer employees ramp up, we expect their increased productivity to contribute to our revenue growth. As of January 31, 2025, we considered approximately 79% of our global sales team members to be fully ramped, while the remaining approximately 21% of our global sales team members are in the process of ramping up. As we continue to focus some of our newer and existing sales team members on major accounts and large deals, and as we operate our subscription-based business model, it may take longer, potentially significantly, for these sales team members to become fully productive, and there may also be an impact to the overall productivity of our sales team. As part of our overall efforts to improve our free cash flow performance, we have also proactively taken steps to increase our go-to-market productivity and over time, we intend to reduce our overall sales and marketing spend as a percentage of revenue. These measures include improving the efficiency of our demand generation spend, focusing on lower cost renewals, increasing leverage of our channel partners and OEMs, including supporting new OEMs, and optimizing headcount in geographies based on market opportunities.

Investment in Research and Development and Engineering – We also intend, in the long term, to grow our global research and development and engineering teams to enhance our solutions, including our newer subscription-based products, improve integration with new and existing ecosystem partners and broaden the range of technologies and features available through our platform. We continue to invest in our growth by strengthening our core offerings, investing in our solution ecosystem, and taking advantage of emerging opportunities around generative AI and modern applications across hybrid and multicloud environments.

We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near term.

Our Subscription-Based Business Model

We operate a subscription-based business model to provide our customers with the flexibility to choose their preferred license levels and durations based on their specific business needs. A subscription-based business model means one in which our products, including associated support and entitlement arrangements, are sold with a defined duration. Subscription-based sales consist of subscription term-based licenses and offerings with ongoing performance obligations, including software entitlement and support subscriptions and cloud-based SaaS offerings. Revenue from subscription term-based licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer. Accordingly, any decline in average contract durations associated with our subscription term-based licenses would negatively impact our top-line results. Revenue from software entitlement and support subscription and cloud-based SaaS offerings is recognized ratably over the contractual service period. Accordingly, any decline in new or renewed subscriptions in any one fiscal quarter may not be fully or immediately reflected in our revenue for that fiscal quarter. For additional information on revenue recognition, see Note 2 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Market Adoption of Our Products

Hybrid and multicloud paradigms, as well as trends in generative AI and modern applications, have affected IT buyer expectations about the simplicity, agility, scalability, portability and pay-as-you-grow economics of IT resources. A key focus of our sales and marketing efforts is creating market awareness about the benefits of our platform. This includes our newer products outside of our core hyperconverged infrastructure offering, both as compared to traditional data center architectures, as well as the public cloud, particularly as we continue to pursue large enterprises and mission critical workloads. Our business and operating results will be significantly affected by the degree to and speed with which organizations adopt our platform.

Leveraging Partners

We plan to continue to leverage our relationships with our channel and OEM partners and expand our network of cloud and ecosystem partners, all of which help to drive the adoption and sale of our solutions with our end customers. We sell our solutions primarily through our partners, and our solutions primarily run on hardware platforms that our customers often choose to purchase from our channel or OEM partners. We believe that increasing channel leverage, particularly as we expand our focus on opportunities in commercial accounts, by investing in sales enablement and co-marketing with our channel and OEM partners in the long term will extend and improve our engagement with a broad set of end customers. Our reliance on manufacturers, including our channel and OEM partners, to produce the hardware platforms on which our software runs exposes us to supply chain delays, which could impair our ability to provide services to end customers in a timely manner. Our business and results of operations will be significantly affected by our success in leveraging our relationships with our channel and OEM partners and expanding our network of cloud and ecosystem partners.

Customer Acquisition, Retention and Expansion

Our business and operating results will depend on our ability to obtain new end customers and retain and sell additional solutions to our existing base of end customers. Our ability to obtain new end customers and retain and sell additional solutions to existing customers will in turn depend in part on a number of factors. These factors include our ability to: execute on our business plans, vision, and objectives (including our growth and go-to-market strategies), respond to competitive pressures, effectively maintain existing and future customer relationships, continue to innovate by adding new functionality and improving usability of our solutions in a manner that addresses our end customers’ needs and requirements, and optimally price our solutions in light of marketplace conditions, our ability to respond to competitive pressures, manage our costs, and anticipate and manage customer demand. Furthermore, our subscription-based business model and product transitions may cause concerns among our customer base, including concerns regarding changes to pricing over time, and may also result in confusion among new and existing end customers, for example, regarding our pricing models. Such concerns and/or confusion can slow adoption and renewal rates among our current and future customer base.

Our end customers typically deploy our technology for a specific workload initially. After a new end customer's initial order, which includes the product and associated software entitlement and support subscription and services, we focus on expanding our footprint by serving more workloads. We also generate recurring revenue from our software entitlement and support subscription renewals, and given our subscription-focused business model, software and support renewals are having an increasing significance for our future revenue streams as existing subscriptions come up for renewal. We view continued purchases and upgrades as critical drivers of our success. As of January 31, 2025, approximately 76% of our end customers who have been with us for 18 months or longer have made a repeat purchase, which is defined as any purchase activity, including renewals of term-based licenses or software entitlement and support subscription renewals, after the initial purchase. Additionally, end customers who have been with us for 18 months or longer have total lifetime orders, including the initial order, in an amount that is more than 9.2x greater, on average, than their initial order. This number increases to approximately 37.9x, on average, for Global 2000 end customers who have been with us for 18 months or longer as of January 31, 2025. These multiples exclude the effect of one end customer who had a very large and irregular purchase pattern that we believe is not representative of the purchase patterns of all of our other end customers.

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More recently, our sales pipeline has evolved to include a higher mix of larger deal opportunities, which often take longer to close and require more levels of review from the customer's executive team, involve greater competition, and have greater variability in timing, outcome and deal structure. We have also seen a modest elongation of average sales cycles compared to historical levels, which we believe is influenced by the macroeconomic environment and continued increased scrutiny on spend. These trends are expected to drive greater variability in our ability to land new customers and expand sales to existing customers, and our top-line results may be adversely affected.

Components of Our Results of Operations

Revenue

We generate revenue primarily from the sale of our Nutanix Cloud Platform, sold primarily as subscription term-based licenses, and which can be deployed on a variety of qualified hardware platforms or, in the case of our cloud-based SaaS offerings, via hosted service or delivered pre-installed on a server that is configured to order. Non-portable software licenses are delivered or sold alongside configured-to-order servers and can be used over the life of the associated server.

Our subscription term-based licenses are sold separately, or can be sold alongside configured-to-order servers. Our subscription term-based licenses typically have a term of one to five years. Our cloud-based SaaS subscriptions have terms extending up to five years.

Our customers generally purchase their qualified hardware platforms for deployment of our software from one of our channel partners or OEMs. Our platform typically includes one or more years of support and entitlements, which provides customers with the right to software upgrades and enhancements as well as technical support. Our platform is primarily sold through channel partners and OEMs. Revenue is recognized net of sales tax and withholding tax.

Product revenue — Product revenue primarily consists of software revenue. A majority of our product revenue is generated from the sale of our Nutanix Cloud Platform. We also sell renewals of previously purchased software licenses and SaaS offerings. Revenue from our software products is generally recognized upon transfer of control to the customer, which is typically upon shipment for sales including a server from a partner, upon making the software available to the customer when not sold with a server, or as services are performed with SaaS offerings. In the infrequent transactions where the hardware is purchased directly from Nutanix, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis.

Support, entitlements and other services revenue — We generate our support, entitlements and other services revenue primarily from software entitlement and support subscriptions, which include the right to software upgrades and enhancements as well as technical support. The majority of our product sales are sold in conjunction with software entitlement and support subscriptions, with terms ranging from one to five years. Occasionally, we also sell professional services with our products. We recognize revenue from software entitlement and support contracts ratably over the contractual service period, which typically commences upon transfer of control of the corresponding products to the customer. We recognize revenue related to professional services as they are performed.

Cost of Revenue

Cost of product revenue — Cost of product revenue consists of costs paid to OEM partners, hardware costs, personnel costs associated with our operations function, consisting of salaries, benefits, bonuses and stock-based compensation, cloud-based costs associated with our SaaS offerings, and allocated costs. Allocated costs consist of certain facilities, depreciation and amortization, recruiting and information technology costs that are allocated based on headcount.

Cost of support, entitlements and other services revenue — Cost of support, entitlements and other services revenue includes personnel and operating costs associated with our global customer support organization, as well as allocated costs. We expect our cost of support, entitlements and other services revenue to increase in absolute dollars as our support, entitlements and other services revenue increases.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development and general and administrative expenses. The largest component of our operating expenses is personnel costs. Personnel costs consist of wages, benefits, bonuses and, with respect to sales and marketing expenses, sales commissions.

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Sales and marketing — Sales and marketing expense consists primarily of personnel costs, including sales commissions. Sales and marketing expense also includes costs for promotional activities and other marketing costs, travel expenses, costs associated with demonstration units, including depreciation, and allocated costs. Commissions are deferred and recognized as we recognize the associated revenue. We expect sales and marketing expense to continue, in the long term, to increase in absolute dollars as part of our long-term plans to invest in our growth. However, as part of our overall efforts to improve our operating cash flow performance, we have also proactively taken steps to increase our go-to-market productivity and over time, we intend to reduce our overall sales and marketing spend as a percentage of revenue. As we continue to recruit additional sales representatives, it will take time to train and ramp them to full productivity. As a result, our sales and marketing expense may fluctuate.

Research and development — Research and development ("R&D") expense consists primarily of personnel costs, as well as other direct and allocated costs. We have devoted our product development efforts primarily to enhancing the functionality and expanding the capabilities of our solutions. R&D costs are expensed as incurred, unless they meet the criteria for capitalization. We expect R&D expense, in the long term, to increase in absolute dollars as part of our long-term plans to invest in our future products and services, including our newer subscription-based products, although R&D expense may fluctuate as a percentage of total revenue and, on an absolute basis, from quarter to quarter.

General and administrative — General and administrative ("G&A") expense consists primarily of personnel costs, which include our executive, finance, human resources and legal organizations. G&A expense also includes outside professional services, which consists primarily of legal, accounting and other consulting costs, as well as insurance and other costs associated with being a public company and allocated costs. We expect G&A expense, in the long term, to increase in absolute dollars, particularly due to additional legal, accounting, insurance and other costs associated with our growth, although G&A expense may fluctuate as a percentage of total revenue and, on an absolute basis, from quarter to quarter.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income and expense, which includes the amortization of the debt discount and debt issuance costs associated with our previously outstanding 2.50% convertible senior notes due 2026 (the "2026 Notes"), our outstanding 0.25% convertible senior notes due 2027 (the "2027 Notes") and our outstanding 0.50% convertible senior notes due 2029 (the "2029 Notes"), non-cash interest expense on the 2026 Notes, interest expense related to the conversion of the 2026 Notes in full, the amortization of the debt discount on the 2026 Notes, interest expense on the 2027 Notes and 2029 Notes, inducement expense related to the partial repurchase of the 2027 Notes, interest income related to our short-term investments, and foreign currency exchange gains or losses.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes for certain foreign jurisdictions in which we conduct business and federal and state income taxes in the United States. We have recorded a full valuation allowance related to our federal and state net operating losses and other net deferred tax assets and a partial valuation allowance related to certain foreign net operating losses due to the uncertainty of the ultimate realization of the future benefits of those assets. Beginning in fiscal 2023, provisions in the U.S. Tax Cuts and Jobs Act of 2017 required us to capitalize and amortize R&D expenditures rather than deducting the costs as incurred. The capitalization of R&D resulted in U.S. taxable income for the fiscal 2025, which was partially offset by net operating loss carryforwards.

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Results of Operations

The following tables set forth our condensed consolidated results of operations in dollars and as a percentage of total revenue for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

 

		Three Months Ended January 31,								Six Months Ended January 31,
		2024				2025				2024				2025
		(in thousands)
Revenue:
Product		$	299,660			$	354,187			$	546,582			$	656,106
Support, entitlements and other services			265,573				300,534				529,705				589,571
Total revenue			565,233				654,721				1,076,287				1,245,677
Cost of revenue:
Product (1)(2)			9,402				8,823				19,636				17,193
Support, entitlements and other services (1)			72,154				76,465				143,879				150,765
Total cost of revenue			81,556				85,288				163,515				167,958
Gross profit			483,677				569,433				912,772				1,077,719
Operating expenses:
Sales and marketing (1)(2)			236,702				261,382				472,025				514,783
Research and development (1)			160,401				182,785				312,376				356,744
General and administrative (1)			49,529				59,828				97,032				113,504
Total operating expenses			446,632				503,995				881,433				985,031
Income from operations			37,045				65,438				31,339				92,688
Other income (expense), net			2,096				(355	)			(3,179	)			9,218
Income before provision for income taxes			39,141				65,083				28,160				101,906
Provision for income taxes			6,346				8,656				11,218				15,553
Net income		$	32,795			$	56,427			$	16,942			$	86,353
(1) Includes stock-based compensation expense as    follows:
Product cost of revenue		$	1,697			$	812			$	3,625			$	2,024
Support, entitlements and other services cost of revenue			7,183				7,325				14,299				14,145
Sales and marketing			20,738				21,397				42,209				42,045
Research and development			40,541				46,765				78,945				90,327
General and administrative			15,810				17,129				30,889				33,636
Total stock-based compensation expense		$	85,969			$	93,428			$	169,967			$	182,177
(2) Includes amortization of intangible assets as follows:
Product cost of revenue		$	749			$	767			$	1,860			$	1,534
Sales and marketing			82				88				119				176
Total amortization of intangible assets		$	831			$	855			$	1,979			$	1,710

 

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		Three Months Ended January 31,								Six Months Ended January 31,
		2024				2025				2024				2025
		(as a percentage of total revenue)
Revenue:
Product			53.0	%			54.1	%			50.8	%			52.7	%
Support, entitlements and other services			47.0	%			45.9	%			49.2	%			47.3	%
Total revenue			100.0	%			100.0	%			100.0	%			100.0	%
Cost of revenue:
Product			1.6	%			1.3	%			1.8	%			1.4	%
Support, entitlements and other services			12.8	%			11.7	%			13.4	%			12.1	%
Total cost of revenue			14.4	%			13.0	%			15.2	%			13.5	%
Gross profit			85.6	%			87.0	%			84.8	%			86.5	%
Operating expenses:
Sales and marketing			41.9	%			39.9	%			43.9	%			41.3	%
Research and development			28.4	%			27.9	%			29.0	%			28.6	%
General and administrative			8.8	%			9.1	%			9.0	%			9.1	%
Total operating expenses			79.1	%			76.9	%			81.9	%			79.0	%
Income from operations			6.5	%			10.1	%			2.9	%			7.5	%
Other income (expense), net			0.4	%			(0.1	)%			(0.3	)%			0.7	%
Income before provision for income taxes			6.9	%			10.0	%			2.6	%			8.2	%
Provision for income taxes			1.1	%			1.3	%			1.0	%			1.2	%
Net income			5.8	%			8.7	%			1.6	%			7.0	%

 

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Comparison of the Three and Six Months Ended January 31, 2024 and 2025

Revenue

 

		Three Months Ended January 31,								Change								Six Months Ended January 31,								Change
		2024				2025				$				%				2024				2025				$				%
		(in thousands, except percentages)
Product		$	299,660			$	354,187			$	54,527				18	%		$	546,582			$	656,106			$	109,524				20	%
Support, entitlements    and other services			265,573				300,534				34,961				13	%			529,705				589,571				59,866				11	%
Total revenue		$	565,233			$	654,721			$	89,488				16	%		$	1,076,287			$	1,245,677			$	169,390				16	%

 

		Three Months Ended January 31,								Change								Six Months Ended January 31,								Change
		2024				2025				$				%				2024				2025				$				%
		(in thousands, except percentages)
U.S.		$	308,674			$	367,275			$	58,601				19	%		$	598,948			$	700,003			$	101,055				17	%
Europe, the Middle    East and Africa			151,917				181,348				29,431				19	%			276,501				332,539				56,038				20	%
Asia Pacific			93,149				92,205				(944	)			(1	)%			176,261				188,024				11,763				7	%
Other Americas			11,493				13,893				2,400				21	%			24,577				25,111				534				2	%
Total revenue		$	565,233			$	654,721			$	89,488				16	%		$	1,076,287			$	1,245,677			$	169,390				16	%

 

Product revenue increased for the three and six months ended January 31, 2025, as compared to the respective prior year periods. Generally, increases in software revenue are the result of increased adoption of our products as well as growth in software renewals. During the fiscal quarter ended January 31, 2025, approximately 59% of our revenue was generated from new customers and the expansion into our existing customer base and approximately 41% was generated from renewals.

For the three and six months ended January 31, 2024, the total average contract duration was approximately 2.8 years and 2.9 years, respectively. For both the three and six months ended January 31, 2025, the total average contract duration was approximately 3.0 years. Total average contract duration represents the dollar-weighted term across all subscription contracts, as well as our limited number of life-of-device contracts billed during the period, using an assumed term of five years for licenses without a specified term, such as life-of-device licenses.

Support, entitlements and other services revenue increased for the three and six months ended January 31, 2025, as compared to the respective prior year periods, in conjunction with the growth of our end customer base and the related software entitlement and support subscription contracts and renewals.

Cost of Revenue and Gross Margin

 

		Three Months Ended January 31,								Change								Six Months Ended January 31,								Change
		2024				2025				$				%				2024				2025				$				%
		(in thousands, except percentages)
Cost of product revenue		$	9,402			$	8,823			$	(579	)			(6	)%		$	19,636			$	17,193			$	(2,443	)			(12	)%
Product gross margin			96.9	%			97.5	%											96.4	%			97.4	%
Cost of support,    entitlements and    other services revenue		$	72,154			$	76,465			$	4,311				6	%		$	143,879			$	150,765			$	6,886				5	%
Support, entitlements    and other services    gross margin			72.8	%			74.6	%											72.8	%			74.4	%
Total gross margin			85.6	%			87.0	%											84.8	%			86.5	%

 

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Cost of product revenue

Cost of product revenue decreased for the three and six months ended January 31, 2025, as compared to the respective prior year periods, due primarily to decreases in overhead resulting from lower software license and support costs and depreciation expense, as well as lower stock-based compensation expense. Slight fluctuations in hardware revenue and cost of product revenue are anticipated, as we expect to continue selling small amounts of hardware for the foreseeable future.

Product gross margin increased by approximately 0.6 percentage points and 1.0 percentage points for the three and six months ended January 31, 2025, respectively, as compared to the respective prior year periods, due primarily to product revenue increasing while cost of product revenue decreased.

Cost of support, entitlements and other services revenue

Cost of support, entitlements and other services revenue increased for the three and six months ended January 31, 2025, as compared to the respective prior year periods, due primarily to higher outside services and personnel-related costs, resulting from growth in our global customer support organization.

Support, entitlements and other services gross margin increased by approximately 1.8 percentage points and 1.6 percentage points for the three and six months ended January 31, 2025, respectively, as compared to the respective prior year periods, due primarily to support, entitlements and other services revenue growing at a higher rate than personnel-related costs.

Operating Expenses

Sales and marketing

 

		Three Months Ended January 31,								Change								Six Months Ended January 31,								Change
		2024				2025				$				%				2024				2025				$				%
		(in thousands, except percentages)
Sales and marketing		$	236,702			$	261,382			$	24,680				10	%		$	472,025			$	514,783			$	42,758				9	%
Percent of total revenue			41.9	%			39.9	%											43.9	%			41.3	%

Sales and marketing expense increased for the three and six months ended January 31, 2025, as compared to the respective prior year periods, due primarily to higher personnel-related costs, including commissions expense, resulting from the 7% growth in our sales and marketing headcount from January 31, 2024 to January 31, 2025.

Research and development

 

		Three Months Ended January 31,								Change								Six Months Ended January 31,								Change
		2024				2025				$				%				2024				2025				$				%
		(in thousands, except percentages)
Research and development		$	160,401			$	182,785			$	22,384				14	%		$	312,376			$	356,744			$	44,368				14	%
Percent of total revenue			28.4	%			27.9	%											29.0	%			28.6	%

Research and development expense increased for the three and six months ended January 31, 2025, as compared to the respective prior year periods, due primarily to higher personnel-related costs, including stock-based compensation expense, resulting from the 8% growth in our R&D headcount from January 31, 2024 to January 31, 2025, as well as higher depreciation expense related to property, plant and equipment additions during the period.

General and administrative

 

		Three Months Ended January 31,								Change								Six Months Ended January 31,								Change
		2024				2025				$				%				2024				2025				$				%
		(in thousands, except percentages)
General and administrative		$	49,529			$	59,828			$	10,299				21	%		$	97,032			$	113,504			$	16,472				17	%
Percent of total revenue			8.8	%			9.1	%											9.0	%			9.1	%

 

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General and administrative expense increased for the three and six months ended January 31, 2025, as compared to the respective prior year periods, due primarily to higher personnel-related costs, including stock-based compensation expense, resulting from the 12% growth in our G&A headcount from January 31, 2024 to January 31, 2025, as well as higher outside services costs and technical costs related to software licenses and support, partially offset by lower depreciation expense.

Other (Expense) Income, Net

 

		Three Months Ended January 31,								Change								Six Months Ended January 31,								Change
		2024				2025				$				%				2024				2025				$				%
		(in thousands, except percentages)
Interest income, net		$	17,649			$	13,940			$	3,709				21	%		$	33,035			$	25,033			$	8,002				24	%
Amortization of debt    discount and issuance    costs and interest    expense			(16,651	)			(1,674	)			(14,977	)			(90	)%			(32,998	)			(2,420	)			(30,578	)			(93	)%
Inducement expense			—				(11,347	)			11,347				100	%			—				(11,347	)			11,347				100	%
Other			1,098				(1,274	)			2,372				216	%			(3,216	)			(2,048	)			(1,168	)			(36	)%
Other (expense) income, net		$	2,096			$	(355	)		$	2,451				117	%		$	(3,179	)		$	9,218			$	(12,397	)			(390	)%

Other (expense) income, net increased for the three months ended January 31, 2025, as compared to the prior year period, due primarily to approximately $11.3 million of inducement expense recognized during the fiscal quarter ended January 31, 2025 related to the partial repurchase of the 2027 Notes as well as a decrease in interest income on our investments, partially offset by a decrease in interest expense related to our convertible notes, as the 2026 Notes were converted during the fiscal quarter ended July 31, 2024.

Other (expense) income, net decreased for the six months ended January 31, 2025, as compared to the prior year period, due primarily to a decrease in interest expense related to our convertible notes, as the 2026 Notes were converted during the fiscal quarter ended July 31, 2024, partially offset by approximately $11.3 million of inducement expense recognized during the fiscal quarter ended January 31, 2025 related to the partial repurchase of the 2027 Notes and an increase in interest income on our investments.

Provision for Income Taxes

 

		Three Months Ended January 31,								Change								Six Months Ended January 31,								Change
		2024				2025				$				%				2024				2025				$				%
		(in thousands, except percentages)
Provision for income taxes		$	6,346			$	8,656			$	2,310				36	%		$	11,218			$	15,553			$	4,335				39	%

The increases in the income tax provision for the three and six months ended January 31, 2025, as compared to the respective prior year periods, were due primarily to an increase in our U.S. taxable income and higher foreign taxes as a result of higher taxable earnings in foreign jurisdictions, partially offset by excess tax benefits on stock options and restricted stock units.

Liquidity and Capital Resources

Our principal sources of liquidity are cash, cash equivalents and marketable securities and net accounts receivable. As of January 31, 2025, we had approximately $1,072.2 million of cash and cash equivalents, $0.3 million of restricted cash and $670.7 million of short-term investments, which were held for general corporate purposes. Our cash, cash equivalents and short-term investments primarily consist of bank deposits, money market accounts and highly rated debt instruments of the U.S. government and its agencies and debt instruments of highly rated corporations. As of January 31, 2025, we had accounts receivable of approximately $327.3 million, net of allowances of $1.6 million.

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In September 2020, we issued $750.0 million in aggregate principal amount of 2.50% convertible senior notes due 2026 to BCPE Nucleon (DE) SPV, LP, an entity affiliated with Bain Capital, LP. On June 6, 2024, BCPE Nucleon (DE) SPV, LP delivered a notice of conversion to convert $817.6 million aggregate principal amount of the 2026 Notes, representing all of the outstanding principal amount of the 2026 Notes. During the fiscal quarter ended July 31, 2024, we settled the conversion by paying $817.6 million in cash and delivering approximately 16.9 million shares of Class A common stock. For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In September 2021, we issued convertible senior notes with a 0.25% interest rate for an aggregate principal amount of $575.0 million due 2027, of which $477.3 million in principal amount was issued in exchange for approximately $416.5 million principal amount of the 2023 Notes and the remaining $97.7 million in principal amount was issued for cash. There are no required principal payments on the 2027 Notes prior to their maturity. For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In December 2024, we issued convertible senior notes with a 0.50% interest rate for an aggregate principal amount of $862.5 million due 2029. We used approximately $95.5 million of the net proceeds from the offering to repurchase $75.0 million aggregate principal amount of the outstanding 2027 Notes. There are no required principal payments on the 2029 Notes prior to their maturity. For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On February 12, 2025, we entered into a credit agreement (the "Credit Agreement") that provides for a senior secured revolving credit facility in an aggregate principal amount of $500.0 million, including a $25.0 million sublimit for the issuance of letters of credit. The Credit Agreement matures in February 2030, subject to earlier springing maturity under certain circumstances. For additional information, see Note 13 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We believe that our cash, cash equivalents and short-term investments, available borrowing capacity under the Credit Agreement, and our expected net cash provided by operating activities will be sufficient to meet our anticipated cash needs for working capital, capital expenditures, share repurchases (if any), the payment of taxes related to the net share settlement of equity awards, and convertible notes servicing and repayment requirements for at least the next 12 months. Our future cash needs will depend on many factors, including our growth strategy and plans, the timing and extent of spending to support research and development and engineering efforts; the expansion of sales and marketing activities; the introduction of new and enhanced product and service offerings; the continuing market acceptance of our products; our end customers and partners; any acquisitions of businesses, technologies or products; any share repurchases; and market, economic and financial conditions (including inflation and interest rates).

Capital Return

In August 2023, our Board of Directors authorized the repurchase of up to $350.0 million of our Class A common stock. Repurchases will be funded from available working capital and may be made at management’s discretion from time to time. The authorization has no fixed expiration date and does not obligate us to repurchase any specified number or dollar value of shares. The program may be modified, suspended or discontinued at any time. For more information on the share repurchase program, refer to Note 8 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Cash Flows

The following table summarizes our cash flows for the periods presented:

 

		Six Months Ended January 31,
		2024				2025
		(in thousands)
Net cash provided by operating activities		$	331,881			$	383,421
Net cash used in investing activities			(67,319	)			(375,455	)
Net cash (used in) provided by financing activities			(98,977	)			408,847
Net increase in cash, cash equivalents and restricted cash		$	165,585			$	416,813

 

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Cash Flows from Operating Activities

Net cash provided by operating activities was approximately $383.4 million for the six months ended January 31, 2025, compared to approximately $331.9 million for the six months ended January 31, 2024. The increase in cash provided by operating activities for the six months ended January 31, 2025 was due primarily to the increase in our net income from operations.

Cash Flows from Investing Activities

Net cash used in investing activities of approximately $67.3 million for the six months ended January 31, 2024 included approximately $455.3 million of short-term investment purchases, $36.8 million of purchases of property and equipment and $4.5 million of cash paid for acquisitions, partially offset by approximately $429.2 million of maturities of short-term investments.

Net cash used in investing activities of approximately $375.5 million for the six months ended January 31, 2025 included approximately $493.2 million of short-term investment purchases and $44.4 million of purchases of property and equipment, partially offset by approximately $162.1 million of maturities of short-term investments.

Cash Flows from Financing Activities

Net cash used in financing activities of approximately $99.0 million for the six months ended January 31, 2024 included approximately $59.2 million of repurchases of our Class A common stock, $53.2 million of taxes paid related to the net share settlement of equity awards and $1.8 million of payments for finance lease obligations, partially offset by approximately $15.2 million of proceeds from the sale of shares through employee equity incentive plans.

Net cash provided by financing activities of approximately $408.8 million for the six months ended January 31, 2025 included approximately $848.0 million of net proceeds from the issuance of the 2029 Notes and $29.3 million of proceeds from the sale of shares through employee equity incentive plans, partially offset by approximately $220.1 million of repurchases of our Class A common stock, $148.2 million of taxes paid related to the net share settlement of equity awards, $95.5 million related to the partial repurchase of the 2027 Notes, $2.8 million of third-party debt issuance costs related to the issuance of the 2029 Notes, and $1.9 million of payments for finance lease obligations.

Material Cash Requirements and Other Obligations

The following table summarizes our material cash requirements and other obligations as of January 31, 2025:

 

		Payments Due by Period
		Total				Less than 1 Year				1 Year to 3 Years				3 to 5 Years				More than 5 Years
		(in thousands)
Principal and interest payable on convertible senior notes (1)		$	1,363,452			$	952			$	500,000			$	862,500			$	—
Operating leases (undiscounted basis) (2)			159,865				29,568				62,267				57,324				10,706
Other commitments (3)			127,916				123,149				4,683				84				—
Guarantees with contract manufacturers			85,331				85,331				—				—				—
Total		$	1,736,564			$	239,000			$	566,950			$	919,908			$	10,706

 

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From time to time, in the normal course of business, we make commitments with our contract manufacturers to ensure a minimum level of financial consideration for their investment in our joint solutions. These commitments are based on revenue targets or on-hand inventory and non-cancelable purchase orders for non-standard components. We record a charge related to these items when we determine that it is probable a loss will be incurred and we are able to estimate the amount of the loss. Our historical charges have not been material.

As of January 31, 2025, we had accrued liabilities related to uncertain tax positions, which are reflected on our condensed consolidated balance sheet. These accrued liabilities are not reflected in the contractual obligations disclosed in the table above, as it is uncertain if or when such amounts will ultimately be settled.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the applicable periods. We evaluate our estimates, assumptions and judgments on an ongoing basis. Our estimates, assumptions and judgments are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our condensed consolidated financial statements, which, in turn, could change the results from those reported.

There have been no material changes to our critical accounting policies and estimates as compared to those described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024.

Recent Accounting Pronouncements

See Note 1 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have operations both within the United States and internationally and we are exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates.

Foreign Currency Risk

Our condensed consolidated results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Substantially all of our sales contracts are denominated in U.S. dollars. Our expenses are generally denominated in the currencies of the countries where our operations are located. To date, we have not undertaken any hedging transactions related to foreign currency exposure, but we may do so in the future if our exposure to foreign currency should become more significant. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. In the event our foreign sales and expenses increase, our operating results may be more significantly affected by foreign currency exchange rate fluctuations, which can affect our operating income or loss. The effect of a hypothetical 10% change in foreign currency exchange rates on our non-U.S. dollar monetary assets and liabilities would not have had a material impact on our historical condensed consolidated financial statements. Foreign currency transaction gains and losses and exchange rate fluctuations have not been material to our condensed consolidated financial statements.

A hypothetical 10% decrease in the U.S. dollar against other currencies would result in an increase in our operating loss of approximately $32.5 million and $36.2 million for the six months ended January 31, 2024 and 2025, respectively. The increase in this hypothetical change is due to an increase in our expenses denominated in foreign currencies. This analysis disregards the possibilities that rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.

Interest Rate Risk

Our investment objective is to conserve capital and maintain liquidity to support our operations; therefore, we generally invest in highly liquid securities, consisting primarily of bank deposits, money market funds, commercial paper, U.S. government securities and corporate bonds. Such fixed and floating interest-earning instruments carry a degree of interest rate risk. The fair market value of fixed income securities may be adversely impacted by a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. Therefore, we do not expect our operating results or cash flows to be materially affected by any sudden change in interest rates.

On February 12, 2025, we entered into the Credit Agreement, which provides for a senior secured revolving credit facility in an aggregate principal amount of $500.0 million, including a $25.0 million sublimit for the issuance of letters of credit. At our option, and subject to certain conditions, any borrowings under the Credit Agreement bear interest at a variable rate tied to a base rate, a term Secured Overnight Financing Rate or an alternative currency term rate, plus, in each case, an applicable margin based on our total leverage ratio. Consequently, our interest expense could fluctuate as a result of the variable interest rates applicable to any borrowings under the Credit Agreement. As of March 6, 2025, we had no borrowings and an immaterial amount of letters of credit outstanding under the credit agreement.

As of January 31, 2025, we had outstanding $500.0 million aggregate principal amount of 2027 Notes and $862.5 million aggregate principal amount of 2029 Notes. The 2027 Notes and the 2029 Notes are not recorded at fair value but are measured at fair value on a quarterly basis for disclosure purposes. See Note 3 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The 2027 Notes and the 2029 Notes have a fixed annual interest rate and therefore we have no economic exposure to changes in interest rates. However, the fair value of the 2027 Notes and the 2029 Notes is affected by interest rates. Generally, the fair value of the 2027 Notes and the 2029 Notes will increase as interest rates decrease and decrease as interest rates increase. In addition, the fair values of the 2027 Notes and the 2029 Notes are affected by the price of our Class A common stock. The fair value of the 2027 Notes and the 2029 Notes will generally increase as the price of our Class A common stock increases and will generally decrease as the price of our Class A common stock decreases.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on management’s evaluation, our principal executive officer and principal financial officer concluded, as of the end of the period covered by this report, that our disclosure controls and procedures are effective at a reasonable assurance level.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recently completed fiscal quarter ended January 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under the "Legal Proceedings" subheading in Note 7 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

You should carefully consider the risks and uncertainties described under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2024, which is incorporated herein by reference, together with the additional risk factor set forth below and all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations", before making a decision to invest in our Class A common stock. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect our business. Except as set forth below, there have been no material changes from the risks and uncertainties previously disclosed under the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024.

Servicing and repaying our debt, including the 2027 Notes and 2029 Notes and any borrowings under the Credit Agreement, may require a significant amount of cash, and we may not have sufficient cash to pay our indebtedness.

As of January 31, 2025, we had outstanding $500.0 million aggregate principal amount of 2027 Notes and $862.5 million aggregate principal amount of 2029 Notes (collectively, the “Notes”). The 2027 Notes bear interest at a rate of 0.25% per annum (with such interest payable semi-annually in arrears on each April 1 and October 1), and the 2029 Notes bear interest at a rate of 0.50% per annum (with such interest payable semi-annually in arrears on each June 15 and December 15). In addition, borrowings under the Credit Agreement will bear interest at a base rate, a term Secured Overnight Financing Rate or an alternative currency term rate, plus, in each case, an applicable margin based upon our total leverage ratio, payable at regular intervals as set forth in the Credit Agreement. Our ability to make scheduled payments in respect of, or to refinance our, indebtedness may depend on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not be able to generate cash flows from operations in the future that are sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive, restructuring debt, or selling assets. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. Higher prevailing interest rates and/or a tightening supply of credit would adversely affect the terms upon which we would be able to refinance our indebtedness, if at all. As a result, we may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, the Credit Agreement contains restrictive covenants that limit us, and any of our future debt agreements may contain restrictive covenants that may limit or prohibit us, in each case, from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default, which could result in the acceleration of our debt.

In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:

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Any of these factors could harm our business, results of operations, and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

We may not have sufficient cash or the ability to raise the funds necessary to settle conversions of the Notes in cash, to repay the Notes at maturity, or to repurchase the Notes upon a fundamental change.

Holders of the Notes will have the right to require us to repurchase for cash all or a portion of their Notes upon the occurrence of a fundamental change before the applicable maturity date at a repurchase price equal to 100% of the principal amount of such Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. Moreover, we will be required to repay the Notes in cash at their maturity unless earlier converted, redeemed or repurchased. We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the Notes of a series surrendered therefor or pay cash with respect to the Notes of such series being converted or at their maturity. In addition, our ability to repurchase the Notes of a series or to pay cash upon conversions of such Notes or at their maturity may be limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to repurchase the Notes of a series at a time when the repurchase is required by the applicable indenture or to pay cash upon conversions of such Notes or at their maturity as required by the applicable indenture would constitute a default under such indenture. A default under the applicable indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. Moreover, the occurrence of a fundamental change under the applicable indenture could constitute an event of default under any such agreement. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness or to pay cash amounts due upon conversion, upon required repurchase or at maturity of the applicable series of the Notes.

The conditional conversion feature of the 2027 Notes or the 2029 Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the 2027 Notes or the 2029 Notes is triggered, holders of such Notes will be entitled to convert their Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity. In addition, even if holders of the Notes of a series do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes of such series as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for the Notes, which may be settled in cash upon conversion, has had, and may continue to have, a material effect on our reported or future financial results.

We utilize the if-converted method for our diluted earnings per share calculation, the effect of which is that the transaction is accounted for as if the outstanding Notes were to be converted into shares of our Class A common stock at the respective conversion rate in the beginning of the respective period, even if the Notes of a series are not yet then convertible and even if, upon any conversion of any Notes of a series, we may elect to settle the conversion using cash or a combination of cash and shares of our Class A common stock. As a result, our diluted earnings per share could be adversely affected.

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Our revolving credit facility contains a financial covenant and other covenants that may restrict our actions, and a failure to comply with these covenants could have a material adverse effect on our financial condition.

In February 2025, we entered into the Credit Agreement. The Credit Agreement includes covenants that limit our ability to, among other things, incur liens, make investments, incur indebtedness, merge or consolidate with other companies, sell substantially all of our assets, make restricted payments, undergo certain fundamental changes, and prepay subordinated debt. In addition, the Credit Agreement contains a financial covenant that requires us to maintain compliance with a maximum consolidated total leverage ratio, calculated as set forth in the Credit Agreement and tested at the end of each fiscal quarter. As a result of these restrictions, we may be limited in how we conduct business, unable to raise additional debt or equity financing to operate during general economic or business downturns, or unable to compete effectively or to take advantage of new business opportunities, and our ability to comply with these covenants depends on many factors, some of which are beyond our control. The Credit Agreement contains various events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments, and events constituting a change of control, in each case subject to thresholds and cure periods as set forth in the Credit Agreement. Upon the occurrence and during the continuance of such an event of default, our lenders would have the right to terminate their commitments and accelerate our obligations under the Credit Agreement as well as exercise other rights and remedies provided for under the Credit Agreement, the other loan documents and applicable law. If outstanding borrowings under the Credit Agreement were to be accelerated, we may not have sufficient cash on hand or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately adversely affect our business, cash flows, results of operations, and financial condition.

Conversion of the Notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our securities.

The conversion of some or all of the Notes, to the extent we deliver shares upon conversion thereof, will dilute the ownership interests of existing stockholders, reduce our earnings per share and potentially have an adverse effect on the price of our securities. Any sales in the public market of our Class A common stock issuable upon such conversion could adversely affect prevailing market prices of our securities. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our Class A common stock could depress the price of our securities.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

The following table summarizes the share repurchase activity for the three months ended January 31, 2025:

Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)				Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
		(in thousands, except per share amounts)
November 1 - 30, 2024			—			$	—				—			$	198,913
December 1 - 31, 2024			3,087			$	64.78				—			$	198,913
January 1 - 31, 2025			—			$	—				—			$	198,913
Total			3,087								—

 

This table excludes shares withheld from stock awards to settle employee withholding obligations related to the vesting of such awards.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended January 31, 2025, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

Item 6. Exhibits

See the Exhibit Index below for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

 

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EXHIBIT INDEX

 

		Incorporated by Reference
Number	Exhibit Title	Form	File No.	Exhibit	Filing Date	Filed Herewith
4.1	Indenture, dated December 16, 2024, between Nutanix, Inc. and U.S. Bank Trust Company, National Association.	8-K	001-37883	4.1	12/16/2024
4.2	Form of 0.50% Convertible Senior Note due 2029 (included in Exhibit 4.1).	8-K	001-37883	4.2	12/16/2024
10.1*	Credit Agreement, dated as of February 12, 2025, among Nutanix, Inc., as borrower, Bank of America, N.A., as administrative agent, collateral agent and L/C issuer, and the lenders party thereto.	8-K	001-37883	10.1	02/12/2025
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XRBL tags are embedded within the Inline XBRL document					X
101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents					X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)					X

 

* The schedules and exhibits to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any such omitted schedule or exhibit, or any section thereof, to the SEC upon request.

 

** These exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of Nutanix, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filings.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		NUTANIX, INC.
Date: March 6, 2025		/s/ Rukmini Sivaraman
		Rukmini Sivaraman
		Chief Financial Officer
		(Principal Financial Officer)

 

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