Hybrid multicloud computing company Nutanix (NASDAQ: NTNX) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 13.5% year on year to $670.6 million. Next quarter’s revenue guidance of $710 million underwhelmed, coming in 5.1% below analysts’ estimates. Its non-GAAP profit of $0.41 per share was in line with analysts’ consensus estimates.
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Nutanix (NTNX) Q3 CY2025 Highlights:
- Revenue: $670.6 million vs analyst estimates of $676.7 million (13.5% year-on-year growth, 0.9% miss)
- Adjusted EPS: $0.41 vs analyst estimates of $0.41 (in line)
- Adjusted Operating Income: $131.8 million vs analyst estimates of $136.3 million (19.7% margin, 3.3% miss)
- Revenue Guidance for the full year is $2.84 billion at the midpoint, below analyst estimates of $2.93 billion
- Operating Margin: 7.4%, up from 4.6% in the same quarter last year
- Free Cash Flow Margin: 26%, down from 31.8% in the previous quarter
- Annual Recurring Revenue: $2.28 billion vs analyst estimates of $2.27 billion (17.6% year-on-year growth, 0.7% beat)
- Billings: $708.1 million at quarter end, up 19.7% year on year
- Market Capitalization: $13.98 billion
Company Overview
Originally pioneering hyperconverged infrastructure to break down traditional data center silos, Nutanix (NASDAQ: NTNX) provides a unified software platform that enables organizations to run applications and manage data across private, public, and hybrid cloud environments.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Nutanix grew its sales at a 14.9% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Nutanix.
Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Nutanix’s annualized revenue growth of 16.1% over the last two years is above its five-year trend, suggesting some bright spots. 
This quarter, Nutanix’s revenue grew by 13.5% year on year to $670.6 million but fell short of Wall Street’s estimates. Company management is currently guiding for a 8.4% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 12.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Nutanix’s ARR punched in at $2.28 billion in Q3, and over the last four quarters, its growth was solid as it averaged 17.6% year-on-year increases. This performance aligned with its total sales growth, reflecting the company’s ability to maintain strong customer relationships and secure longer-term commitments. Its growth also contributes positively to Nutanix’s predictability and valuation, as investors typically prefer businesses with recurring revenue. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Nutanix is extremely efficient at acquiring new customers, and its CAC payback period checked in at 18.8 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Nutanix more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.
Key Takeaways from Nutanix’s Q3 Results
It was good to see Nutanix narrowly top analysts’ annual recurring revenue expectations this quarter. On the other hand, its full-year revenue guidance missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $51.69 immediately after reporting.
So should you invest in Nutanix right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
