Nutanix: Mid-Teens Growth Is Easily Achievable

Investment Summary - Nutanix (NASDAQ:NTNX) maintains a buy rating due to strong demand momentum and the ability to capture market share from VMware [2][8] 4Q24 Results Update - NTNX reported 4Q24 adjusted revenue of $548 million, reflecting an 11% year-over-year growth, which is a deceleration from 1Q24's 16.9% growth [3] - Adjusted gross margins improved to 86.9%, with a 110 basis points expansion from 4Q23, sustaining the adjusted EBIT margin at 12.9% [3] Growth Outlook - The slowdown in headline growth is attributed to a tough comparison base from the previous year, with 4Q24 growth being an all-time high over the past 12 quarters on a two-year stack basis [4] - Annual Contract Value (ACV) billings growth accelerated from 20% in 3Q24 to 21% in 4Q24, while Annual Recurring Revenue (ARR) growth remained stable at over 20% [4] - The net retention rate (NRR) fell by 900 basis points to 114% in 4Q24, but this is not indicative of increased churn; rather, it reflects a higher mix of large deals in the pipeline [4] - NTNX is positioned to capture market share from VMware due to customer dissatisfaction with Broadcom's pricing strategy post-acquisition [4] Valuation - NTNX is valued at $79 based on a forward revenue approach, with growth assumptions of 15% for the next three years, supported by the potential benefits from share loss from VMware [5] - The market has recognized this opportunity, as NTNX's valuation increased from approximately 5.5x to 6.2x post-earnings despite slow headline revenue growth [5]