Nutanix .NEXT 2020: 7 Biggest Product Announcements

CRN breaks down the seven biggest launches Tuesday at Nutanix .NEXT—from new hyperconverged infrastructure software to Kubernetes and security offerings.

See the latest entry: Nutanix .Next 2021: 5 Huge Launches You Need To Know

Nutanix’s virtual .NEXT conference kicked off Tuesday as the hyperconverged and hybrid cloud software standout launched a slew of new products and as-a-service offerings ranging from hyperconverged infrastructure software to Kubernetes and security offerings.

“There’s a lot of room for growth in hyperconverged, and channel partners have a huge opportunity right now with Nutanix,” said Nutanix CTO Rajiv Mirani in an interview with CRN. “We’ve made significant investments in R&D to advance our core software stack as you can see with these releases. We’re continuing to set the bar for innovation.”

Thousands of people are expected to participate in Nutanix’s free .NEXT Digital Experience conference, which runs from Sept. 8 to Sept. 11.

CRN breaks down the seven biggest product news and announcements unveiled at Nutanix .NEXT.

One of Nutanix’s biggest launches at .NEXT is its new Karbon Platform Services, a Kubernetes multi-cloud Platform as a Service (PaaS) with automated system-managed security. The new cloud-native PaaS gives software developers a turnkey managed services experience on-premises, in the public cloud or at the edge to build and run cloud-native applications. Karbon Platform Services also lets developers decouple applications from the underlying infrastructure.

“Our Karbon Platform Services is a full PaaS offering that essentially takes some of the most common cloud-native services and makes them available on-premises. So capabilities like Containers as a Service, but also Functions as a Service, serverless applications, support for monitoring with Prometheus, as well as advanced networking and data services,” said Mirani. “Few applications today are just self-contained inside a container, they do use all these other PaaS services as well. … We wanted to make Karbon very simple.”

Karbon Platform Services builds on the core Kubernetes life-cycle management capabilities with Karbon as an integrated component of the Nutanix HCI software. This new offering brings automated system-managed security and multitenancy to run a wide range of microservices-based applications across multiple cloud infrastructures, said Mirani.

“It’s a great opportunity for the channel because as people monetize their applications, they look for new ways to build them,” said Mirani. “This is something that could be a great value-added service that our partners can provide.

Nutanix Karbon Platform Services is now available.

Nutanix has revamped its flagship HCI architecture by injecting NVMe-based SSDs and Intel Optane SSDs, delivering up to 50 percent faster performance for I/O-intensive workloads such as large databases.

“It improves performance on some of the most complex workloads that we have by up to 50 percent. Things like latencies when you have sustained operations or IOPS [Input/Out Operations Per Second] when you have sustained operations. The way we did this was to rearchitect AOS,” Nutanix’s Mirani told CRN. “Obviously, it lets us go after the most critical applications like SAP HANA, Epic, etc. So that’s always extending the reach of what we can do.”

Nutanix’s new Blockstore technology self-manages storage with greater efficiency than traditional file systems. In addition, Nutanix HCI software adds support with the Storage Performance Development Kit, an open-source library developed by Intel that enables applications to access NVMe capacity directly in order to avoid any OS or kernel-level overhead and drive even faster workload performance.

“The net result is that with these improvements in performance, we continue to extend our lead,” said Mirani. “It really makes us well positioned for some of the newer hardware technologies that we just started working with.”

The enhanced Nutanix HCI software is now available.

Nutanix is launching a new centralized SaaS-based management plan, Flow Security Central, which provides compliance monitoring, network visibility and security operations across Nutanix-powered private clouds and public cloud environments. The offering also provides new micro-segmentation security planning as well as security audit and remediation.

“Flow Security Central is not just networking, it’s a lot more than that. It provides a view into your security posture, into your compliance requirements as well as doing networking monitoring. Think of it as single pane of glass from which you can monitor your Nutanix infrastructure, look for compliance violations, you can get recommendations on how to fix them—but on top of that, you can look into your network traffic, get recommendations on micro-segmentation rules and so on,” said Mirani.

Flow Security Central provides customers with a hub for their security operations so they can assess their overall security posture of Nutanix deployments and generate detailed recommendations to bring environments into compliance. In addition, it offers the network visibility and context needed to secure cloud networks and applications, according to Mirani.

Flow Security Central is now available.

Nutanix is taking its infrastructure and hypervisor management offering, Prism, to the next level with the launch of Prism Ultimate, a cloud-based SaaS service.

Prism Ultimate adds advanced application insight and automation for troubleshooting application-related infrastructure bottlenecks. It also offers visibility into cloud IT resource consumption for targeted IT cost reductions and more accurate budgeting.

Nutanix Prism can also monitor non-Nutanix environments, including popular virtualization stacks, to give Nutanix customers a single pane of glass for their entire infrastructure.

“Prism Ultimate is mainly based around analytics and monitoring, but instead of running on-premises this will run as a SaaS service in the cloud,” said Mirani. “We can apply a lot more resourcing in terms of CPU memory and so on, and provide even deeper insight into what’s happening. Plus, over time, you’ll be able to do cross-customer analytics.”

Prism Ultimate is currently available.

Built into Nutanix’s AHV virtualization, Nutanix Flow delivers advanced networking and security services to provide visibility into a virtual network as well as application protection and automation of common network operations.

At .NEXT, Nutanix introduced Flow Networking, aimed at simplifying the tasks of creating, isolating and managing software-defined networks that connect applications running in private data centers and in public clouds. The goal is to significantly simplify networking for hybrid and multi-cloud deployments. The new offering is based on virtual private cloud (VPC) constructs used by the leading public cloud providers and is a result of the company’s multiyear investment in Nutanix Xi Cloud that powers Nutanix’s cloud-based offerings.

“We have our own Xi offering, which lets you do disaster recovery as a service. We’ve developed the technology in the context of that so when people fail over to the Nutanix cloud, they don’t have to change their IP addresses to get their own virtual cloud which they can operate. We’re making that technology available on-premises,” said Mirani. “So people can now create on-premises multiple virtual private clouds completely isolated from each other and enable networking multitenancy within their on-premises infrastructure.”

The new software-defined networking capabilities of Nutanix Flow Networking are currently in development and will become available in late 2020, according to Mirani.

Nutanix also unveiled Calm as a Service, a hosted version of its application management and orchestration offering to support DevOps teams.

“Calm itself used to run only on a Nutanix AOS cluster. We’re now making it available as a service. You’ll be able to orchestrate and automate your environments from the cloud,” said Mirani. “So now there’s no dependency at all on Nutanix. Of course, you’ll still be able to orchestrate and automate Nutanix environments as well, but if you’re using it for VMware or cloud environments you can do that straight from the cloud.”

Nutanix Calm automates provisioning, scaling and life-cycle management for the cloud. Calm as a Service is now available.

On the channel partner front, Nutanix launched its new Elevate Partner Program that for the first time brings together all of Nutanix’s partner ecosystem from VARs, systems integrators and distributors to service providers and hardware vendors.

Elevate includes new front-end margins, mechanisms to help deliver margin-rich services, better rebate levels for bringing in new business, and a new rebate that rewards Elevate Cloud Champion partners for selling across the entire Nutanix portfolio.

Nutanix also created a new partner portal with greater access to information and insight across the partner ecosystem through custom-branded marketing materials, training tools and personalized insight, allowing for more effective data-driven decisions. Another new enhancement is Nutanix’s new Performance+ Deal Registration, designed to increase incentive potential and opportunity protection. The deal registration program provides increased partner discounts, more predictable deal margins and enhanced opportunity protection.

Nutanix also launched a new Americas Partner Support Center – a team of dedicated channel sales, systems engineers and marketing resources—who will deliver an enhanced partner experience and will be available to usher the partner community through the transition along with ongoing presales support. The Elevate Partner Program emphasizes partner capabilities and competencies to sell and support Nutanix’s portfolio rather than revenue thresholds.

Nutanix: Leading The Charge With AI Deals To Drive Upside In 2024

Sundry Photography

With markets soaring to YTD highs, many value-conscious investors are asking the same question: is it too late for me to move cash off the sidelines and throw money into the market rebound? My answer, of course, is no: but it requires thoughtful stock picking. In particular, we need to focus in companies that still have room to run from a valuation perspective, and have catalysts for growth in 2024.

Nutanix (NASDAQ:NTNX) is a fantastic choice in this regard. The hyperconverged infrastructure software company has been on a tear this year as it executed very strong top line trends amid a challenging year for IT. Up more than 75% year to date, I still believe there is more upside for next year.

I last wrote a bullish note on Nutanix, when the stock was trading closer to $36 per share. Even with the strong rally since then (which has been in concert with other mid-cap tech stocks rallying on the back of lower interest rate expectations), I think Nutanix’s stock outperformance has been accompanied by both encouraging and new growth drivers as well as meaningful profit expansion.

AI is by now a bit of a tired conversation in the markets, and the top “obvious” plays like C3.ai (AI) and Palantir (PLTR) have already seen a substantial boom and bust cycle this year. But I also think companies like Nutanix that enjoy tangential benefits to AI adoption have plenty to benefit from increased interest in automation as well.

Nutanix management believes that AI will be deployed close to where the data is stored. And that’s what Nutanix is all about: building a fast infrastructure around data that can be rapidly used for analytics. In Q1, Nutanix started selling its “GPT in a Box” solution; and to a federal agency leveraging it for a crime detection use case, no less (which harkens very strongly to Palantir’s functions). Going forward, I see many more of these use cases driving continued demand for next-gen data platforms like Nutanix - especially for those organizations that want to run AI apps outside of the cloud and in their own data warehouses.

For all these reasons, I remain quite bullish on Nutanix. As a reminder to investors who are newer to this name, here is my full updated long-term bull case on Nutanix:

In spite of these strengths, I continue to think that Nutanix trades cheaply. At current share prices near $46, the company trades at a market cap of $11.24 billion. After netting off the $1.44 billion of cash and $1.22 billion of convertible debt on Nutanix’s most recent balance sheet, the company’s resulting enterprise value is $11.02 billion.

Meanwhile, for the current fiscal year FY24 (the year for Nutanix ending in September 2024), Wall Street analysts are expecting the company to generate $2.48 billion in revenue, representing 17% y/y growth. This puts Nutanix’s valuation at 4.4x EV/FY24 revenue.

In my view, Nutanix’s combination of top-line growth catalysts (including and especially AI-driven use case expansion) plus high gross margins that are yielding strong profit gains merit at least a 5.5x revenue multiple for the company, implying a $57 price target for the stock and ~23% upside from current levels.

Stay long here and keep riding the recent upside trends.

Let’s now cover Nutanix’s latest quarterly results in greater detail. The Q3 earnings summary is shown below:

Nutanix Q3 earnings summary (Nutanix Q3 earnings release)

Nutanix’s revenue grew 18% y/y to $511.1 million, well ahead of Wall Street’s $500.8 million (+15% y/y) by a three-point margin. The company also saw strength in ARR adds, growing 30% y/y to $1.66 billion - a $102 million sequential increase to the recurring revenue base, up from $95 million in the previous quarter.

Nutanix ARR (Nutanix Q3 earnings release)

The company noted specific strength in the federal government sector in Q1, including the aforementioned GPT-in-a-Box deal: which was Nutanix’s first such win for the product with an existing large customer. It’s also comforting to note that public sector clients - which have a reputation for longer approval processes - have been quick to adopt new AI-related products, which is a harbinger for increased adoption to benefit calendar 2024 trends.

Nutanix has also been able to drive go-to market expansion through reseller partners. In particular, it has deepened its relationship with Cisco, whose sales team is now pushing a joint Cisco-Nutanix solution.

Still, the company is noting some overhang of macro impacts, and is also expecting some of these effects to linger into next year. Per CFO Rukmini Sivaraman’s remarks on the Q1 earnings call:

Similar to last quarter, we saw a modest elongation of average sales cycles, relative to the year ago quarter […]

We are seeing continued new and expansion opportunities for our solutions, despite the uncertain macro environment. However, as we mentioned previously, we have continued to see a modest elongation of average sales cycles. Our fiscal year '24 new and expansion ACV performance outlook assumes some impact from these macro dynamics. Second, the guidance assumes that our renewals business will continue to perform well.

And a reminder that while our available to renew, or ATR pool, continues to grow year-over-year, it is growing at a slower pace in fiscal year '24, but is expected to reaccelerate in fiscal year '25, based on our current view.”

Note that the comment on higher renewal base starting in FY25 is a great leading indicator for continued strong growth trajectory.

From a profitability standpoint, pro forma gross margins hit a sky high level of 85.9%, up 250bps y/y. Note that one of the common misconceptions of Nutanix - based on its earlier post-IPO business model - was that it sold commoditized hardware. Now with margins approaching 90% and towering over most of the software sector, it’s difficult to argue that Nutanix is anything but a software company.

Pro forma operating income of $79.5 million also notched a 15.5% margin, up from just 2.3% in the year ago quarter. Needless to say, Nutanix is truly showing the profitability potential of a more mature software company that has slowed down opex growth and is capitalizing on strong expansions/renewals.

Choosing companies with both a reasonable valuation and clear catalysts for outperformance in 2024 is a critical strategy for outperforming the markets next year. Though Nutanix has already recorded plenty of gains this year, there’s still room to go even further.

Why Nutanix Stock Popped Today