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What’s Driving Deferred Revenue Growth for Nutanix?

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Key drivers of deferred revenue growth

Enterprise cloud management operator Nutanix (NTNX) has sustained strong growth in deferred revenue driven by growing contract wins and a strong product portfolio. Its rising Global 2000 customer list has also led to higher deferred revenue growth.

The company struck ~241 deals of more than $1 million in fiscal 2018, which also supported an increase in its deferred revenue. The cloud enterprise software operator exited fiscal 2018 with 26 lifetime bookings of over $10 million compared to 11 bookings of over $10 million in fiscal 2017.

Other broader factors, such as the ongoing data transition of enterprises toward the cloud platform, have also led to strong demand for cloud computing technology.

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Detailed analysis

In the last five quarters, Nutanix’s deferred revenue grew at a CAGR (compound annual growth rate) of 14.4%. In the graph above, we can see that the company’s deferred revenue has maintained an increasing trend driven by an increase in the sizes of the deals.

In the fiscal fourth quarter, Nutanix’s unearned revenue, which includes both its short-term and long-term revenue, came in at nearly $631 million, up 71% YoY (year-over-year). The company has continued to generate solid revenue growth in recent quarters. Its Software business remains a key driver buoyed by huge cloud adoption in different organizations. In the reported quarter, the company’s Software revenue rose 45.3% to $189 million, whereas its overall revenue rose 20.6% YoY to $304 million.

Moreover, the company’s partnership with PC makers such as Dell and virtual desktop providers such as Citrix (CTXS) may not only drive its software revenue but also increase its deferred revenue going forward.

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