FinanceLooker

Excrept from filing document 2025-07-31

The aggregate market value of the registrant s common stock held by non affiliates of the registrant as of January 31 2025 the last business day of the registrant s most recently completed second fiscal quarter was approximately 18 3 billion based upon the closing sale price of such stock on the Nasdaq Global Select Market The registrant has no non voting common equity
As noted herein certain information called for by Parts II and III is incorporated by reference to specified portions of the registrant s definitive proxy statement to be filed in conjunction with the registrant s 2025 annual meeting of stockholders which is expected to be filed not later than 120 days after the registrant s fiscal year ended July 31 2025
This Annual Report on Form 10 K 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 Annual Report on Form 10 K 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 Annual Report on Form 10 K include but are not limited to statements regarding
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 in Part I Item 1A Risk Factors in this Annual Report on Form 10 K 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 Annual Report on Form 10 K 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 Annual Report on Form 10 K 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
Nutanix Inc we us our or Nutanix is a hybrid multicloud computing leader offering organizations a unified software platform for running applications and AI and managing data anywhere Our vision is to simplify the deployment and operation of the increasingly distributed landscape of apps and data while freeing organizations to focus on business goals Our mission is to delight customers with an open secure platform with rich data services that increases their ability to take advantage of new technologies such as cloud native and AI optimizes how they run their organizations today and accelerates innovation efficiency and growth
The Nutanix Cloud Platform is designed to enable organizations to build 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 while supporting customer choice across server platforms storage options public and managed clouds and container and virtualization platforms The Nutanix Cloud Platform supports a wide variety of workloads with varied compute storage and network requirements including business critical applications data platforms including SQL NoSQL and vector databases and business intelligence applications enterprise AI workloads including machine learning generative AI and agentic AI general purpose workloads including system infrastructure networking and security end user computing and virtual desktop infrastructure services and cloud native applications including modern containerized applications
We originally pioneered hyperconverged infrastructure HCI to break down legacy silos by merging compute storage and networking into a single software defined data center platform We continued to innovate and developed Nutanix AHV our native hypervisor that offers enterprise grade virtualization and built in Kubernetes support To provide our customers with more choice we further engineered our software solutions to run on a variety of server platforms and with a variety of external storage providers Most recently we have extended our software platform support to include external storage from qualified partners To provide our customers with the flexibility to choose their preferred license levels and durations based on their specific business needs we reshaped our licensing by completing a transition to a subscription based business model In addition to enabling enterprise AI and simplifying hybrid multicloud deployments we have a further long term vision to enable developers to build modern container based applications once and run them anywhere through Project Beacon our multi year effort to provide consistent Kubernetes platform management and data centric platform services across clouds
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 For more information see the section titled Components of Our Results of Operations included in Part II Item 7 as well as Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K
The Nutanix Cloud Platform delivers a set of software products solutions and services to enable our customers to run and manage their private cloud edge public cloud managed cloud and hybrid multicloud environments The Nutanix Cloud Platform s scale out architecture common operating model across locations enterprise grade data services and freedom of infrastructure choice enable organizations to standardize on the Nutanix Cloud Platform as a single cloud platform to run a wide variety of workloads
Nutanix Cloud Infrastructure NCI is a distributed HCI for enterprise IT applications NCI software combines compute storage and networking resources from a cluster of servers into a single logical pool with integrated resiliency security performance and simplified administration NCI includes the following underlying features and services
Nutanix Kubernetes Platform NKP is an enterprise grade Kubernetes platform that enables organizations to accelerate app development without lock in NKP brings resiliency security and Day 2 operations to cloud native applications through a complete open and enterprise grade Kubernetes platform NKP accelerates app delivery with an intelligent platform that standardizes management for fleets of clusters across public clouds data centers and the edge
Nutanix Unified Storage NUS is a software defined data services platform that consolidates access and management of siloed block file and object storage into a single platform Powered by data services such as analytics ransomware protection lifecycle management and data protection NUS enables organizations to adapt to fast changing applications needs and shift their management focus from data storage to more strategic global data management NUS includes the following underlying features and services
Nutanix Database Service NDB is a platform that automates management of diverse database environments with a database as a service platform functionality across on premises and public cloud environments NDB automates database lifecycle management and integrates with cloud native development processes
Nutanix Enterprise AI NAI is a centralized inferencing control plane that is secure and sovereign helping standardize generative AI infrastructure across an organization to create adaptive AI factories and agents NAI can provide inferencing on any CNCF Kubernetes running across public clouds data centers and the edge with Day 2 operations security and resilience
The Nutanix Cloud Platform can be deployed in core data centers at the edge or in public or managed clouds running on a variety of qualified hardware platforms in popular public cloud environments such as Amazon Web Services AWS Microsoft Azure Azure and Google Cloud currently in public preview and expected to become generally available in the future through NC2 or in the case of our cloud based software and software as a service SaaS offerings via hosted service Our subscription term based licenses are sold separately and typically have durations ranging from one to five years Our cloud based SaaS subscriptions have durations 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 original equipment manufacturers OEMs
The Nutanix Cloud Platform typically includes 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
Channel Partners Our channel partners sell our solutions to end customers and in certain cases may also deliver our solutions to end customers through a managed or integrated offering Our Elevate Partner Program simplifies engagement for our partner ecosystem using a consistent set of tools resources and marketing platforms Our channel partners include distributors resellers managed service providers telcos and global systems integrators Our top two distributors to our end customers represented 48 47 and 41 of our total revenue for fiscal 2023 2024 and 2025 respectively
OEM Partners Our software can run on qualified hardware from Cisco Systems Inc Cisco Dell Technologies Dell Fujitsu Technology Solutions GmbH Fujitsu Hewlett Packard Enterprise HPE and Lenovo Group Ltd Lenovo as part of Cisco Compute Hyperconverged with Nutanix Dell XC Fujitsu XF HPE DX and Lenovo Converged HX respectively HPE also delivers our software with HPE DX servers as a service through the HPE GreenLake offering Our OEM partners sell our solutions to end customers We have also developed a new solution with Dell involving the integration of the Nutanix Cloud Platform and Dell PowerFlex which is the first external storage supported and integrated with Nutanix AHV and our platform as well as with Cisco to certify Cisco UCS blade servers to enable organizations to repurpose existing deployed servers that are qualified to run Nutanix AHV
Ecosystem Partners We have developed relationships with a broad range of leading technology companies that help us deliver world class solutions to our customers Through the Technology Alliance Partner and AI Partner arms of our Elevate Partner Program our developer application networking and security data protection hardware and infrastructure partners receive access to resources that allow them to validate and integrate their products with Nutanix solutions and engage in joint sales training and enablement Such integrations enable a simpler deployment and consumption experience for our customers in their environments and increase adoption of our platform We have also developed and announced strategic technology partnerships that bring together best in class solutions across the ecosystem into integrated offerings and demonstrated interoperability and support for our customers including partnerships with Advanced Micro Devices Inc Citrix Systems Inc Intel Corporation Nvidia Corporation Omnissa LLC Palo Alto Networks Inc and Pure Storage Inc In addition we work closely with our technology partners through co marketing and lead generation activities in an effort to broaden our marketing reach and help us win new customers while retaining existing ones
Cloud Partners Our partnerships with leading public cloud providers support our vision of a hybrid multicloud NC2 extends the availability of our core HCI software and other solutions to AWS and to Microsoft Azure In May 2025 we announced the public preview of NC2 on Google Cloud further expanding the reach of our platform across leading public cloud providers
We have end customers across a broad range of industries such as financial services retail manufacturing public sector automotive and other transportation consumer goods education energy healthcare media technology and telecommunications We also sell to service providers which also use the Nutanix Cloud Platform to provide a variety of cloud based services to their customers We had a broad and diverse base of over 29 000 end customers as of July 31 2025 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
Sales We primarily engage with our end customers through our global sales force who directly interact with key IT decision makers while also providing sales development opportunity qualification and support to our channel partners We have established relationships with our channel partners who represent many of the key resellers and distributors of data center infrastructure software and systems in each of the geographic regions where we operate We also engage our end customers through our OEM partners which license our software and package it with their hardware and sell through their direct sales forces and channel partners We expect to continue leveraging our relationships with our channel and OEM partners and deepening relationships with our cloud and ecosystem partners to reach our end customers
Marketing Our marketing team enables our global sales force and sales via our partner ecosystem Our marketing focuses on educating our customers prospects partners media and analysts and influencers about the benefits and business outcomes our cloud software platform and solutions can deliver The breadth of our product portfolio allows us to engage multiple buyer and user personas across the organization including senior executives IT professionals and developers Over the past year we have focused on driving market awareness of our virtualization cloud native and enterprise AI ready capabilities amid ongoing industry disruption In addition we continue to drive market awareness of our evolution from a pioneer in HCI to a provider of a unified platform that helps enterprises manage the growing complexity of virtualized containerized and enterprise AI workloads across hybrid multicloud environments We seek to create and capture buyer demand through a variety of outbound and inbound marketing programs that include email digital marketing corporate and third party events that generate customer and prospect awareness including our annual user event NEXT in person and virtual demand generation activities social media outreach media and analyst relations activities learning certifications community programs platform test drives thought leadership and our website Our robust community empowers customers and partners to share and discuss best practices for leveraging our solutions as well as network with peers We foster strategic marketing partnerships with our ecosystem of technology channel OEM system integrator and service provider partners to expand market reach increase brand awareness and drive business growth Through our unified Elevate Partner Program we offer qualified partners access to market development funds co branded marketing campaigns joint demand programs and comprehensive learning paths
Our research and development efforts are focused primarily on enhancing our existing technologies developing new technologies in current and adjacent markets and supporting existing end customer deployments Our research and development teams include distributed systems software engineers platform engineers systems engineers user interface engineers and user experience designers A large portion of our research and development team is based in San Jose California and India We also maintain research and development centers in North Carolina Serbia Washington Germany Mexico and the United Kingdom We plan to dedicate significant resources to our continued research and development efforts and intend to continue to invest in our global research and development teams to support enhancements to our solutions improve integration with ecosystem partners and expand the range of technologies and features available through our platform We believe that these investments will support our long term growth strategy although they may result in increased expenses and adversely affect our profitability in the near term
We do not manufacture any hardware The Nutanix branded NX series hardware platforms are manufactured by Super Micro Computer Inc Supermicro Supermicro designs assembles and tests the Nutanix branded NX series hardware platforms and it procures the components used in the NX series hardware platforms directly from third party suppliers Our agreement with Supermicro automatically renews annually in May for successive one year periods thereafter with the option to terminate upon each annual renewal Distributors handle fulfillment and shipment for certain end customers but do not hold inventory
We operate in the intensely competitive cloud infrastructure and platform services markets and compete with a broad range of companies that sell software and hardware to build and operate private clouds integrated systems and standalone storage and servers as well as cloud services providers and managed service providers These markets are characterized by constant change rapid innovation and evolving licensing and consumption models We face competition from a broad range of providers including among others
Competition generally varies by workload and customer segment and customers often evaluate multiple alternatives simultaneously Several of our competitors are also our partners resellers or OEMs in certain offerings As the market in which we compete continues to develop we expect it will continue to attract new companies as well as existing larger vendors Some of our competitors may also expand their product and service offerings acquire or invest in competing businesses or emerging technologies offer differentiated pricing terms bundle their products with other products and capabilities including AI machine learning generative AI and emerging agentic AI capabilities provide closed technology platforms partner with other companies to develop joint solutions or otherwise leverage their scale brand recognition or ecosystem relationships to gain a competitive advantage Furthermore as we expand our product offerings we may expand into new markets and we may encounter additional competitors in such markets Additionally as companies increasingly offer competing solutions they may be less willing to cooperate with us as an OEM or otherwise
We have also strategically expanded into a number of markets that are adjacent to our core HCI market both through the expansion in hybrid multicloud environments as well as through our addition of new functionality and features in our platform and through portfolio products These adjacent markets include areas such as Kubernetes management and data and platform services AI platform services cloud disaster recovery data security governance and compliance cloud management files and object storage and database automation and database as a service Competitors in these markets include large sophisticated companies that may have more experience or longer operating histories in these markets as well as new entrants
We believe that we are positioned favorably against our competitors based on these factors However many of our competitors have substantially greater financial technical and other resources greater brand recognition larger sales forces and marketing budgets a larger existing customer base broader distribution and larger and more mature intellectual property portfolios
Our success depends in part upon our ability to protect and use our core technology and intellectual property We rely on patents trademarks copyrights and trade secret laws confidentiality procedures and employee nondisclosure and invention assignment agreements to protect our intellectual property rights As of July 31 2025 we had 578 U S patents that have been issued and 159 non provisional patent applications pending in the United States Our issued U S patents expire between 2033 and 2045 We also leverage some open source software in most of our products See Item 1A Risk Factors for further discussion of risks related to protecting our intellectual property
Our corporate headquarters are located in San Jose California where under lease agreements that expire through May 2030 we currently lease approximately 215 000 square feet of space We also maintain offices in North America Europe Asia Pacific the Middle East Latin America and Africa We lease all of our facilities and do not own any real property We believe that our facilities are adequate to meet our needs for the immediate future and that should it be needed we would be able to lease suitable additional space to accommodate our operations
Our business activities are subject to various federal state local and foreign laws rules and regulations Compliance with these laws rules and regulations has not had and is not expected to have a material effect on our capital expenditures results of operations or competitive position as compared to prior periods Nevertheless compliance with existing or future governmental regulations including but not limited to those pertaining to global trade acquisitions AI related governance data protection and data privacy climate employment and labor and taxes could have a material impact on our business in subsequent periods See Item 1A Risk Factors for further discussion of risks related to the potential impact of government regulation on our business
We had approximately 7 800 employees worldwide as of July 31 2025 None of our employees in the United States are represented by a labor organization or are a party to any collective bargaining arrangement In certain European countries in which we operate we are subject to and comply with local labor law requirements in relation to the establishment of works councils and or industry wide collective bargaining agreements We are often required to consult and seek the consent or advice of these works councils We have never had a work stoppage and we consider our relationship with our employees to be good
We understand the importance of human capital and prioritize building our culture talent development and compensation and benefits Our human capital resources objectives include attracting retaining and rewarding talent as well as promoting the development and integration of our existing and new employees The principal objectives of our equity and cash incentive plans are to attract retain and reward personnel through stock based and cash based compensation awards to drive stockholder value and the success of our company by motivating such individuals to align their work to company goals and to perform to the best of their abilities and to achieve our objectives
We believe a robust and competitive Total Rewards portfolio is essential to attracting and retaining diverse talent that moves Nutanix forward Our comprehensive reward programs offer physical mental emotional and financial support to our employees and their families We regularly review our programs and encourage employee feedback about the rewards they value most We tailor rewards programs specifically based on local market practice and the competitive landscape We provide a range of globally available support programs such as an Employee Assistance Program online health engagement and child development support
The health and safety of employees and others on our property are a top priority We also focus on compliance with all health and safety laws applicable to our business To that end appropriate requirements are implemented as needed in order to comply with public health or safety obligations We have a physical security policy applicable to all our employees with a global physical security team that is empowered to protect the safety of our employees in the event of emergencies or disasters In addition we work with our employees and facilities management at our office locations to ensure that work areas are kept safe and free of hazardous conditions Employees are required to be conscientious about workplace safety In compliance with applicable laws and to promote the concept of a safe workplace we maintain an Injury and Illness Prevention Program We also continue to support the well being and continued development of our employees by offering well being days during which all employees may enjoy private time away from work requirements
We challenge our employees to constantly learn continuously improve and evolve and to that end we invest in resources to foster a learning culture throughout our company We empower our employees to drive their own personal and professional growth by equipping them with onboarding and learning programs Our learning programs include digital learning speed coaching customized learning workshops manager enablement and skills training for current new and future managers training on culture language learning programs and employee wellness programs We believe that by empowering our employees as they strive to grow personally and professionally we will be able to build a flexible and resilient workforce and maintain and nurture a robust pipeline of talent to fuel our future growth and strategy
We were incorporated in Delaware in September 2009 as Nutanix Inc Our principal executive offices are located at 1740 Technology Drive Suite 150 San Jose California 95110 and our telephone number is 408 216 8360 We have operations throughout North America Europe Asia Pacific the Middle East Latin America and Africa Our website address is www nutanix com Information contained on or accessible through our website is neither a part of this Annual Report on Form 10 K nor incorporated by reference herein and any references to our website and the inclusion of our website address in this Annual Report on Form 10 K are intended to be inactive textual references only
Our website is located at www nutanix com and our investors relations website is located at ir nutanix com We file reports with the Securities and Exchange Commission SEC which maintains an internet site http www sec gov that contains reports proxy and information statements and other information regarding issuers including us that file electronically with the SEC This Annual Report on Form 10 K our Quarterly Reports on Form 10 Q our Current Reports on Form 8 K and amendments to those reports filed or furnished pursuant to Section 13 a or 15 d of the Exchange Act as amended are made available free of charge on the investor relations portion of our website as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC We also provide a link to the section of the SEC s website at www sec gov that has or will have all of our public filings including this Annual Report on Form 10 K and our Quarterly Reports on Form 10 Q Current Reports on Form 8 K all amendments to those reports our Proxy Statements and other ownership related filings We use our investor relations website as well as social media as channels of distribution for important company information For example webcasts of our earnings calls and certain events we participate in or host with members of the investment community are on our investor relations website Additionally we announce investor information including news and commentary about our business and financial performance SEC filings notices of investor events and our press and earnings releases on our investor relations website It is possible that the information we post on social media could be deemed to be material information Therefore we encourage investors the media and others interested in our company to review the information we post on social media channels listed on our investor relations website Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts and RSS feeds Further corporate governance information including our corporate governance guidelines board committee charters and code of business conduct and ethics is also available on our investor relations website under the heading Governance Documents Information contained on or accessible through our websites is neither a part of nor incorporated by reference into this Annual Report on Form 10 K or any other report or document we file with or furnish to the SEC and any references to our websites and the inclusion of our website addresses in this Annual Report on Form 10 K are intended to be inactive textual references only
You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report on Form 10 K including our consolidated financial statements and related notes before making a decision to invest in our securities The risks and uncertainties described below are not the only ones we face 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 If any of the following risks occur our business financial condition operating results cash flows and prospects could be materially harmed In that event the price of our securities could decline and you could lose part or all of your investment In addition the global macroeconomic environment remains uncertain which may adversely impact our business operating results cash flows and prospects
Our business and an investment in our securities are subject to a number of risks including risks that may prevent us from achieving our business objectives or may adversely affect our business financial condition results of operations cash flows and prospects These risks are discussed more fully below and include but are not limited to risks related to
We have incurred GAAP net losses in annual periods from our inception through fiscal 2024 including GAAP net losses of 254 6 million and 124 8 million for fiscal 2023 and 2024 respectively While we generated GAAP net income in fiscal 2025 and non GAAP net income in fiscal 2023 fiscal 2024 and fiscal 2025 we may not be able to sustain profitability in future periods As of July 31 2025 we had an accumulated deficit of 4 9 billion We expect to continue making significant investments to grow our business If we fail to grow our revenue or manage our operating expenses effectively we may not be able to continue generating net income on a GAAP or non GAAP basis
We intend to continue balancing our growth against our operating expenses However maintaining this balance may make it challenging to sustain profitability on a GAAP basis over time Further expenditures related to expanding our research and development efforts sales and marketing efforts infrastructure and other such investments may not ultimately grow our business revenue or result in continued profitability Although we achieved GAAP profitability in fiscal 2025 we did not do so in prior years and there is no assurance that we will be able to maintain profitability in future periods If we are ultimately unable to maintain profitability at the level anticipated by analysts and our stockholders the price of our securities may decline potentially significantly
Our business operations and performance are dependent in part on worldwide market economic and financial conditions and events that may be outside of our control such as global regional and local economic developments fiscal monetary and tax policies high inflation elevated interest rates recessionary pressures political and social unrest geopolitical tensions the evolving policy landscape following the 2024 U S elections and related shifts in domestic and international policy terrorist attacks hostilities or the perception that hostilities may be imminent military conflict war including the ongoing military conflict in Ukraine and related sanctions the continuing conflict in the Middle East malicious human acts climate change natural disasters including extreme weather pandemics or other major public health concerns and other similar events These conditions and events may adversely affect demand for enterprise computing infrastructure solutions and reduce the economic health and IT spending budgets of our current and prospective end customers The global macroeconomic environment has been and may continue to be inconsistent challenging and unpredictable due to international trade disputes or tensions the imposition or expansion of tariffs including those imposed by the U S government targeting imports from numerous countries which may increase the cost of IT products and services and thereby reduce available IT budgets or shift spending priorities away from our solutions restrictions on sales and technology transfers elevated interest and inflation rates uncertainties related to changes in public policies such as domestic and international regulations and fiscal and monetary stimulus measures and taxes potential changes to international trade agreements actual or potential government shutdowns elections and any related political instability geopolitical turmoil and civil unrest instability in the global credit markets and other disruptions to global and regional economies and markets
These macroeconomic challenges and uncertainties have and may continue to put pressure on global economic conditions and overall IT spending As a result our current and prospective end customers may reprioritize spending delay or cancel purchasing decisions extend sales cycles or seek lower pricing for our solutions These factors may make it difficult for us to forecast sales and operating results plan future investments and could materially and adversely affect our business operating results and financial condition
We operate in the intensely competitive cloud infrastructure and platform services markets and compete with a broad range of companies that sell software and hardware to build and operate private clouds integrated systems and standalone storage and servers as well as cloud services providers and managed service providers These markets are characterized by constant change rapid innovation and evolving licensing and consumption models We face competition from a broad range of providers including among others
Competition generally varies by workload and customer segment and customers often evaluate multiple alternatives simultaneously Several of our competitors are also our partners resellers or OEMs in certain offerings As the market in which we compete continues to develop we expect it will continue to attract new companies as well as existing larger vendors Some of our competitors may also expand their product and service offerings acquire or invest in competing businesses or emerging technologies offer lower pricing or aggressive discounting bundle their products with other products and capabilities including artificial intelligence machine learning generative AI and emerging agentic AI capabilities provide closed technology platforms partner with other companies to develop joint solutions or otherwise leverage their scale brand recognition or ecosystem relationships to gain a competitive advantage Furthermore as we expand our product offerings we may expand into new markets and we may encounter additional competitors in such markets Additionally as companies increasingly offer competing solutions they may be less willing to cooperate with us as an OEM or otherwise
Many of our existing competitors have and some of our potential competitors may have competitive advantages over us such as longer operating histories significantly greater financial technical marketing or other resources stronger brand awareness and name recognition larger intellectual property portfolios and broader global presence and distribution networks They may be able to devote greater resources to the promotion and sale of products and services than we can and they may offer heavy discounts forcing us to compete aggressively on pricing Moreover our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition such as the acquisition of VMware by Broadcom in November 2023 Furthermore some of our competitors have access to larger customer bases and supply a wide variety of products to and have well established relationships with our current and prospective end customers Some of these competitors have in the past and may in the future take advantage of their existing relationships with end customers distributors or resellers to provide incentives to such current or prospective end customers that make their products more economically attractive or to interfere with our ability to offer our solutions to our end customers Our competitors may also be able to offer products or functionality similar to ours at a more attractive price such as by integrating or bundling their solutions with their other product offerings or those of technology partners or establishing cooperative relationships with other competitors technology partners or other third parties Some potential end customers have preferred and in the future may continue to prefer to purchase from their existing suppliers rather than a new supplier especially given the significant investments that they have historically made in their legacy infrastructures Some of our competitors may also have stronger or broader relationships with technology partners than we do which could make their products more attractive than ours We have also ventured into a number of markets that are adjacent to our core HCI market both through the expansion of HCI in hybrid multicloud environments as well as through our emerging products and some of our competitors in these adjacent markets have more experience with those markets and more resources targeted at penetration of those markets than we do As a result we cannot assure you that our solutions will compete favorably and any failure to do so could adversely affect our business operating results and prospects
In addition in recent years an increasing number of customers have been allocating their IT spending toward artificial intelligence machine learning and generative AI capabilities The IT infrastructure market for artificial intelligence machine learning and generative AI workloads is also expected to be an intensely competitive and rapidly evolving market
We believe that our opportunity to increase market share has grown since VMware now known as VMware by Broadcom one of our main competitors was acquired by Broadcom in November 2023 Since the acquisition Broadcom has made changes to VMware by Broadcom s product portfolio pricing and partner programs which we believe have led many VMware by Broadcom customers to explore alternatives to its virtualization and cloud infrastructure solutions However a variety of factors could adversely affect the timing and our ability to convert these opportunities For example many prospective customers may remain under multi year VMware by Broadcom contracts or may defer migration until their next hardware or software refresh cycle In addition Broadcom may respond aggressively to our pursuit of these opportunities and we may not be able to compete effectively across customer segments or geographies Other factors that could limit our ability to capitalize on these opportunities include the length of enterprise sales cycles and customer evaluation of migration and interoperability considerations and the availability of alternative solutions Some customers may choose to remain with VMware by Broadcom due to existing investments perceived switching risks or contract obligations while others may select competing vendors offering different architectures pricing models or cloud strategies If we are unable to capitalize on these opportunities in a timely or cost effective manner our business and operating results could be materially and adversely affected
The markets in which we compete are rapidly evolving Accordingly our future financial performance will depend in large part on the allocation of spending in traditional IT markets and on our ability to adapt to new market demands Currently sales of our solutions are dependent in large part upon replacement of spending in traditional markets including x86 servers storage systems and virtualization software In addition as we continue to develop new solutions designed to address new market demands sales of our solutions will in part depend on capturing new spending in these markets including public cloud hybrid cloud and cloud native services Moreover in recent years an increasing number of customers have been allocating their IT spending toward artificial intelligence machine learning and generative AI capabilities The IT infrastructure market supporting AI workloads is intensely competitive and rapidly evolving and our ability to compete effectively in this space will depend on our ability to deliver differentiated scalable and AI ready infrastructure solutions If the markets in which we compete experience a shift in customer demand or if customers in these markets focus their new spending on or shift their existing spending to public cloud solutions or other solutions that do not interoperate with our solutions more quickly or more extensively than expected our solutions may not compete as effectively if at all It is also difficult to predict end customer demand or adoption rates for our solutions or the future growth of our market
In addition we have estimated the size of our total addressable and serviceable available markets based on internally generated data and assumptions as well as data published by third parties which we have not independently verified While we believe these estimates are reasonable such information is inherently imprecise and subject to a high degree of uncertainty If our third party or internally generated data prove to be inaccurate or we make errors in our assumptions based on that data our actual market may be more limited than our estimates In addition these inaccuracies or errors may cause us to misallocate capital and other critical business resources which could harm our business Even if our total addressable market meets our size estimates and experiences growth we may not continue to grow our share of the market
Traditional IT infrastructure architecture is entrenched in the data centers of many of our end customers because of their historical financial investment in existing IT infrastructure architecture and the existing knowledge base and skill sets of their IT administrators As a result our sales and marketing efforts often involve extensive efforts to educate our end customers as to the benefits and capabilities of our solutions particularly as we introduce new products and continue to pursue large organizations as end customers If we fail to achieve market acceptance of our solutions our ability to grow our business and our operating results will be adversely affected
As we target some of our sales efforts at larger enterprise customers we may face greater costs longer sales cycles greater competition increased pricing pressure deployment and customization challenges and less predictability in our ability to close sales and we may have to delay revenue recognition for some complex transactions all of which could harm our business and operating results
Large organizations often undertake a significant evaluation process that results in a lengthy sales cycle Although we have a channel sales model our sales representatives typically engage in direct interaction with our prospective end customers as well as our distributors and resellers We typically provide evaluation products to these end customers and may spend substantial time effort and money in our sales efforts to these prospective end customers In addition product purchases by large organizations are frequently subject to budget constraints multiple approvals and unanticipated administrative processing and other delays Finally large organizations typically have longer implementation cycles require greater product functionality and scalability require a broader range of services demand that vendors take on a larger share of risks require acceptance provisions that can lead to a delay in revenue recognition expect greater payment flexibility which may delay cash collections and negatively impact our free cash flow and may also have a greater ability to resist any attempts to pass on increases in our operating and procurement costs Given these variables it can be difficult for us to estimate when an expected sale from a large organization service provider or government entity may occur and our ability to accurately forecast our future operating results may be adversely affected If we fail to realize an expected sale from a large end customer in a particular quarter or at all our business and operating results could be adversely affected All of these factors can add further risk to business conducted with these end customers
As part of our strategy to expand our addressable market and meet the needs of customers invested in legacy three tier IT infrastructure we recently expanded our offerings to include support for qualified third party external storage platforms While we believe this flexibility may facilitate customer adoption of our platform in brownfield environments and enable longer term expansion opportunities it may also negatively impact sales of our core HCI offering In addition support for external storage may increase the complexity of our offerings and require additional resources for integration testing and customer success It also increases our reliance on third party technologies over which we have limited control If these third party platforms experience performance issues customer dissatisfaction or changes in strategic direction that affect interoperability with our solutions our reputation and customer relationships could be negatively impacted Furthermore if customers adopt our solutions to support external storage as a permanent architecture rather than as a transitional step toward full HCI adoption our investment in this capability may not yield the anticipated return which could adversely affect our operating results
Our sales efforts involve educating our end customers about the uses and benefits of our solutions including their technical capabilities and cost saving potential End customers often undertake an evaluation and testing process that can result in a lengthy sales cycle Increasing competition and the availability or emergence of competing infrastructure virtualization and containerization solutions as well as different consumption models often result in customers evaluating multiple vendors at the same time which can further lengthen the sales cycle We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales Platform purchases are frequently subject to budget constraints multiple approvals and unanticipated administrative processing and other delays In addition because our platform is deployed on a hardware platform and many prospective customers have invested in legacy three tier infrastructures consisting of separate servers storage systems and storage area networks customers may not be ready to consider adopting our platform unless and until they are due for a hardware refresh which occurs at intervals These factors and the legacy relationships that our end customers have with existing IT vendors sometimes lead to unpredictable sales cycles which make it difficult for us to predict when end customers may purchase solutions from us The unpredictable nature of our sales cycles may be increased in future periods as we continue to focus our sales efforts more heavily on major accounts and large deals Our business and operating results will be significantly affected by the degree to which and speed with which organizations adopt our solutions In addition over time our sales pipeline has evolved to include a higher mix of larger deal opportunities Because larger deal opportunities 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 this recent trend is expected to drive greater variability in our ability to land new end customers and expand sales to existing end customers and our top line results may be adversely affected
We have expanded our overall business and operations significantly in prior periods Our employee headcount has increased significantly since our inception We anticipate that our operating expenses will increase in the long term as we scale our business including in developing and improving our new and existing solutions expanding our sales and marketing capabilities and global coverage and in providing general and administrative resources to support our growth In addition as we continue to grow our business in the long term we must effectively train integrate develop motivate and retain a large number of new employees as well as existing employees who are promoted or moved into new roles while maintaining the effectiveness of our business execution The failure to manage these changes could significantly delay the achievement of our strategic objectives In particular our success depends heavily on our ability to ramp new sales teams in a fast and effective manner and retain those sales teams In recent years we have also seen higher than normal attrition among our sales representatives and while we are actively recruiting additional sales representatives it will take time to replace train and ramp them to full productivity and if we are unable to do so we may not be able to achieve our growth targets We must also continue to improve and expand our IT and financial infrastructure management systems and product management and sales processes We expect that our future growth will continue to place a significant strain on our management operational and financial resources and we may not be able to sustain or manage any future growth effectively We may make investments or otherwise incur costs associated with future growth that may not translate into revenues or otherwise result in the realization of their anticipated benefits within the expected timeframe or at all and the return on these investments may be lower if any or may develop more slowly than we expect
If we are unable to sustain or manage our growth effectively we may not be able to take advantage of market opportunities We also may fail to satisfy end customers requirements maintain product quality execute on our business plan or respond to competitive pressures any of which could adversely affect our business operating results financial condition and prospects
Our historical financial performance including revenue growth may not be indicative of our future performance Over the years we have undergone several business model transitions including our transition to focus on software only sales and our transition to a subscription based business model These transitions can make it difficult to compare our current results against our historical results Operating under a subscription based business model results in differences in revenue recognition compared to our previous life of device model For example subscription contracts typically have shorter durations than the assumed five year duration of contracts under our previous life of device license model which typically results in lower upfront revenue per transaction
If other IT vendors do not cooperate with us to ensure that our solutions interoperate with their products including by providing us with early access to their new products or information about their new products our product development efforts may be delayed or impaired our solutions could become less attractive to end customers and our business operating results and prospects may be adversely affected
Our solutions provide a platform on which software applications and hypervisors from different software providers run As a result our solutions must interoperate with our end customers existing hardware and software infrastructure specifically their networks servers software and operating systems as well as the applications that they run on this infrastructure which may be manufactured and provided by a wide variety of vendors and OEMs In addition to ensuring that our solutions interoperate with these hardware and software products initially we must regularly update our software to ensure that our solutions continue to interoperate with new or updated versions of these hardware and software products Current or future providers of hardware software applications hypervisors or data management tools could make changes that would diminish the ability of our solutions to interoperate with them Significant additional time and effort may be necessary to ensure the continued compatibility of our solutions which might not be possible at all Even if our solutions are compatible with those of other providers if they do not certify or support our solutions for their systems or cooperate with us to coordinate troubleshooting and hand off of support cases end customers may be reluctant to buy our solutions which could decrease demand for our solutions and harm our ability to achieve a return on the investments and resources that we have dedicated to ensuring compatibility Developing solutions that interoperate properly requires substantial partnering capital investment and employee resources as well as the cooperation of the vendors or developers of the software applications and hypervisors both with respect to product development certification and support processes Vendors may not provide us with early or any access to their technology and products assist us in these development efforts certify our solutions share with or sell to us any application programming interfaces APIs formats or protocols we may need or cooperate with us to support end customers If they do not provide us with the necessary access assistance or proprietary technology on a timely basis or at all we may experience product development delays or be unable to ensure the compatibility of our solutions with such new technology or products Some of these vendors also sell solutions that compete directly or indirectly with our solutions and therefore may not be incentivized to cooperate with us to ensure interoperability certify our solutions or support joint customers To the extent that vendors develop products that compete with ours they have in the past and may again in the future withhold their cooperation decline to share access certify our solutions or sell or make available to us their proprietary APIs protocols or formats or engage in practices to actively limit the functionality compatibility certification or support of our products If any of the foregoing occurs our product development efforts may be delayed or impaired our solutions could become less attractive to end customers resulting in a decline in sales which could reduce demand for our solutions impair our competitive position and adversely affect our business operating results and prospects
We have sold and anticipate selling more of our products and services as cloud based offerings which include offerings hosted on public cloud infrastructure as well as part of the Nutanix Cloud Platform on a ratable subscription basis While cloud based offerings currently make up a small portion of our business selling these offerings has required and will continue to require a considerable investment of resources and will continue to divert resources and increase costs especially in cost of license and other revenues in any given period We have also made and intend to continue to make investments in the supporting infrastructure for such cloud based offerings that we host and may not recoup the costs of such investments Such investments of resources may also not improve our long term growth and results of operations Further the increase in some costs associated with our cloud based services may be difficult to predict over time especially in light of our lack of historical experience with the costs of delivering cloud based versions of our solutions
We operate in a dynamic environment characterized by rapidly changing technologies industry standards and technological obsolescence We must continually create valuable software solutions and integrate these solutions across hardware platforms To compete successfully we must design develop market and sell new or enhanced solutions that provide increasingly higher levels of performance capacity scalability security interoperability application mobility and reliability and meet the cost expectations of our end customers The introduction of new products by our competitors the market acceptance of products based on new or alternative technologies including generative and agentic AI capabilities or the emergence of new industry standards could render our existing or future solutions obsolete or less attractive to end customers Any failure to anticipate or develop new or enhanced solutions or technologies in a timely or cost effective manner in response to technological shifts including those driven by AI could result in decreased revenue and harm to our business and prospects Any new feature or application that we develop or acquire may not be introduced in a timely or cost effective manner and may not achieve broad market acceptance and investments in research and development or efforts to optimize our engineering cost structure may not be successful In particular if we fail to timely release new products technology or services that we previously announced our brand and reputation could be harmed For example in May 2023 we announced Project Beacon our multi year effort to deliver a portfolio of data centric infrastructure as a service and platform as a service level services available natively anywhere including on the Nutanix Cloud Platform or on public clouds In May 2025 we launched Cloud Native AOS the first product from Project Beacon If we fail to introduce new or enhanced solutions that meet the needs of our end customers such as Project Beacon or penetrate new markets in a timely fashion we may lose market share and our business operating results and prospects could be adversely affected
Significant developments in enterprise IT infrastructure technologies such as advances in storage virtualization containers networking disaster recovery edge computing management software and public cloud and hybrid cloud infrastructure solutions may materially and adversely affect our business operating results and prospects in ways we do not currently anticipate Any failure by us to develop new or enhanced technologies or processes to react to changes or advances in existing technologies or to correctly anticipate these changes or advances as we create and invest in our product roadmap could materially delay our development and introduction of new solutions which could result in the loss of competitiveness of our solutions decreased revenue and a loss of market share to competitors In addition public cloud infrastructure offers alternatives to the on premises infrastructure deployments that our platform currently primarily supports Various factors could cause the rate of adoption of public cloud infrastructure to increase including decreases in the price of public cloud offerings increased interoperability with on premises infrastructure solutions that compete with our solutions and improvements in the ability of public cloud providers to deliver reliable performance enhanced security better application compatibility and more precise infrastructure control In addition the rate of adoption of public cloud infrastructure could increase due to increased customer interest in artificial intelligence machine learning and generative AI capabilities that may be offered by public cloud providers Any of these factors could make our platform less competitive as compared to the public cloud and could materially and adversely affect the demand for our solutions
We have made and expect to continue making investments in our AI capabilities across our business products and services including efforts to position the Nutanix Cloud Platform as a preferred platform for running enterprise AI workloads AI technologies are complex and rapidly evolving and we face significant competition from other companies and are subject to an evolving regulatory landscape The introduction of AI technologies into new or existing products and services may result in new or enhanced governmental or regulatory scrutiny litigation privacy confidentiality or security risks ethical concerns legal liability or other complications that could adversely affect our business reputation or financial results For example the European Union has enacted the AI Act and in the United States new AI related laws and regulations are emerging such as the Colorado AI Act the California AI Transparency Act the Utah Artificial Intelligence Policy Act and the Texas Responsible AI Governance Act with numerous more being proposed at the federal state and local levels These laws and regulations could require us to comply with various requirements depending on the nature and categorization of AI and our role This may result in expending resources and additional costs to comply with these requirements change our business practices or provide additional infrastructure policies safeguards and personnel to support the ongoing governance and oversight of such AI technologies including notice transparency and AI risk assessment and mitigation obligations For example in the United States in 2025 the current presidential administration rescinded an executive order relating to the safe and secure development of AI technologies that was previously implemented by the former administration in 2023 The administration then issued a new executive order that among other things requires certain agencies to develop and submit to the president action plans to sustain and enhance America s global AI dominance and to specifically review and if possible rescind rulemaking taken pursuant to the rescinded executive order In July 2025 the current administration further issued America s AI Action Plan focusing on the three pillars of innovation infrastructure and international diplomacy and security in AI and seven underlying principles The current administration may continue to rescind other existing federal orders and or administrative policies relating to AI technologies or may implement new executive orders and or other rule making relating to AI technologies in the future Any such changes at the federal level could require us to expend significant resources to modify our products services or operations to ensure compliance with old frameworks or meet new obligations
The intellectual property ownership and license rights including copyright surrounding AI technologies have not been fully addressed by laws or regulations and our use or adoption of third party AI technologies into our business operations products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation as well as potential liability to customers
AI technologies may use algorithms datasets or training methodologies that may be flawed or contain deficiencies that may be difficult to detect during testing AI technologies including generative AI may create content that appears correct but is factually inaccurate flawed or biased Use of such content may be to the detriment of the user or it may lead to discriminatory or other adverse outcomes which may expose us to brand or reputational harm competitive harm regulatory scrutiny and fines and or legal liability Further AI technologies may repurpose data beyond its original intent or without the consent of an individual where required or involve unintended cross border transfers challenging privacy principles and potentially resulting in privacy related claims liability or regulatory scrutiny As we expand our use of AI technologies we may be required to update our agreements policies and controls to address these risks and meet evolving customer and regulatory expectations
Our future success depends on our existing end customers renewing or upgrading their subscription and support and entitlement agreements and making additional purchases of software licenses and software upgrades If our end customers do not renew or upgrade their subscription and support and entitlement agreements and or purchase additional software licenses or software upgrades our revenue may decline and our operating results may be harmed In order for us to maintain or improve our operating results we depend on our existing end customers renewing their subscription agreements as well as their support and entitlement agreements or purchasing additional solutions End customers may choose not to renew their subscription agreements or support and entitlement agreements or purchase additional solutions because of several factors such as dissatisfaction with our platform solutions support or prices including relative to competitive offerings reductions in our end customers spending levels or other causes outside of our control If our existing end customers do not purchase new solutions or renew or upgrade their subscription agreements or support and entitlement agreements our revenue may grow more slowly than expected or may decline and our business and operating results may be adversely affected
We primarily sell our solutions through indirect sales channels including channel partners such as distributors our OEM partners value added resellers and system integrators Our OEM partners may in turn distribute our solutions through their own networks of channel partners with whom we have no direct relationships
We rely to a significant degree on our channel partners to select screen and maintain relationships with their distribution networks and to distribute our solutions in a manner that is consistent with applicable law regulatory requirements and our quality standards If our channel partners or a partner in their distribution network violates applicable law or regulations misrepresents the functionality of our solutions or otherwise engages in conduct that results in regulatory scrutiny or legal action our reputation and brand could be damaged and we could be subject to potential liability Additionally if we are unable to establish relationships with strong channel partners in key growth regions our ability to sell our solutions in these regions may be adversely affected Our agreements with our channel partners are generally non exclusive meaning our channel partners may offer end customers the products of several different companies including products that compete with ours As a result our channel partners including our OEM partners may not be fully incentivized to prioritize or actively promote our solutions particularly if they also sell their own products or those of our competitors In addition we have limited visibility into and control over the sales efforts and go to market strategies of our OEM partners and their sales performance may not meet our expectations If our OEM partners or other channel partners do not effectively market and sell our solutions choose to allocate fewer resources to our solutions or fail to meet the needs of our end customers our business operating results and prospects may be adversely affected Our channel partners may cease marketing our solutions with limited or no notice and with little or no penalty The loss of a substantial number of our channel partners together with our inability to replace them or the failure to recruit additional channel partners or establish an alternative distribution network could materially and adversely affect our business and operating results Sales through our top two distributors to our end customers represented 41 of our total revenue for fiscal 2025 In addition if a channel partner offers its own products or services that are competitive to our solutions is acquired by a competitor or reorganizes or divests its reseller business units our revenue derived from that partner may be adversely impacted or eliminated altogether
Recruiting and retaining qualified channel partners and training them in the use of our technologies requires significant time and resources If we fail to devote sufficient resources to support and expand our network of channel partners our business may be adversely affected Maintaining strong indirect sales channels for our products and effectively leveraging our channel partners and OEMs is important to our growth strategy and the failure to effectively manage these relationships may lead to higher costs and reduced revenue Although we believe that this transition will make our sales channels more efficient and broader reaching in the long term in these markets there is no guarantee that this new distribution model will increase our sales in the short term or allow us to sustain our gross margins Any potential delays or confusion during the transition process to our new partners may negatively affect our relationship with our existing end customers and channel partners and may cause us to lose prospective end customers or additional business from existing end customers or cause a decline in renewal rates with existing end customers Upon completion of the transition to the new sales model we will be more reliant on fewer channel partners which may reduce our contact with our end customers making it more difficult for us to establish brand awareness ensure proper delivery and installation of our software support ongoing end customer requirements estimate end customer demand respond to evolving end customer needs and obtain subscription renewals from end customers
Substantially all of our sales to government entities have been made indirectly through our channel partners Government entities may have statutory contractual or other legal rights to terminate contracts with our channel partners for convenience or due to a default If a material portion of government contracts becomes subject to renegotiation or termination any such renegotiation or termination may adversely impact our future operating results We also sometimes rely on our channel partners to satisfy certain regulatory obligations that we would otherwise have to satisfy if we sold directly to the government entities and our channel partners may be unable or unwilling to satisfy these obligations in the future In addition a channel partner may become restricted in its ability to conduct business with government entities due to its own regulatory or legal issues If we are unable to transition to another qualified channel partner in a timely manner our ability to sell to government entities could be negatively impacted Governments routinely investigate and audit government contractors including subcontractors administrative processes and any unfavorable audit could result in the government refusing to continue buying our solutions our channel partners changing their business models or refusing to continue to sell our solutions under current models a reduction of revenue or fines or civil or criminal liability if the audit uncovers improper or illegal activities
If our indirect distribution channel is disrupted particularly if we are reliant on a fewer number of channel partners or if we are required to directly satisfy certain regulatory obligations imposed by government entities as a result of our efforts to expand our sales to government entities we may be required to devote more time and resources to distribute our solutions directly and support our end customers which may not be as effective and could lead to higher costs reduced revenue and growth that is slower than expected
Our operating results and key financial and performance metrics including revenue ARR and free cash flow may fluctuate due to a variety of factors many of which are outside of our control As a result comparing our operating results on a period to period basis may not be meaningful If our operating results or any of our key financial and performance metrics in any particular period fall below analyst or investor expectations the market price of our securities would likely decline potentially significantly Factors that are difficult to predict and that could cause our operating results to fluctuate include but are not limited to
Subscription revenue accounts for the substantial majority of our revenue comprising 93 94 and 95 of our total revenue for fiscal 2023 2024 and 2025 respectively A significant portion of our subscription revenue is revenue from software entitlement subscriptions support subscriptions and SaaS offerings which is recognized ratably over the contractual service period As a result a significant portion of our revenue that we report for each fiscal quarter represents the recognition of deferred revenue from subscription agreements entered into during previous fiscal quarters Consequently any decline in any such subscriptions whether new subscriptions or renewals in any given fiscal quarter will not be fully or immediately reflected in our revenue for that quarter However any such decline will negatively affect our revenue for future quarters Accordingly the effect of significant downturns in sales our failure to achieve our internal sales targets a decline in the market acceptance of our services or a decrease in retention rates may not be fully reflected in our operating results until future periods Our subscription model also makes it more difficult for us to rapidly increase our revenue through additional sales in any period as a significant portion of our revenue from additional sales must be recognized over the applicable subscription duration
Our gross and operating margins may be affected by a variety of factors including fluctuations in the pricing of our products including as a result of competitive pricing pressures or increases in component pricing the degree to which we are successful in selling the value of incremental feature improvements and upgrades customer renewal rates and the degree to which renewals drive our top line growth changes in the mix between direct versus indirect sales changes in the mix of products sold and the timing and amount of recognized and deferred revenue particularly as a result of our subscription based business model In addition operating margin may be affected by changes in our cost structure including investments in sales and marketing research and development and general and administrative functions as well as the timing of those investments relative to revenue recognition If we are unable to manage these factors effectively our gross and operating margins may decline and fluctuations in these metrics may make it difficult to manage our business and to maintain profitability which could adversely affect our business and operating results
Because our business depends on manufacturers of hardware including our OEM partners to timely and cost effectively produce and ship the hardware platforms on which our software runs we are susceptible to supply chain disruptions delays quality events and pricing fluctuations which have adversely affected and could further adversely affect our business
Our business depends on manufacturers including Supermicro and our OEM partners to produce the hardware platforms on which our software runs including both the Nutanix branded NX series hardware platforms and the various third party hardware platforms that are included on our hardware compatibility list as well as various products that are beyond our control or the control of such manufacturers which exposes us to direct and indirect risks beyond our control including reduced control over quality assurance product costs product availability supply chain disruptions and delays and potential reputational harm and brand damage We may not be able to discover manage and or remediate such risks in a timely manner or at all Key components of the servers on which our software runs have in the past been and may in the future be affected by chip shortages In addition increases in hardware prices whether due to component shortages or other cost pressures could reduce customer demand for our software if customers delay or scale back purchases of certified hardware platforms needed to run our solutions Customers may also respond to rising hardware costs by reevaluating their overall IT budgets or seeking to reduce total solution costs which could adversely affect demand for our software and put pressure on pricing and margins Furthermore fulfilling orders for NX series hardware platforms or other hardware platforms on which our software runs may not be a priority for such manufacturers in guiding their business decisions and operational commitments If we fail to manage our relationships with such manufacturers effectively or if such manufacturers experience delays disruptions or increased manufacturing lead times component lead time disruptions capacity constraints or quality control problems in their operations or are unable to address our or our end customers requirements for or concerns about timely delivery our ability to sell our solutions to our end customers could be severely impaired due to the lack of availability of certified hardware platforms and our customers ability or willingness to consume our software may be materially impacted or delayed which could adversely affect our business and operating results competitive position brand and reputation as well as our relationships with affected customers
In particular we rely substantially on Supermicro to manufacture as well as assemble and test the Nutanix branded NX series hardware platforms Our agreement with Supermicro automatically renews for successive one year periods with the option to terminate upon each annual renewal and does not contain any minimum long term commitment to manufacture NX branded hardware platforms If we are required to change the manufacturer or contract manufacturers for the assembly and testing of our NX branded hardware platforms we may lose revenue incur increased costs and damage our channel partner and end customer relationships We may also decide to switch or bring on additional contract manufacturers for the assembly and testing of our NX branded hardware platforms in order to better meet our needs Switching to or bringing on a new OEM partner or contract manufacturer and commencing production can be expensive and time consuming and may cause delays in order fulfillment at our existing OEM partners and contract manufacturers or cause other disruptions
Our agreement with Supermicro does not contain any price assurances and increases in component costs without a corresponding increase in the price of our NX series solutions could reduce the amount that an end customer pays for our software thereby adversely affecting our revenue Furthermore we may need to increase our component purchases manufacturing capacity and internal test and quality functions if we experience increased demand The inability of Supermicro or other manufacturers to produce adequate supplies of hardware platforms could cause a delay in customers ability to consume our software and our order fulfillment and our business operating results and prospects would be adversely affected As of July 31 2025 we had approximately 106 9 million in the form of guarantees to our contract manufacturers related to certain components
There are a limited number of suppliers and in some cases single source suppliers for several key components in our NX branded hardware platforms as well as other hardware platforms that our software is certified to operate on including hardware platforms from our OEM partners and any delay or disruption in the availability or quality of these components could delay shipments of the NX branded hardware platforms and damage our channel partner or end customer relationships or cause our customers to delay purchasing our software
We rely on a limited number of suppliers and in some cases single source suppliers for several key hardware components of the Nutanix branded NX series hardware platforms These components are generally purchased on a purchase order basis through Supermicro and we do not have long term supply contracts with these suppliers This reliance on key suppliers exposes us to risks including reduced control over product quality production and component costs timely delivery and capacity It also exposes us to the potential inability to obtain an adequate supply of required components because we do not have long term supply commitments and replacing some of these components would require a lengthy product qualification process Furthermore we extensively test and qualify the components that are used in NX branded hardware platforms and other platforms on our hardware compatibility list including hardware platforms from our OEM partners to ensure that they meet certain quality and performance specifications If the supply of certain components is disrupted or delayed or if there is a need to replace existing suppliers on the qualified hardware configuration there can be no assurance that additional supplies or components can serve as adequate replacements for the existing components will be available when required or that supplies will be available on terms that are favorable and it may require modifying our solutions to interoperate with the replacement components Any of these developments could extend the lead times increase the costs of the components or costs of product development cause us to miss market windows for product launch and adversely affect our business operating results and financial condition
We generally maintain minimal inventory for repairs and a number of evaluation and demonstration units and generally acquire components only as needed We do not enter into long term supply contracts for these components As a result our ability to respond to channel partner or end customer orders efficiently may be constrained by the then current availability terms and pricing of these components The technology industry has experienced component shortages and delivery delays in the past including a global chip shortage and there may be shortages or delays of critical components in the future as a result of strong demand in the industry component availability constraints or other factors If we or our suppliers inaccurately forecast demand for our solutions or we ineffectively manage our enterprise resource planning processes our suppliers may have inadequate inventory which could increase the prices we must pay for substitute components or result in our inability to meet demand for our solutions as well as damage our channel partner or end customer relationships
If the suppliers of the components of compatible hardware platforms increase prices of components experience delays disruptions capacity constraints quality control problems in their manufacturing operations or adverse changes to their financial condition our ability to ship hardware platforms to our channel partners or end customers in a timely manner and at competitive prices could be impaired and our customers ability to acquire hardware on which to run our software could be impaired and our competitive position brand reputation and operating results could be adversely affected Qualifying a new component can be expensive and time consuming If we are required to change key suppliers we may lose revenue and damage our channel partner or end customer relationships which could adversely impact our revenue and operating results
We outsource the warehousing and delivery of hardware platforms and spare parts to a third party logistics provider for spares and service parts fulfillment In addition some of our support offerings commit us to replace defective parts in our hardware platforms as quickly as four hours after the initial customer support call is received which we satisfy by storing replacement parts inventory in various third party supply depots in strategic worldwide locations As a result of relying on third parties we have reduced control over shipping and logistics transactions and costs quality control security and the supply of replacement parts for support Consequently we may be subject to shipping disruptions and unanticipated costs as well as failures to provide adequate support for reasons that are outside of our direct control If we are unable to have hardware platforms or replacement products shipped in a timely manner end customers may seek to cancel their contracts with us we may suffer reputational harm and our business operating results and prospects may be adversely affected
Once our solutions are deployed our end customers depend on our support organization to resolve any technical issues relating to our solutions Furthermore because of the emerging nature of our solutions our support organization often provides support for and troubleshoots issues for products of other vendors running on our solutions even if the issue is unrelated to our solutions There is no assurance that we can solve issues unrelated to our solutions or that vendors whose products run on our solutions will not challenge our provision of technical assistance to their products Our ability to provide effective support is largely dependent on our ability to attract train and retain personnel who are not only qualified to support our solutions but also well versed in some of the primary applications and hypervisors that our end customers run on our solutions Furthermore as we have international operations our support organization faces additional challenges including those associated with delivering support training and documentation in languages other than English In addition as we continue to evolve our product portfolio which may include additional solutions our ability to provide high quality support will become more difficult and will involve more complexity Any failure to maintain high quality installation and technical support or a market perception that we do not maintain high quality support could harm our reputation and brand adversely affect our ability to sell our solutions to existing and prospective end customers and could harm our business operating results and financial condition
Our solutions are highly technical and complex and are often used to store information critical to our end customers business operations Our solutions may contain undetected errors defects or security vulnerabilities that could result in data unavailability unauthorized access to loss corruption or other harm to our end customers data including personal or identifying information regarding their employees customers and suppliers as well as their finance and payroll data and other sensitive business information In addition as we expand our platform and introduce new cloud based products that may hold more of our customers data any undetected or unresolved errors defects or security vulnerabilities may result in data unavailability unauthorized access to loss corruption or other harm to our end customers data Some errors or defects in our solutions may only be discovered after they have been installed and used by end customers In addition we may make certain commitments to our OEMs regarding the time frames within which we will correct any security vulnerabilities in our software If any hardware or software errors defects or security vulnerabilities are discovered in our solutions after commercial release a number of negative effects in our business could result including but not limited to
In addition we could face legal claims for breach of contract product liability tort or breach of warranty While many of our contracts with end customers contain provisions relating to warranty disclaimers and liability limitations these provisions might not be upheld or might not provide adequate protection if we face such legal claims Defending a lawsuit regardless of its merit could be costly and may divert management s attention and adversely affect the market s perception of us and our solutions In addition our business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on terms favorable or acceptable to us or at all These product related issues could result in claims against us and our business could be adversely impacted
We derive a portion of our revenue from contracts with federal state local and foreign governments and we believe that the success and growth of our business will continue to depend on our successful procurement of government contracts Government contracts may require the maintenance of certain security clearances for facilities and employees However demand is often unpredictable from government organizations and there can be no assurance that we will be able to maintain or grow our revenue from the public sector Government agencies are subject to budgetary processes and expenditure constraints that could lead to delays or decreased capital expenditures in IT spending particularly in light of continued uncertainties about government spending levels such as recent changes to or failure to appoint new government leaders We have also recently experienced longer sales cycles and increased variability in transactions involving federal government agencies which we believe are due to internal personnel changes and more extensive procurement reviews within these organizations The budget and approval process for government agencies also experiences a longer sales cycle relative to our other end customers and it may be difficult for us to accurately forecast the impact of these contracts on our future operating results If government organizations reduce or shift their capital spending patterns our business operating results and prospects may be harmed Factors that could impede our ability to maintain or increase the amount of revenue derived from government contracts include but are not limited to
We derive a significant portion of our revenue from end customers and channel partners outside the United States We derived approximately 44 45 and 44 of our total revenue from our international customers based on bill to location for fiscal 2023 2024 and 2025 respectively We are continuing to adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect As of July 31 2025 approximately 59 of our full time employees were located outside of the United States We expect that our international activities will continue to grow over the foreseeable future as we continue to pursue opportunities in existing and new international markets which will require significant management attention and financial resources We are subject to risks associated with having significant worldwide operations including but not limited to
As we expand our business globally our success will depend in large part on our ability to anticipate and effectively manage these risks These factors and other factors could harm our ability to gain future international revenue and consequently materially impact our business operating results and financial condition The entry into additional international markets will require significant management attention and financial resources Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business
If we are the victim of a cyber attack or other cybersecurity incident and our networks computer systems or software solutions are breached or unauthorized access to sensitive or proprietary information including employee or customer data otherwise occurs our business operations may be interrupted our reputation and brand may be damaged and we may incur significant liabilities
Cyber attacks designed to gain access to sensitive or proprietary information by breaching mission critical systems of large organizations are constantly evolving and high profile electronic security breaches and other cybersecurity incidents leading to the unauthorized release of sensitive or proprietary information including employee and customer information have occurred at a number of large companies in recent years Companies in our industry have reported that they have been subject to such cyber attacks including attacks potentially from nation state actors and we could be subject to similar attempted attacks More generally computer malware viruses social engineering predominantly spear phishing attacks and general hacking have become prevalent in our industry particularly against cloud services and we and companies like us can suffer security breaches and other cybersecurity incidents from a variety of causes whether due to third party action software bugs or vulnerabilities or coding errors physical break ins employee error malfeasance or otherwise In addition retaliatory acts by countries subject to Western sanctions could include cyber attacks that could disrupt the economy or that could also either directly or indirectly impact our operations We also continue to incorporate AI solutions and features into our platform which may result in security incidents jailbreaking or otherwise increase cybersecurity risks Additionally artificial intelligence and machine learning may increase cybersecurity risks we face through for example being used to increase the prevalence or intensity of cyber attacks
While we regularly face a wide variety of attempted attacks and other cybersecurity incidents our preventative and detective security systems and controls have protected us to date from any such attack or incident having a significant impact on our business However there is no assurance that these systems and controls will prevent any future attacks or incidents that may have a significant impact on our business As we transition to offering more cloud based solutions as well as those based on our partnerships with third party public cloud providers we and our third party public cloud providers may increasingly be the target of cyber threats or be exposed to other types of cybersecurity incidents We also use other third party platforms and other services and as a result we have been exposed to in the past and may be exposed to in the future cybersecurity incidents related to such third party services
Because the techniques used and vulnerabilities exploited to obtain unauthorized access or to sabotage systems change frequently and generally are not identified until they are launched against a target we may be unable to anticipate these techniques or vulnerabilities or implement adequate preventative measures We may also experience security breaches that may remain undetected for an extended period
If any unauthorized access to or security breach of or other cybersecurity incident affecting our solutions occurs such an event could result in the loss of data loss of intellectual property or trade secrets loss of business severe reputational or brand damage adversely affecting end customer or investor confidence regulatory investigations and orders and other enforcement actions litigation indemnity obligations damages for contract breach and penalties for violation of privacy data protection artificial intelligence and other applicable laws regulations or contractual obligations We may also be subject to potentially significant costs for remediation that may include liability for stolen assets or information and repair of system damage that may have been caused or incentives offered to end customers or other business partners in an effort to maintain business relationships after a breach and other liabilities Additionally any such event or perceived event could impact our reputation and brand harm customer confidence hurt our sales and expansion into existing and new markets or cause us to lose potential or existing end customers Any actual potential or anticipated attack or other cybersecurity incident may cause us to incur increasing costs including costs to deploy additional personnel and protection technologies train employees and engage third party experts and consultants
Furthermore a high profile security breach or incident suffered or perceived to have been suffered by an industry peer may entail a general loss of trust in our industry and thereby have a similar adverse impact on our business and financial performance as a direct breach suffered by us We could be required to expend significant capital and other resources to alleviate problems caused by such actual or perceived breaches or incidents and to remediate our systems we could be exposed to a risk of loss litigation or regulatory action and possible liability and our ability to operate our business may be impaired
In addition if the security measures of our end customers partners vendors or suppliers are compromised even without any actual compromise of our own systems or of our solutions used by such end customers partners vendors or suppliers we may face negative publicity reputational harm or brand damage if our end customers partners vendors or suppliers or anyone else incorrectly attributes the blame for such incidents to us or our solutions If end customers believe that our solutions do not provide adequate security for the storage of personal or other sensitive or proprietary information or the transmission of such information over the internet our business will be harmed End customers concerns about security or privacy may deter them from using our solutions for activities that involve personal or other sensitive information which may significantly affect our business and operating results
Moreover we have acquired a number of companies products services and technologies over the years Although we devote significant resources to address any security issues with respect to such acquisitions we may still inherit additional risks as we integrate these companies products services and technologies into our business and solutions
A number of companies both within and outside of the enterprise and cloud computing infrastructure industry hold a large number of patents covering aspects of storage servers networking desktop security virtualization containerization database management cloud services products and other technologies relevant to our products In addition to these patents participants in these technology and market areas typically also protect their technology through copyrights as trade secrets and by contractual means As a result there is frequent litigation based on allegations of infringement misappropriation or other violations of intellectual property rights We have received and in the future may receive inquiries from other intellectual property holders and may become subject to allegations and claims in litigation and outside litigation that we infringed or are infringing their intellectual property rights particularly as we expand our presence in the market and face increasing competition There can be no assurance that we will be successful in defending against these allegations or claims or in reaching a business resolution that is satisfactory to us which could affect or even preclude our ability to sell our products in the relevant market and subject us to payment of damages and other financial remedies In addition parties may claim that the names and branding that we use for our company and our various products and services infringe their trademark rights in certain countries or territories If such a claim were to prevail we may have to change the names and branding that we use in the affected countries or territories and we could incur other costs
We currently have a number of agreements in effect pursuant to which we have agreed to defend indemnify and hold harmless our end customers suppliers and channel and other partners from damages and costs which may arise from allegations of infringement or actual infringement by our products and services of third party patents or other intellectual property rights in the United States and or in other countries The scope of these defense and indemnity obligations varies but may in some instances include indemnification for damages and expenses including attorneys fees A claim that our solutions infringe a third party s intellectual property rights even if untrue could harm our relationships with our end customers and or channel partners may deter future end customers from purchasing our solutions and could expose us to costly litigation and settlement expenses Even if we are not a party to any litigation between a customer and a third party relating to infringement by our products or services an adverse outcome in any such litigation could make it more difficult for us to defend our solutions against intellectual property infringement claims in any subsequent litigation in which we are a named party Any of these results could harm our brand and operating results
Our defense of intellectual property rights claims brought against us or our end customers suppliers and channel partners regardless of whether the claims have merit could be time consuming expensive to litigate or settle divert management resources and attention and force us to acquire intellectual property rights and licenses which may involve substantial royalty or other payments Further a party making such a claim if successful could secure a judgment that requires us to pay substantial damages An adverse determination also could prevent us from offering or delivering our products and services to our end customers or channel partners and may require that we procure or develop substitute solutions that do not infringe which could require significant effort and expense We may have to seek a license for the technology at issue which may not be available on terms favorable or acceptable to us or at all and as a result may significantly increase our operating expenses or require us to restrict our business activities in one or more respects Any of these events could adversely affect our business operating results financial condition and prospects
We rely on a combination of patent copyright service mark trademark and trade secret laws as well as confidentiality procedures and contractual restrictions and covenants to establish and protect our proprietary rights all of which provide only limited protection Effective patent trademark service mark copyright and trade secret protection may not be available in every country in which our solutions are available We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology Moreover others may independently develop technologies that are competitive to ours and reduce our sales or market advantages or infringe our intellectual property A reduction in our market advantages or an inability to adequately protect and enforce our intellectual property and other proprietary rights could seriously harm our business operating results financial condition and prospects
We cannot assure you that any patents will be issued with respect to our currently pending patent applications in a manner that gives us adequate defensive protection or competitive advantages if at all or that any patents issued to us will not be challenged invalidated or circumvented We have filed for patents in the United States and in certain international jurisdictions but such protections may not be available in all countries in which we operate or in which we seek to enforce our intellectual property rights or may be difficult to enforce in practice Our currently issued patents and any patents that may be issued in the future with respect to pending or future patent applications may not provide sufficiently broad protection or they may not prove to be enforceable in actions against alleged infringers
Protecting against the unauthorized use of our intellectual property solutions and other proprietary rights is expensive and difficult particularly internationally Litigation via court proceedings arbitrations or similar proceedings may be necessary in the future to enforce or defend our intellectual property rights or to determine the validity and scope of the proprietary rights of others For example in March 2024 we announced that we filed a lawsuit in U S District Court against Tessell Inc Tessell alleging that Tessell engaged in willful copyright and patent infringement including theft of our source code and intellectual property related to our database service offering and commenced separate arbitration proceedings against Tessell s founders Litigation and arbitration are unpredictable and we may not win a litigation or arbitration even if there is significant evidence supporting our claims and defenses Further these proceedings and any other similar proceedings could result in substantial costs and diversion of management resources either of which could harm our business operating results and financial condition Further many of our current and potential competitors have the ability to dedicate substantially greater resources to defending intellectual property infringement claims and to enforcing their intellectual property rights than we have Attempts to enforce our rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against us or result in a holding that invalidates or narrows the scope of our rights in whole or in part
A number of our solutions incorporate or are based upon software that we obtained under open source licenses some of which may restrict or impose certain obligations on how we use or distribute our solutions subject us to various risks and challenges and could result in increased development expenses delays or disruptions to the release or distribution of those solutions an inability to protect our intellectual property rights and increased competition
A number of our solutions incorporate or are based upon open source software and we may incorporate or base our solutions on open source software in the future Such open source software is generally licensed under permissive and copyleft open source licenses such as the Apache License 2 0 BSD 2 Clause License Eclipse Public License 2 0 GNU General Public License GNU Lesser General Public License MIT License the Mozilla Public License 2 0 and other open source licenses The use of open source software subjects us to a number of risks and challenges including but not limited to
Our success and growth depend to a significant degree on the skills and continued services of our management team and other key personnel If we lose the services of any member of management or any key personnel we may encounter challenges or delays in identifying a suitable or qualified replacement and we may incur additional expenses to recruit and train a replacement In recent years we have experienced changes in our management team resulting from the hiring or departure of executives and other key personnel While we seek to manage these transitions carefully these changes may result in a loss of institutional knowledge and may cause disruptions to our business and growth If we fail to successfully integrate new key personnel into our organization or if key employees are unable to successfully transition into new roles our business could be adversely affected In addition we do not have life insurance policies that cover any of our executive officers or other key employees The loss of the services of any of our executive officers or key employees and any failure to have in place and execute an effective succession plan for key executives could disrupt our business and have a significant negative impact on our operating results prospects and future growth
In addition our success and growth also depend substantially on our ability to continue to attract hire integrate train retain and adequately motivate qualified and highly skilled personnel in particular in sales and engineering We have invested and may need to continue to invest significant amounts of cash and equity to attract and retain employees and we may never realize returns on these investments Moreover ineffective management of any leadership transitions especially within our sales organization or the inability of our recently hired sales personnel to effectively ramp to target productivity levels could negatively impact our growth and operating margins It requires a significant time investment to replace train and ramp sales representatives to full productivity Competition for highly skilled personnel particularly in sales and engineering is frequently intense especially in the San Francisco Bay Area where we are headquartered and have a substantial need for engineering talent This competition for highly skilled personnel results in increased costs in the form of cash and stock based compensation Furthermore the industry in which we operate generally experiences high employee attrition
Although we have entered into employment offer letters with some of our key personnel these agreements generally do not have a fixed duration or term Volatility or underperformance in the price of our Class A common stock may also impact our ability to attract and retain key employees There is no assurance that we will be able to successfully attract or retain qualified personnel Additionally potential changes in U S immigration and work authorization laws and regulations may make it difficult to renew or obtain visas for any highly skilled personnel that we have hired or are actively recruiting Our inability to attract and retain the necessary personnel could adversely affect our business operating results and financial condition
Moreover we believe that a key contributor to our success and our ability to retain a highly skilled workforce has been our company culture which we believe fosters innovation teamwork and a passion for our products and customers As we grow and evolve we may find it difficult to maintain the beneficial aspects of our company culture globally These difficulties may be further amplified by our globally distributed workforce which could have a negative impact on our workplace culture and on the execution of our business plans and operations An inability to maintain our company culture could adversely affect our ability to attract and retain employees continue to perform at current levels or execute on our business strategy
Although we have a channel sales model our sales representatives typically engage in direct interaction with our prospective end customers Therefore we continue to be substantially dependent on our sales force to obtain new end customers and sell additional solutions to our existing end customers There is significant competition for sales personnel with the skills and technical knowledge that we require Our ability to achieve revenue growth will depend in large part on our success in recruiting training and retaining sufficient numbers of sales personnel to support our growth New hires require significant training and may take significant time before they achieve full productivity we estimate based on past experience that our average sales team members typically do not fully ramp and are not fully productive until around the time of the start of their fourth quarter of employment with us Our recent hires and planned hires may not become productive as quickly as we expect and we may be unable to hire or retain sufficient numbers of qualified individuals particularly individuals who are focused on sales of our solutions to new and existing large enterprises service providers and government entities in the markets where we do business or plan to do business Hiring sales personnel in new countries also requires additional set up upfront and ongoing costs that we may not recover if the sales personnel fail to achieve full productivity In addition as a result of our rapid growth a large percentage of our sales force is new to our company and our solutions and therefore less effective than our more seasoned employees
If our new sales employees particularly those focused on sales of our solutions to new and existing large enterprises service providers and government entities do not become fully productive on the timelines that we have projected or if we are unable to ensure that our seasoned sales employees remain productive our revenue will not increase at anticipated levels and our ability to achieve long term projections may be negatively impacted If we are unable to hire train and maintain sufficient numbers of effective sales personnel or our new or existing sales personnel are not successful in obtaining new end customers convincing existing customers to renew their subscription based purchases or increasing sales to our existing customer base generally our business operating results and prospects will be adversely affected
As indicated above our growth is dependent in large part on the success of our sales force and in particular our ability to structure our sales force and sales compensation structure in a way that aligns with our growth strategy As part of our efforts to appropriately structure and compensate our sales force such that their incentives are properly aligned with our growth strategy we have made changes to our sales processes sales segmentation and leadership structures for our global sales teams and may need to make additional changes in the future Such changes may take longer than anticipated to successfully implement and we may not be able to realize the full benefits thereof which may have a material adverse impact on our sales productivity as well as our business and operational results generally In particular as indicated above our growth continues to be substantially dependent on our ability to increase our sales to large enterprises particularly when those sales result in large orders for our solutions Competition for sales employees who have the knowledge and experience necessary to effectively penetrate major enterprise accounts is fierce and we may not be successful in hiring such employees or hiring them on the timelines we anticipate which will negatively impact our ability to target and penetrate major enterprise accounts
As a public company we are subject to the reporting requirements of the Exchange Act the Sarbanes Oxley Act of 2002 Sarbanes Oxley Act and the rules and regulations of the Nasdaq Stock Market We expect that the requirements of these rules and regulations will continue to increase our legal accounting and financial compliance costs make some activities more difficult time consuming and costly and place significant strain on our personnel systems and resources
The Sarbanes Oxley Act requires among other things that we maintain effective disclosure controls and procedures and internal control over financial reporting We are continuing to develop and refine our disclosure controls internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded processed summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business Further weaknesses in our internal controls may be discovered in the future Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes Oxley Act Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information which would likely have a negative effect on the market price of our securities
In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting to comply with the SEC rules that implement Sections 302 and 404 of the Sarbanes Oxley Act we have expended and anticipate that we may continue to expend significant resources and undertake various actions including incurring accounting related costs implementing new internal controls and procedures and providing significant management oversight Any failure to maintain the adequacy of our internal controls or consequent inability to produce accurate financial statements on a timely basis could increase our operating costs and could materially impair our ability to operate our business and could have a material and adverse effect on our operating results and could cause a decline in the price of our securities In addition if we are unable to continue to meet these requirements we may not be able to maintain our listing on the Nasdaq Global Select Market
We are and may in the future become involved in various legal proceedings and claims including cases involving our IP rights and those of others commercial matters employee related claims and other actions including actions that arise in the ordinary course of business Any litigation whether meritorious or not could result in substantial costs divert our management s attention and resources from our business and adversely impact our reputation and brand This could have an adverse effect on our business operating results and financial condition While we maintain insurance coverage for certain types of claims such insurance coverage may be insufficient to cover all losses or all types of claims that may arise If we are required to make substantial payments or implement significant changes to our operations as a result of legal proceedings or claims our business results of operations and financial condition could be adversely affected
In addition companies that experience volatility in their stock price including us have historically been subject to securities class action and derivative litigation and we may face similar claims in the future For example class action securities lawsuits and shareholder derivative lawsuits were filed against us in February 2019 and March 2023 which have since been resolved Any such litigation instituted against us whether meritorious or not could result in substantial costs divert management s attention and adversely affect our reputation business operating results and financial condition
Our business is subject to laws and regulations in the United States and internationally including those related to employment and labor antitrust workplace safety environmental consumer protection anti bribery laws import export controls trade and economic sanctions securities and taxation In certain jurisdictions these legal and regulatory requirements may be more stringent than in the United States Noncompliance with applicable regulations or requirements could subject us to investigations sanctions mandatory product recalls enforcement actions disgorgement of profits fines damages and civil and criminal penalties or injunctions If any governmental sanctions are imposed or if we do not prevail in any possible civil or criminal litigation our business reputation operating results and financial condition could be adversely affected In addition responding to any action will likely result in a significant diversion of management s attention and resources and an increase in third party professional fees Enforcement actions and sanctions could harm our reputation business operating results and financial condition
In addition we must comply with laws and regulations relating to the formation administration and performance of contracts with the public sector including U S federal state and local governmental organizations which affect how we and our channel partners do business with governmental agencies Selling our solutions to the U S government whether directly or through channel partners also subjects us to certain regulatory and contractual requirements including meeting the compliance requirements necessary for maintaining any required security clearances for facilities and employees Failure to comply with these requirements by either us or our channel partners could subject us to investigations fines and other penalties which could have an adverse effect on our business operating results financial condition and prospects For example the U S Department of Justice DOJ has recently identified procurement fraud as an enforcement priority indicating an ongoing commitment to aggressive enforcement under the False Claims Act and other applicable laws Violations of certain regulatory and contractual requirements could also result in us being suspended or debarred from future government contracting Any of these outcomes could have an adverse effect on our revenue operating results financial condition and prospects
These laws and regulations impose added costs on our business and failure to comply with these or other applicable regulations and requirements including noncompliance in the past could lead to claims for damages from our channel partners penalties termination of contracts loss of exclusive rights in our intellectual property and temporary suspension or permanent debarment from government contracting Any such damages penalties disruptions or limitations in our ability to do business with the public sector could have an adverse effect on our business and operating results
We are subject to stringent and rapidly changing laws regulations industry standards and frameworks and other obligations related to privacy artificial intelligence data protection and information security and our actual or perceived failure to comply with such obligations could adversely affect our business and operating results Any inability to comply with such obligations could also impair our efforts to maintain and expand our customer base and thereby decrease our revenue
Privacy artificial intelligence data protection and information security are significant issues in the United States and the other jurisdictions where we offer our solutions The regulatory framework for privacy artificial intelligence and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future Our handling of data is subject to a variety of global laws and regulations including regulation by various government agencies including the U S Federal Trade Commission FTC and various state local and foreign bodies data protection authorities and agencies
The U S federal and various state and foreign governments have adopted or proposed limitations on the collection use storage disclosure and transfer of personal information of individuals including end customers and employees In the United States the FTC and many state attorneys general are applying federal and state consumer protection laws to the online collection use and dissemination of data Additionally many foreign countries and governmental bodies including in Australia Brazil the European Economic Area EEA the UK Switzerland India Japan China and numerous other jurisdictions in which we operate or conduct our business have laws and regulations concerning the collection and use of personal information obtained from their residents or by businesses operating within their jurisdiction These laws and regulations often are more restrictive than those in the United States For example the General Data Protection Regulation GDPR the UK General Data Protection Regulation and Brazil s Lei Geral de Protecao de Dados LGPD impose more stringent data protection requirements provide an enforcement authority which substantially increases compliance costs and impose large penalties for noncompliance Such laws and regulations may require companies to implement new privacy and security policies conduct transfer and privacy impact assessments permit individuals to access correct and delete personal information stored or maintained by such companies inform individuals of security breaches that affect their personal information and among others obtain individuals consent to use personal information for certain purposes In addition some countries have enacted or are currently considering legislation that requires local storage and processing of data to avoid any form of transfer to a third country or other restrictions on transfer and disclosure of personal data outside of that country which may impact our compliance obligations potentially exposing us to liability and increase the cost and complexity of delivering our products and services
We also expect that there will continue to be new proposed laws regulations industry standards and case law concerning privacy data protection and information security in the United States the EEA and other jurisdictions and we cannot yet determine the impact these developments may have on our business This increases uncertainty and may require us to change our data practices and or change our technology solutions business model or processes which may in turn adversely affect demand for our products Additionally our sales cycles may lengthen due to increasingly rigorous and complex customer driven security artificial intelligence and privacy assessments as part of customers purchasing decisions
While the EU U S Data Privacy Framework accepted by the European Commission in July 2023 as well as the UK Extension to the EU U S DPF and Swiss U S DPF provides us with a transfer mechanism for data from the EEA data transfers continue to be scrutinized by regulators in the EEA the UK and other countries with similar transfer restrictions requiring organizations to ensure that the data is protected to a standard that is essentially equivalent to that under the GDPR UK GDPR Swiss Federal Data Protection Act and or other applicable laws and to document this
As a result of these and future data transfer developments we may experience a reluctance from current or prospective customers in the EEA the UK Switzerland and other similar countries to use our products and may find it necessary to make changes to our data transfer mechanisms and handling of personal data including with respect to the provision of our products and services This may adversely impact our business financial condition and operating results
In the United States more states are adopting their own data protection legislation creating a complex privacy landscape from state to state The California Consumer Privacy Act CCPA among other things requires covered companies to provide disclosures to California consumers and afford such consumers new abilities to opt out of the sale of their personal information The California Privacy Rights Act CPRA generally expanded consumers privacy rights and protections with respect to their personal information Colorado Virginia Connecticut Utah Florida Montana Oregon Texas Iowa Delaware Indiana Kentucky Maryland Minnesota Nebraska Nevada New Hampshire New Jersey Rhode Island and Tennessee all have passed privacy legislation now in effect We cannot yet predict the full impact of these laws on our business or operations but it may continue to require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply
Moreover as a result of current and proposed data protection and privacy laws addressing the use of personal data for marketing purposes including the European Commission s draft ePrivacy Regulation which is intended to replace the ePrivacy Directive in the EEA as well as the CCPA CPRA and other U S state privacy laws we face increased difficulty in marketing to current and potential customers as these laws impact the ability to use internet based services and tracking technologies such as cookies which impacts our ability to spread awareness of our products and services and in turn grow a customer base in some regions We also expect to incur additional costs to comply with the requirements of these laws
As we begin to offer more cloud based services we will increasingly be positioned as a data processor which imposes additional obligations under the foregoing and other laws and regulations relating to privacy and data protection and may increase our liability exposure by operation of law contract or penalties for noncompliance Additionally we expect that existing laws regulations and standards may be interpreted in new ways in the future Current or future laws regulations standards and other obligations as well as changes in the interpretation of existing laws regulations standards and other obligations could impair our or our customers ability to collect use or disclose information relating to individuals which could decrease demand for our solutions require us to restrict our business operations increase our costs and impair our ability to maintain and grow our customer base and increase our revenue
Although we are working to comply with federal state and foreign laws and regulations industry standards contractual obligations and other legal obligations that apply to us those laws regulations standards and obligations are evolving and may be modified interpreted and applied in an inconsistent manner from one jurisdiction to another and may conflict with one another other requirements or legal obligations our practices or the features of our solutions As such we cannot assure ongoing compliance with all such laws or regulations industry standards contractual obligations and other legal obligations Any failure or perceived failure by us to comply with federal state or foreign laws or regulations industry standards contractual obligations or other legal obligations or any actual or suspected security incident whether or not resulting in unauthorized access to or acquisition release or transfer of personal information or other data may result in governmental enforcement actions and prosecutions private litigation fines and penalties or adverse publicity and could cause our customers to lose trust in us which could have an adverse effect on our reputation brand and business Any inability to adequately address privacy and security concerns even if unfounded or comply with applicable laws regulations policies industry standards contractual obligations or other legal obligations could result in additional cost and liability to us damage our reputation and brand inhibit sales and adversely affect our business and operating results
We are subject to the FCPA the U S domestic bribery statute contained in 18 U S C 201 the U S Travel Act the UK Bribery Act and possibly other anti bribery and anti money laundering laws in countries in which we conduct activities We face significant risks if we fail to comply with the FCPA and other anti corruption laws that prohibit companies and their employees and third party intermediaries from authorizing offering or providing directly or indirectly improper payments or benefits to foreign government officials political parties and private sector recipients for the purpose of obtaining or retaining business directing business to any person or securing any advantage In many foreign countries particularly in countries with developing economies it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other applicable laws and regulations In addition we use various third parties to sell our solutions and conduct our business abroad We or our third party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state owned or affiliated entities and we can be held liable for the corrupt or other illegal activities of these third party intermediaries our employees representatives contractors partners and agents even if we do not explicitly authorize such activities We continue to update and implement our FCPA anti corruption compliance program and no assurance can be given that all of our employees and agents as well as those companies to which we outsource certain of our business operations will not take actions in violation of our policies and applicable law for which we may be ultimately held responsible
Any violation of the FCPA other applicable anti corruption laws and anti money laundering laws could result in whistleblower complaints adverse media coverage investigations loss of export privileges severe criminal or civil sanctions and in the case of the FCPA suspension or debarment from U S government contracts which could have a material and adverse effect on our reputation brand business operating results and prospects In addition responding to any enforcement action may result in a materially significant diversion of management s attention and resources and significant defense costs and other third party professional fees
Our solutions are subject to U S export controls including the Export Administration Regulations and economic sanctions administered by the Office of Foreign Assets Control and we incorporate encryption technology into certain of our solutions These encryption products and the underlying technology may be exported outside of the United States only with the required export authorizations including by license a license exception or other appropriate government authorizations
Furthermore our activities are subject to the U S economic sanctions laws and regulations that prohibit the export of certain products and services without the required export authorizations including to countries governments and persons targeted by U S embargoes or sanctions Additionally the U S government has recently been critical of existing trade agreements and may impose more stringent export and import controls Obtaining the necessary export license or other authorization for a particular sale may be time consuming and may result in the delay or loss of sales opportunities even if the export license ultimately may be granted While we take precautions to prevent our solutions from being exported in violation of these laws including obtaining authorizations for our encryption products implementing IP address blocking and screenings against U S government and international lists of restricted and prohibited persons we cannot guarantee that the precautions we take will prevent violations of export control and sanctions laws Violations of U S sanctions or export control laws can result in significant fines or penalties and possible incarceration for responsible employees and managers could be imposed for criminal violations of these laws
We also note that if our channel alliance and OEM partners fail to obtain appropriate import export or re export licenses or permits we may also be adversely affected through reputational harm as well as other negative consequences including government investigations and penalties We presently incorporate export control compliance requirements into our relevant partner agreements however no assurance can be given that our partners will be able to comply with such requirements
Also various countries in addition to the United States regulate the import and export of certain encryption and other technology including import and export licensing requirements and have enacted laws that could limit our ability to distribute our solutions or could limit our end customers ability to implement our solutions in those countries Changes in our solutions or future changes in export and import regulations may create delays in the introduction of our solutions in international markets prevent our end customers with international operations from deploying our solutions globally or in some cases prevent the export or import of our solutions to certain countries governments or persons altogether From time to time various governmental agencies have proposed additional regulation of encryption technology including the escrow and government recovery of private encryption keys Any change in export or import regulations economic sanctions or related legislation increased export and import controls stemming from U S government policies or change in the countries governments persons or technologies targeted by such regulations could result in decreased use of our solutions by or in our decreased ability to export or sell our solutions to existing or potential end customers with international operations Any decreased use of our solutions or limitation on our ability to export or sell our solutions would adversely affect our business operating results and prospects
We do not collect sales and use value added or similar taxes in all jurisdictions in which we have sales and we have been advised that such taxes are not applicable to our products and services in certain jurisdictions Sales and use value added and similar tax laws and rates vary greatly by jurisdiction Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable If we are unsuccessful in collecting such taxes from our end customers we could be held liable for such costs which may adversely affect our operating results
We have expanded our international operations and staff to better support our growth into the international markets Our corporate structure and associated transfer pricing policies contemplate the business flows and future growth into the international markets and consider the functions risks and assets of the various entities involved in the intercompany transactions The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions including the United States to our international business activities changes in tax rates change in our geographical earnings mix new or revised tax laws or interpretations of existing tax laws and policies and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to the intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions If such a challenge or disagreement were to occur and our position was not sustained we could be required to pay additional taxes interest and penalties which could result in one time tax charges higher effective tax rates reduced cash flows and lower overall profitability of our operations Our financial statements could fail to reflect adequate reserves to cover such a contingency
Global tax developments applicable to multinational businesses may have a material impact on our business cash flow from operating activities or financial results The U S Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we comply with the law which could affect our results of operations in the period issued The Organisation for Economic Cooperation and Development reached agreement among various countries to implement a global minimum tax framework commonly referred to as Pillar Two which imposes a minimum effective tax rate of 15 on certain multinational enterprises Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two proposals The potential effects of Pillar Two may vary depending on specific provisions and rules implemented by each country that adopts Pillar Two These changes may increase our tax obligations in these countries In addition several countries have proposed or enacted digital services taxes many of which would apply to revenues derived from digital services We will continue to assess the ongoing impact of these current and pending changes to global tax legislation and the impact on our future financial statements upon the finalization of laws regulations and additional guidance In addition as we continue to evaluate our corporate structure any changes to the taxation of undistributed foreign earnings could also change our plans regarding reinvestment of such earnings Due to the large scale of our U S and international business activities many of these enacted and proposed changes to the taxation of our activities could increase our worldwide effective tax rate and have an adverse effect on our operating results cash flow or financial condition
We are subject to income taxes as well as non income based taxes in both the U S and various foreign jurisdictions Many judgments are required in determining our worldwide provision for income taxes and other tax liabilities and we are under audit by various tax authorities which often do not agree with positions taken by us on our income and non income based tax returns Although we believe that our estimates are reasonable the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially affect our financial results in the period or periods for which such determination is made
In general under Section 382 of the United States Internal Revenue Code of 1986 as amended the Code a corporation that undergoes an ownership change is subject to limitations on its ability to utilize its pre change net operating losses NOLs and other tax attributes to offset future taxable income An ownership change occurs when a company s five percent shareholders as defined in Section 382 of the Code collectively increase their ownership in the company by more than 50 percentage points by value over a rolling three year period Similar limitations may apply for state tax purposes If our existing NOLs are subject to limitations arising from previous ownership changes our ability to utilize NOLs could be limited by Section 382 of the Code We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership In addition at the state level there may be periods during which the use of net operating losses is suspended or otherwise limited
As of July 31 2025 we had outstanding 500 0 million aggregate principal amount of 0 25 convertible senior notes due 2027 the 2027 Notes and 862 5 million aggregate principal amount of 0 50 convertible senior notes due 2029 the 2029 Notes and together with the 2027 Notes collectively the Notes As of July 31 2025 we also had outstanding a revolving credit agreement the Revolver that provides for a senior secured revolving credit facility in an aggregate principal amount of 500 0 million
As of July 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 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 any borrowings under the Revolver 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 Revolver
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 Revolver 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
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 2027 Notes and the 2029 Notes are convertible under the circumstances described in Note 5 of the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K 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
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
In February 2025 we entered into the Revolver The Revolver 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 Revolver contains a financial covenant that requires us to maintain compliance with a maximum consolidated total leverage ratio calculated as set forth in the Revolver 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 Our ability to comply with these covenants depends on many factors some of which are beyond our control The Revolver 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 Revolver 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 Revolver as well as exercise other rights and remedies provided for under the Revolver the other loan documents and applicable law If outstanding borrowings under the Revolver 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
The market price of our securities has fluctuated and may continue to fluctuate substantially The market price of our securities depends on a number of factors including those described in this Risk Factors section many of which are beyond our control and may not be related to our operating performance These fluctuations could cause you to lose all or part of your investment in our securities Factors that could cause fluctuations in the market price of our securities include the following
In addition the stock market in general and the market for technology companies in particular has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies Broad market and industry factors may seriously affect the market price of our securities regardless of our actual operating performance
Sales of a substantial number of shares of our Class A common stock in the public markets particularly sales by our directors executive officers and significant stockholders or the perception that these sales could occur including public disclosure of sales contemplated by 10b5 1 trading plans could adversely affect the market price of our Class A common stock
We may also issue our shares of Class A common stock or additional securities convertible into shares of our Class A common stock from time to time in connection with a financing acquisition investments or otherwise Any such issuance could result in substantial dilution to our existing stockholders and cause the market price of our Class A common stock to decline
From time to time we release financial guidance in our earnings conference calls earnings releases investor presentations or otherwise regarding our future performance that represents our management s estimates as of the date of release This guidance includes forward looking statements based on projections prepared by our management Projections are based upon a number of assumptions and estimates that while presented with numerical specificity are inherently subject to significant business economic and competitive uncertainties and contingencies on our business many of which are beyond our control and are based upon specific assumptions with respect to future business decisions some of which will change Some of those key assumptions relate to the macroeconomic environment including inflation and interest rates which are inherently difficult to predict Other assumptions relate to the timing and structure of customer payments For example while we typically invoice customers upfront for multi year subscriptions any change to this practice could affect the timing of our free cash flow
We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges Furthermore analysts and investors may develop and publish their own projections of our business which may form a consensus about our future performance Our actual business results may vary significantly from such guidance or that consensus due to a number of factors many of which are outside of our control including those described in this Risk Factors section any of which or combination thereof could materially and adversely affect our business and future operating results Furthermore if we make downward revisions to our previously announced guidance if we withdraw our previously announced guidance or if our publicly announced guidance regarding future operating results fails to meet expectations of securities analysts investors or other interested parties the price of our securities would decline
Guidance is necessarily speculative in nature and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results Accordingly our guidance is only an estimate of what management believes is realizable as of the date of release Actual results may vary from our guidance and the variations may be material In light of the foregoing investors are urged not to rely upon our guidance in making an investment decision regarding 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
In August 2023 our Board of Directors authorized the repurchase of up to 350 0 million of our Class A common stock of which 111 5 million remained available for future share repurchases under the authorization as of July 31 2025 In August 2025 our Board of Directors approved a 350 0 million increase to the share repurchase authorization The authorization has no expiration date and does not obligate us to repurchase any minimum number of shares The timing and amount of share repurchases will depend upon prevailing stock prices business and market conditions corporate and regulatory requirements alternative investment opportunities and other factors We cannot guarantee that the share repurchase program will be fully executed or that it will enhance long term stockholder value Share repurchases under the program could affect and increase the volatility of the price of our Class A common stock and will diminish our cash reserves In addition as part of the Inflation Reduction Act signed into law in August 2022 the United States implemented a 1 excise tax on the value of certain stock repurchases by publicly traded companies This tax may increase the costs to us of any share repurchases The program may be modified suspended or discontinued at any time and any future announcement of a termination of the program could result in a decrease in the price of our Class A common stock
The trading market for our securities will be influenced by the research and reports that industry or financial analysts publish about us or our business We do not control these analysts or the content and opinions included in their reports If any of the analysts who cover us issue an inaccurate or unfavorable opinion regarding our securities the price of our securities would likely decline In addition analyst research or reports may also raise performance expectations that we may not be able to meet The stock prices of many companies in the high technology industry have declined significantly after those companies have failed to meet or in some cases failed to significantly exceed the financial guidance publicly announced by the companies or the expectations of analysts If our financial results fail to meet or exceed our announced guidance or the expectations of analysts or public investors analysts could downgrade our securities or publish unfavorable research about us If analysts cease coverage of our company or fail to publish reports on us regularly we could lose visibility in the financial markets which in turn could cause the price of our securities or trading volume to decline potentially significantly
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change in control of our company These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our Board of Directors or take other corporate actions including effecting changes in our management These provisions include
Our amended and restated bylaws designate the Court of Chancery of the State of Delaware and to the extent enforceable the federal district courts of the United States of America as the exclusive forums for certain disputes between us and our stockholders which will restrict our stockholders ability to choose the judicial forum for disputes with us or our directors officers or employees
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law any derivative action or proceeding brought on our behalf any action asserting a breach of a fiduciary duty any action arising pursuant to the Delaware General Corporation Law our amended and restated certificate of incorporation or our amended and restated bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine This choice of forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction
Furthermore Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions Accordingly both state and federal courts have jurisdiction to entertain such claims To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts among other considerations our amended and restated bylaws provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act While the Delaware courts have determined that such choice of forum provisions are facially valid a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions
These choice of forum provisions may limit a stockholder s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors officers or other employees If a court were to find either exclusive forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action we may incur additional costs associated with resolving the dispute in other jurisdictions which could seriously harm our business
We have never declared or paid any cash dividends on our Class A common stock We do not anticipate paying any dividends on our Class A common stock in the foreseeable future Any determination to pay dividends in the future will be at the discretion of our Board of Directors Accordingly investors must rely on sales of their Class A common stock after price appreciation which may never occur as the only way to realize any future gains on their investments
There is an increasing focus from certain investors customers partners employees other stakeholders and regulators concerning environmental social and governance matters ESG Some investors may use these non financial performance factors to guide their investment strategies and in some cases may choose not to invest in us if they believe our policies and actions relating to ESG are inadequate We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies which may prove challenging if such standards diverge or even contradict
As ESG best practices and reporting standards continue to develop we may incur increasing costs relating to ESG monitoring and reporting and complying with ESG initiatives For example the SEC adopted climate change and ESG reporting requirements Following several legal challenges the SEC voted to end its defense of such rules If in the future the SEC were to reverse its current position our compliance costs would increase We may also face greater costs to comply with new ESG standards or initiatives in the European Union We publish an annual Impact Report which reports among other things our greenhouse gas emissions and our efforts to manage our emissions In addition our annual Impact Report provides highlights of how we are supporting our workforce including our efforts to foster culture and community Our disclosures on these matters or a failure to meet evolving stakeholder expectations for ESG practices and reporting may potentially harm our reputation and customer relationships Due to new regulatory standards and market standards certain new or existing customers particularly those in the European Union may impose stricter ESG guidelines or mandates for and may scrutinize relationships more closely with their counterparties including us which may lengthen sales cycles or increase our costs
Furthermore if our competitors ESG performance is perceived to be better than ours potential or current investors may elect to invest with our competitors instead In addition in the event that we communicate certain initiatives or goals regarding ESG matters we could fail or be perceived to fail in our achievement of such initiatives or goals or we could be criticized for the scope of such initiatives or goals If we fail to satisfy the expectations of investors customers employees and other stakeholders or our initiatives are not executed as planned our business financial condition results of operations and prospects could be adversely affected
Significant natural disasters such as earthquakes fires floods and extreme weather man made problems such as significant power outages security breaches acts of terrorism or war civil unrest or geopolitical turmoil and other similar events that may be outside of our control could have an adverse impact on our business and operating results For example despite the implementation of network security measures our networks also may be vulnerable to computer viruses break ins and similar disruptions from unauthorized tampering with our solutions Further both our corporate headquarters and our contract manufacturer are located in the San Francisco Bay Area a region known for seismic activity In addition natural disasters including extreme weather and man made problems could cause disruptions in our or our end customers or channel partners businesses our suppliers and manufacturers operations or the global economy as a whole Epidemics pandemics such as the COVID 19 pandemic other outbreaks of novel diseases or other major public health concerns could also cause disruptions in our or our end customers or channel partners businesses our supply chain our suppliers and manufacturers operations or the global economy as a whole We also rely on IT systems to communicate among our workforce and with third parties Any disruption to our communications whether caused by a natural disaster or by man made problems such as power disruptions could adversely affect our business We do not have a formal disaster recovery plan or policy in place and do not currently require that our manufacturing partners have such plans or policies in place To the extent that any such disruptions result in delays or cancellations of orders or impede our suppliers or our manufacturers ability to timely deliver our solutions and product components or the deployment of our solutions our business operating results and financial condition would be adversely affected We do maintain what we believe are commercially reasonable levels of business interruption insurance However such insurance may not adequately cover our losses in the event of a significant disruption in our business
Our business strategy may from time to time include acquiring other complementary products technologies or businesses or divesting certain products We also may enter into relationships with other businesses in order to expand our solutions which could involve preferred or exclusive licenses additional channels of distribution or discount pricing or investments in other companies Negotiating these transactions can be time consuming difficult and expensive and our ability to close these transactions may be subject to third party approvals such as government regulatory approvals which are beyond our control Consequently we can make no assurance that these transactions once undertaken and announced will close
These kinds of acquisitions divestitures or investments may result in unforeseen expenditures and operating and integration difficulties especially if the acquisitions divestitures or investments are more complex in structure and scope including due to the geographic location of the acquired company In particular we may encounter difficulties assimilating or integrating the businesses technologies products personnel or operations of companies that we may acquire particularly if the key personnel of the acquired business choose not to work for us We may have difficulty retaining the customers of any acquired business or the acquired technologies or research and development expectations may prove unsuccessful Acquisitions or divestitures may also disrupt our ongoing business divert our resources require significant management attention that would otherwise be available for development of our business and may be viewed negatively by our end customers investors or securities analysts We may not successfully evaluate or utilize the acquired technology or personnel or accurately forecast the financial impact of an acquisition or divestiture transaction including accounting charges Any acquisition or investment could expose us to unknown liabilities and risks and we may incur additional costs and expenses necessary to address an acquired company s failure to comply with laws and governmental rules and regulations Moreover we cannot assure you that the anticipated benefits of any acquisition or investment would be realized in a timely manner if at all or that we would not be exposed to unknown liabilities In connection with these types of transactions we may issue additional equity securities that would dilute our stockholders use cash that we may need in the future to operate our business incur debt on terms unfavorable to us or that we are unable to repay incur large charges or substantial liabilities encounter difficulties integrating diverse business cultures and become subject to adverse tax consequences substantial depreciation or deferred compensation charges These challenges related to acquisitions divestitures or investments could adversely affect our business operating results financial condition and prospects
Our sales contracts are denominated in U S dollars therefore substantially all of our revenue is not subject to foreign currency risk However any strengthening of the U S dollar relative to foreign currencies could increase the effective cost of our solutions for customers outside the United States which may adversely affect our financial condition and operating results An increasing portion of our operating expenses is incurred outside the United States and denominated in foreign currencies including the Euro Pound Sterling Indian Rupee and Australian Dollar We also have expenses in other currencies which are smaller in magnitude but still subject to currency fluctuations As a result our total expense base is exposed to foreign exchange volatility In particular ongoing geopolitical instability and divergent fiscal and monetary policies across regions have caused and may continue to cause significant exchange rate volatility for the foreseeable future If our exposure to foreign currency fluctuations continues to grow and we are unable to effectively hedge against this risk our operating results could be negatively impacted Additionally such fluctuations may impair our ability to accurately forecast financial performance particularly with respect to operating expenses and margins To date we have not entered into any hedging arrangements or used derivative instruments to manage foreign currency risk We continue to monitor our exposure and evaluate the potential benefits of implementing a hedging program
We maintain a portfolio of marketable securities through a professional investment advisor The investments in our portfolio are subject to credit liquidity market price and interest rate risks that could materially and adversely affect our business financial condition results of operations and prospects Under our corporate investment policy we seek to preserve principal maintain liquidity avoid excessive credit concentrations and capture a market rate of return However the portfolio s value may decline due to changes in interest rates instability in the global financial markets that reduces the liquidity of securities in our portfolio and other factors including unexpected or unprecedented events such as health epidemics or pandemics Even with diversification and ongoing risk profile monitoring we could experience significant losses or reduced liquidity If we increase our holdings in these securities our exposure to such risks would grow potentially exacerbating any adverse impact
Cybersecurity is an important component of our overall enterprise risk management strategy We are committed to protecting our information systems and data from a wide range of cybersecurity threats including operational risks intellectual property theft fraud extortion privacy violations legal risks and reputational damage Our approach integrates comprehensive processes and technologies designed to identify assess and mitigate these risks
Information on the cybersecurity risks we face is discussed in Part I Item 1A Risk Factors We believe that risks from cybersecurity threats including as a result of any previous cybersecurity incidents have not materially affected us including our business strategy results of operations or financial condition However we remain subject to risks from unknown or future cybersecurity threats that could materially affect us including our business strategy results of operations or financial condition We remain vigilant and continue to invest in security technologies and practices to safeguard our systems
Our corporate headquarters are located in San Jose California where under lease agreements that expire through May 2030 we currently lease approximately 215 000 square feet of space We also maintain offices in North America Europe Asia Pacific the Middle East Latin America and Africa We lease all of our facilities and do not own any real property We believe that our facilities are adequate to meet our needs for the immediate future and that should it be needed we would lease suitable additional space to accommodate our operations
Our Class A common stock began trading publicly on the NASDAQ Stock Market under the ticker symbol NTNX on September 30 2016 Prior to that time there was no public market for our Class A common stock The following table sets forth for the periods indicated the high and low sale prices of our Class A common stock as reported on the Nasdaq Global Select Market
We have never declared or paid cash dividends on our Class A common stock We do not anticipate paying any dividends on our Class A common stock in the foreseeable future Any future determination to declare dividends will be made at the discretion of our Board of Directors subject to applicable laws and will depend on our financial condition operating results capital requirements general business conditions and other factors that our Board of Directors may deem relevant
The following graph shows a comparison from July 31 2020 through July 31 2025 of the cumulative five year total shareholder return for our Class A common stock based on the closing price on the last day of each respective period The graph assumes an initial investment of 100 on July 31 2020 in the common stock of Nutanix Inc the NASDAQ Composite Index and NASDAQ Computer Index and assumes reinvestment of any dividends The stock price performance on the following graph is not necessarily indicative of future stock price performance
The information on the above graph shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 as amended or otherwise subject to the liabilities of that section or Sections 11 and 12 a 2 of the Securities Act and shall not be incorporated by reference into any registration statement or other document filed by us with the SEC whether made before or after the date of this Annual Report on Form 10 K regardless of any general incorporation language in such filing except as shall be expressly set forth by specific reference in such filing
The following discussion and analysis of our financial condition results of operations and cash flows should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10 K 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 Risk Factors or in other parts of this Annual Report on Form 10 K See also Special Note Regarding Forward Looking Statements above For a discussion of our results of operations for the fiscal year ended July 31 2024 as compared to the fiscal year ended July 31 2023 please refer to Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10 K filed with the SEC on September 19 2024
Nutanix Inc we us our or Nutanix is a hybrid multicloud computing leader offering organizations a unified software platform for running applications and AI and managing data anywhere Our vision is to simplify the deployment and operation of the increasingly distributed landscape of apps and data while freeing organizations to focus on business goals Our mission is to delight customers with an open secure platform with rich data services that increases their ability to take advantage of new technologies such as cloud native and AI optimizes how they run their organizations today and accelerates innovation efficiency and growth
The Nutanix Cloud Platform is designed to enable organizations to build 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 while supporting customer choice across server platforms storage options public and managed clouds and container and virtualization platforms The Nutanix Cloud Platform supports a wide variety of workloads with varied compute storage and network requirements including business critical applications data platforms including SQL NoSQL and vector databases and business intelligence applications enterprise AI workloads including machine learning generative AI and agentic AI general purpose workloads including system infrastructure networking and security end user computing and virtual desktop infrastructure services and cloud native applications including modern containerized applications
We originally pioneered hyperconverged infrastructure HCI to break down legacy silos by merging compute storage and networking into a single software defined data center platform We continued to innovate and developed Nutanix AHV our native hypervisor that offers enterprise grade virtualization and built in Kubernetes support To provide our customers with more choice we further engineered our software solutions to run on a variety of server platforms and with a variety of external storage providers decoupling our software from the underlying hardware and powering a variety of hybrid multi cloud deployments as part of our previously completed transition from a hardware company to a software company Most recently we have extended our software platform support to include external storage from qualified partners To provide our customers with the flexibility to choose their preferred license levels and durations based on their specific business needs we reshaped our licensing by completing a transition to a subscription based business model In addition to enabling enterprise AI and simplifying hybrid multicloud deployments we have a further long term vision to enable developers to build modern container based applications once and run them anywhere through Project Beacon our multi year effort to provide consistent Kubernetes platform management and data centric platform services across clouds
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 software as a service 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 29 000 end customers as of July 31 2025 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 plan to continue investing in initiatives that support the long term growth of our business including the development of our solutions and sales and marketing efforts aimed at capitalizing on market opportunities Simultaneously we are focused on improving our operating cash flow through operational efficiencies including in our go to market functions By maintaining this balance we believe we can sustain profitable growth
Other non subscription product revenue Other non subscription product revenue includes approximately 37 4 million 27 9 million and 10 8 million of non portable software revenue for fiscal 2023 2024 and 2025 respectively and approximately 2 8 million 3 3 million and 4 2 million of hardware revenue for fiscal 2023 2024 and 2025 respectively
In addition to GAAP metrics we regularly monitor 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
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 including our ability to acquire subscriptions with new customers and to retain and expand with existing customers while normalizing for differences in contract durations 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
Non GAAP financial measures 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 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 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 Annual Report on Form 10 K 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
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 Beginning with the first quarter of fiscal 2026 our methodology for calculating ARR will be updated to align more closely with the timing of when licenses are made available to customers Our calculation of ARR is not adjusted for the impact of any known or projected future events such as customer cancellations expansion or contraction of existing customers relationships or price increases or decreases that may cause any subscription contract not to be renewed on its existing terms ARR is a performance measure that should be viewed independently of revenue and does not represent our revenue under GAAP on an annualized basis or a forecast of GAAP revenue Investors should not place undue reliance on ARR as an indicator of our future or expected results ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled performance measures presented by other companies
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
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
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
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 Refer to Part I Item 1A Risk Factors in this Annual Report on Form 10 K for details If we are unable to address these challenges our business and operating results could be materially and adversely affected
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 We plan to continue investing in sales and marketing functions including initiatives focused on opportunities with major accounts large deals and commercial accounts as well as other 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 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 addressing a growing mix of renewals which have a lower cost than landing new customers or expanding into our existing customer base improving the efficiency of our demand generation spend 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 We plan to continue investing in our global research and development teams to support enhancements to our solutions improve integration with ecosystem partners and expand the range of technologies and features available through our platform These investments are intended to strengthen our core offerings and enable us to respond to evolving technology trends including developments in generative AI and modern applications across hybrid and multicloud environments
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 subscriptions 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 occurs when we make the software available to the customer Accordingly any reduction in the total average contract duration of our subscription term based licenses would decrease the amount of license revenue recognized upfront and could adversely affect our revenue for the applicable period Revenue from software entitlement subscriptions support subscriptions and cloud based SaaS offerings is recognized ratably over the contractual service period Accordingly any decline in such subscriptions whether new subscriptions or renewals in any given fiscal quarter may not be fully or immediately reflected in our revenue for that quarter For additional information on revenue recognition see Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K and Critical Accounting Estimates later in this Management s Discussion and Analysis of Financial Condition and Results of Operations section
Hybrid and multicloud architectures as well as trends in enterprise AI and modern containerized applications have affected IT buyer expectations around 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 of the benefits of our platform This includes our newer solutions that extend beyond 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
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
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 subscriptions support subscription and services we focus on expanding our footprint by serving more workloads We also generate recurring revenue from renewals and given our subscription focused business model these 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 July 31 2025 approximately 77 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 subscription 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 6x greater on average than their initial order This number increases to approximately 37 2x on average for Global 2000 end customers who have been with us for 18 months or longer as of July 31 2025
As of July 31 2025 our net dollar based retention rate NRR was 108 compared to 114 as of July 31 2024 NRR is calculated as of the end of a twelve month period We calculate NRR by starting with the ARR for all customers with subscription contracts at the beginning of the period We then divide end of the period ARR for the same customer group by the beginning of the period ARR NRR is a performance measure that we believe provides useful information to our management and investors as it provides an indication of our ability to retain and expand ARR from our existing customer base
Over time 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 These trends 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
Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer and partner behavior Macroeconomic conditions including inflation fluctuations in interest rates foreign currency fluctuations tariffs or other trade restrictions geopolitical issues changes in government policy or spending and other changes in economic conditions may adversely affect the buying patterns of our customers and prospective customers including the length of sales cycles our overall pipeline and pipeline conversion and our top line growth expectations Due to our subscription focused business model any impact of the current macroeconomic environment on our business particularly as a result of changes in our customer and partner behavior may not be fully reflected in our results of operations until future periods if at all As we continue to monitor the direct and indirect impacts of the current environment the broader implications of macroeconomic conditions on our business results of operations and financial condition particularly in the long term remain uncertain
We generate revenue primarily from the sale of the 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 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 the 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 when 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 subscriptions 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 subscriptions 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 subscriptions 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 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 and services 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
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
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 consists primarily of interest income and expense which includes the amortization of the debt discount and debt issuance costs associated with our previously outstanding 0 convertible senior notes due 2023 the 2023 Notes 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 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 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 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 research and experimental R E expenditures rather than deducting the costs as incurred The capitalization of R E resulted in U S taxable income for fiscal 2025 which was partially offset by net operating loss carryforwards
The One Big Beautiful Bill Act OBBBA signed into law on July 4 2025 has officially repealed the amortization requirement under IRC Section 174 restoring immediate expensing for domestic R E expenditures Effective for taxable years beginning after December 31 2024 taxpayers may deduct domestic R E expenditures immediately and for the R E expenditures capitalized from 2022 to 2024 OBBBA also allows taxpayers to make an election to accelerate the deductions over one year or two years We have assessed the impact of OBBBA on our fiscal 2025 provision for income taxes and determined that there is no material impact to our financial statements for fiscal 2025
Product revenue increased year over year by approximately 273 4 million or 26 for fiscal 2025 due primarily to increases in software revenue as a result of increased adoption of our products driven by growth in software renewals and the various programs we have put in place to attract new customers onto our platform and expand with existing customers
Support entitlements and other services revenue increased year over year by approximately 115 7 million or 11 for and fiscal 2025 in conjunction with the growth of our end customer base which grew approximately 10 during fiscal 2025 and the related software entitlement subscription and support subscription contracts and renewals
The total average contract duration was approximately 3 0 years and 3 1 years for fiscal 2024 and 2025 respectively 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
Cost of product revenue decreased year over year for fiscal 2025 due primarily to lower stock based compensation expense as well as decreases in overhead resulting from lower operating and finance lease costs 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
Sales and marketing expense increased year over year due primarily to higher personnel related costs including commissions expense resulting from the 8 growth in our sales and marketing headcount from July 31 2024 to July 31 2025 as well as increased marketing spend on events and partnership programs
Research and development expense increased year over year due primarily to higher personnel related costs including stock based compensation expense and bonus expense due to a 12 growth in our R D headcount from July 31 2024 to July 31 2025 Research and development expense also increased due to higher depreciation expense related to property and equipment additions during the period and an increase in outside services costs
General and administrative expense increased year over year due primarily to higher legal and outside services costs higher personnel related costs resulting from the 10 growth in our G A headcount from July 31 2024 to July 31 2025 as well as higher technical costs related to software licenses and support partially offset by lower depreciation expense
The decrease in other expense net for fiscal 2025 was due primarily to 107 9 million of interest expense recognized during the fiscal quarter ended July 31 2024 resulting from our conversion of the 2026 Notes as well as a decrease in interest expense related to our convertible notes given the conversion of the 2026 Notes The decrease was 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
The year over year decrease in the provision for income taxes in fiscal 2025 was due primarily to the lapse of the statute of limitations for some foreign uncertain tax positions and foreign excess tax benefits on stock options and restricted stock units exercised during the periods partially offset by higher U S federal income tax and state income taxes as a result of higher taxable earnings We continue to maintain a full valuation allowance on our U S federal and state deferred tax assets
Our principal sources of liquidity are cash cash equivalents and marketable securities and net accounts receivable As of July 31 2025 we had approximately 769 5 million of cash and cash equivalents and 1 223 2 million of short term investments which were held for general corporate purposes Our restricted cash balance was not material 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 July 31 2025 we had accounts receivable of approximately 338 0 million net of allowances of 2 2 million
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
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
On February 12 2025 we entered into a revolving credit agreement the Revolver 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 Revolver matures in February 2030 subject to earlier springing maturity under certain circumstances As of July 31 2025 we had no borrowings and an immaterial amount of letters of credit outstanding under the Revolver The Revolver contains customary affirmative and negative covenants including a financial covenant and restrictions on liens investments indebtedness fundamental changes restricted payments transactions with affiliates prepayments of subordinated debt and other matters all subject to certain exceptions The financial covenant requires us to maintain a total leverage ratio of less than or equal to 3 75 1 00 tested at the end of each fiscal quarter As of July 31 2025 we were in compliance with the financial covenant
We believe that our cash cash equivalents and short term investments available borrowing capacity under the Revolver 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 Holders of the 2027 Notes or the 2029 Notes will be entitled to convert their 2027 Notes or 2029 Notes under certain circumstances as described in Note 5 of Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K If one or more holders elect to convert their 2027 Notes or 2029 Notes as applicable we may elect to satisfy our conversion obligation by delivering shares of our Class A common stock or a combination of cash and shares of Class A common stock rather than exclusively in cash
As of July 31 2025 we had aggregate future minimum lease payments under non cancelable operating leases and finance leases were 179 8 million of which 41 3 million is short term Non cancelable operating leases include leases that have been executed but not yet commenced We lease offices research and development facilities and data centers under operating leases expiring through October 2030 and lease certain data center equipment under finance leases
As of July 31 2025 we had accrued liabilities related to uncertain tax positions which are reflected on our consolidated balance sheet These accrued liabilities are not reflected in the contractual obligations disclosed above as it is uncertain if or when such amounts will ultimately be settled Uncertain tax positions are further discussed in Note 12 of Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K
In August 2023 our Board of Directors authorized the repurchase of up to 350 0 million of our Class A common stock In August 2025 our Board of Directors approved a 350 0 million increase to the share repurchase authorization Repurchases will be funded from available liquidity and may be made from time to time through open market purchases in privately negotiated transactions or by other means including through the use of trading plans intended to qualify under Rule 10b5 1 under the Exchange Act in accordance with applicable securities laws and other restrictions The timing and amount of share repurchases will depend upon prevailing stock prices business and market conditions corporate and regulatory requirements alternative investment opportunities and other factors The authorization has no expiration date may be modified suspended or discontinued at any time and does not obligate us to repurchase any minimum number of shares For more information on the share repurchase refer to Note 8 of Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K
Net cash provided by operating activities was approximately 672 9 million and 821 5 million for fiscal 2024 and 2025 respectively representing an improvement of approximately 148 5 million The increase in cash generated from operating activities for fiscal 2025 was due primarily to the increase in our net income from operations
Net cash provided by investing activities of approximately 529 6 million for fiscal 2024 included approximately 774 2 million of maturities of short term investments and 706 4 million of sales of short term investments partially offset by approximately 871 3 million of short term investment purchases 75 3 million of purchases of property and equipment and 4 5 million of cash paid for acquisitions
Net cash used in investing activities of approximately 951 7 million for fiscal 2025 included approximately 1 359 6 million of short term investment purchases and 71 3 million of purchases of property and equipment partially offset by 476 2 million of maturities of short term investments and 3 0 million of sales of short term investments
Net cash used in financing activities of approximately 1 062 6 million for fiscal 2024 included approximately 817 6 million used to pay the cash portion of the obligation due upon conversion of the 2026 Notes 161 6 million of taxes paid related to the net share settlement of equity awards 131 1 million of repurchases of our Class A common stock and 3 9 million of payments for finance lease obligations partially offset by approximately 51 6 million of proceeds from the sale of shares through employee equity incentive plans
Net cash provided by financing activities of approximately 244 1 million for fiscal 2025 included approximately 848 0 million of net proceeds from the issuance of the 2029 Notes and 68 9 million of proceeds from the sale of shares through employee equity incentive plans partially offset by approximately 307 9 million of repurchases of our Class A common stock 256 6 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 4 6 million of payments for finance lease obligations 3 4 million of third party debt issuance costs related to the issuance of the 2029 Notes 2 8 million of issuance costs related to the Revolver and 2 0 million of deferred payments for purchases of property and equipment
Our consolidated financial statements are prepared in accordance with U S GAAP The preparation of these 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 consolidated financial statements which in turn could change the results from those reported
Some of our contracts with customers contain multiple performance obligations Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment For these contracts we account for individual performance obligations separately if they are distinct The transaction price is allocated to the separate performance obligations on a relative standalone selling price SSP basis For deliverables that we routinely sell separately such as software entitlement subscriptions and support subscriptions on our core offerings we determine SSP by evaluating the standalone sales over the trailing 12 months For those that are not sold routinely we determine SSP based on our overall pricing trends and objectives taking into consideration market conditions and other factors including the value of our contracts the products sold and geographic locations
If the contract contains a single performance obligation the entire transaction price is allocated to the single performance obligation Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP We determine SSP based on the price at which the performance obligation is sold separately If the SSP is not observable through past transactions we estimate the SSP taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations Refer to Note 1 and Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K for additional information on revenue recognition
The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity s financial statements or tax returns We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position We recognize uncertain tax positions only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date We consider many factors when evaluating and estimating our tax positions and tax benefits which may require periodic adjustments and which may not accurately anticipate actual outcomes Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements
We measure and recognize compensation expense for all stock based awards including stock options and purchase rights issued to employees under our 2016 Employee Stock Purchase Plan 2016 ESPP based on the estimated fair value of the awards on the grant date We use the Black Scholes Merton Black Scholes option pricing model to estimate the fair value of stock options and 2016 ESPP purchase rights The fair value of restricted stock units RSUs is measured using the fair value of our common stock on the date of the grant The fair value of awards with a market based condition is measured using a Monte Carlo simulation
The fair value of stock options and RSUs with a service condition is recognized as expense on a straight line basis over the requisite service period which is generally four years For stock based awards granted to employees with a performance condition we recognize stock based compensation expense using the graded vesting attribution method over the requisite service period when management determines it is probable that the performance condition will be satisfied For stock based awards with a market based condition we recognize stock based compensation expense using the graded vesting attribution method over the requisite service period regardless of achievement provided the requisite service condition is met The fair value of the 2016 ESPP purchase rights is recognized as expense on a straight line basis over the offering period We account for forfeitures of all share based awards when they occur
Our use of the Black Scholes option pricing model requires the input of subjective assumptions including the fair value of the underlying common stock expected term of the option expected volatility of the price of our common stock risk free interest rates and the expected dividend yield of our common stock The assumptions used in our option pricing model represent management s best estimates These estimates involve inherent uncertainties and the application of management s judgment If factors change and different assumptions are used our stock based compensation expense could be materially different in the future
The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty An estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated In determining whether a loss should be accrued we evaluate among other factors the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss Changes in these factors could materially impact our consolidated financial statements
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
Our 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 consolidated financial statements Foreign currency transaction gains and losses and exchange rate fluctuations have not been material to our 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 60 8 million 70 4 million and 77 7 million for fiscal 2023 2024 and 2025 respectively The increase in this hypothetical change in fiscal 2025 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
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 Revolver 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 Revolver 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 Revolver As of July 31 2025 we had no borrowings and an immaterial amount of letters of credit outstanding under the Revolver
As of July 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 Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K 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
We have audited the accompanying consolidated balance sheets of Nutanix Inc and subsidiaries the Company as of July 31 2025 and 2024 the related consolidated statements of operations comprehensive income loss stockholders deficit and cash flows for each of the three years in the period ended July 31 2025 and the related notes collectively referred to as the financial statements In our opinion the financial statements present fairly in all material respects the financial position of the Company as of July 31 2025 and 2024 and the results of its operations and its cash flows for each of the three years in the period ended July 31 2025 in conformity with accounting principles generally accepted in the United States of America
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of July 31 2025 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 23 2025 expressed an unqualified opinion on the Company s internal control over financial reporting
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services The Company offers customers an enterprise cloud platform which can be preinstalled on hardware or delivered separately as well as related support subscriptions and professional services Product revenue was 1 3 billion and support entitlements and other services revenue was 1 2 billion for the year ended July 31 2025
We identified revenue recognition as a critical audit matter because of these significant judgments required by management This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate whether revenue was recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services
Nutanix Inc was incorporated in the state of Delaware in September 2009 Nutanix Inc is headquartered in San Jose California and together with its wholly owned subsidiaries collectively we us our or Nutanix has operations throughout North America Europe Asia Pacific the Middle East Latin America and Africa
We are a hybrid multicloud computing leader offering organizations a unified software platform for running applications and AI and managing data anywhere Our vision is to simplify the deployment and operation of the increasingly distributed landscape of apps and data while freeing organizations to focus on business goals Our mission is to delight customers with an open secure platform with rich data services that increases their ability to take advantage of new technologies such as cloud native and AI optimizes how they run their organizations today and accelerates innovation efficiency and growth
The Nutanix Cloud Platform is designed to enable organizations to build 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 while supporting customer choice across server platforms storage options public and managed clouds and container and virtualization platforms The Nutanix Cloud Platform supports a wide variety of workloads with varied compute storage and network requirements including business critical applications data platforms including SQL NoSQL and vector databases and business intelligence applications enterprise AI workloads including machine learning generative AI and agentic AI general purpose workloads including system infrastructure networking and security and end user computing and virtual desktop infrastructure services and cloud native applications including modern containerized applications
Our business is organized into a single operating and reportable segment Our subscription based business model provides 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 Our solutions are primarily sold through channel partners and original equipment manufacturers OEMs collectively Partners and delivered directly to our end customers
The accompanying consolidated financial statements which include the accounts of Nutanix Inc and its wholly owned subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States U S GAAP All intercompany accounts and transactions have been eliminated in consolidation
The preparation of consolidated financial statements in conformity with U S GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes Such management estimates and assumptions include but are not limited to the best estimate of selling prices for products and related support useful lives and recoverability of intangible assets and property and equipment allowance for credit losses determination of fair value of stock based awards accounting for income taxes including the valuation allowance on deferred tax assets and uncertain tax positions purchase commitment liabilities to our contract manufacturers sales commissions expense and the period of benefit for deferred commissions whether an arrangement is or contains a lease the incremental borrowing rate to measure the present value of right of use assets and lease liabilities and contingencies and litigation Management evaluates these estimates and assumptions on an ongoing basis using historical experience and other factors and makes adjustments when facts and circumstances dictate As future events and their effects cannot be determined with precision actual results could materially differ from those estimates and assumptions
Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents and accounts receivable We invest only in high quality credit instruments and maintain our cash and cash equivalents and available for sale investments in fixed income securities Management believes that the financial institutions that hold our investments are financially sound and accordingly are subject to minimal credit risk Our deposits are with multiple institutions however such deposits may exceed federally insured limits We provide credit in the normal course of business to a number of companies and perform credit evaluations of our customers
We determine the appropriate classification of our marketable securities at the time of purchase and reevaluate such designation as of each balance sheet date We classify and account for our marketable securities as available for sale securities We classify our marketable securities with stated maturities greater than twelve months as short term investments due to our intent and ability to use these securities to support our current operations
Our marketable securities are recorded at their estimated fair value Unrealized gains or losses on available for sale securities are reported in other comprehensive income loss We periodically review whether our securities may be other than temporarily impaired including whether or not i we have the intent to sell the security or ii it is more likely than not that we will be required to sell the security before its anticipated recovery If one of these factors is met we will record an impairment loss associated with our impaired investment The impairment loss will be recorded as a write down of investments in our consolidated balance sheets and a realized loss within other expense in our consolidated statements of operations
We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value we consider the principal or most advantageous market in which to transact and the market based risk We apply fair value accounting for all assets and liabilities that are recognized or disclosed at fair value in our consolidated financial statements on a recurring basis The carrying amounts reported in our consolidated financial statements for cash and cash equivalents accounts receivable accounts payable and accrued liabilities approximate their fair values due to their short term nature The fair value of the outstanding 0 25 convertible senior notes due 2027 the 2027 Notes is determined based on the closing trading price per 100 of the 2027 Notes as of the last day of trading for the period The fair value of the outstanding 0 50 convertible senior notes due 2029 the 2029 Notes is determined based on the closing trading price per 100 of the 2029 Notes as of the last day of trading for the period
Our convertible senior notes including any embedded conversion features are accounted for under the convertible debt accounting model and are treated as a liability net of unamortized issuance costs The carrying amount of the liability is classified as a current liability if we have committed to settle with current assets otherwise it is classified as a long term liability as we retain the option to settle conversion requests in shares of our Class A common stock The embedded conversion features are not remeasured as long as they do not meet the separation requirement of a derivative otherwise they are classified as derivative instruments and accounted for as such Issuance costs are amortized to interest expense using the effective interest rate method over the term of the notes In accounting for a holder s exercise in accordance with a note s original conversion terms of a conversion option for which the carrying amount has previously been reclassified to equity any unamortized discount remaining at the date of conversion is first recognized as interest and then the remaining carrying amount of the converted notes is reduced by the cash transferred and then recognized in equity to reflect the shares issued such that no gain or loss is recognized In accounting for extinguishments of the notes the reacquisition price of the extinguished notes is compared to the carrying amount of the respective extinguished notes and a gain or loss is recorded in other expense net on our consolidated statements of operations
Accounts receivable are recorded at the invoiced amount net of an allowance for credit losses Credit is extended to customers based on an evaluation of their financial condition and other factors We generally do not require collateral or other security to support accounts receivable We perform ongoing credit evaluations of our customers and maintain an allowance for credit losses
The allowance for credit losses is based on the best estimate of the amount of probable credit losses in existing accounts receivable We assess credit losses on accounts receivable by taking into consideration past collection experience the credit quality of the customer the age of the receivable balance current and future economic conditions and forecasts that may affect the collectibility of the reported amount In circumstances where we are aware of a specific customer s inability to meet its financial obligations e g bankruptcy filings or substantial downgrading of credit ratings we record an allowance for credit losses in order to reduce the net recognized receivable to the amount we reasonably believe will be collected For all other customers we record an allowance for credit losses based on the length of time the receivable is past due and our historical experience of collections and write offs
Property and equipment including leasehold improvements are stated at cost less accumulated depreciation and amortization We include the cost to acquire demonstration units and the related accumulated depreciation in property and equipment as such units are generally not available for sale Depreciation and amortization is computed using the straight line method over the estimated useful lives of the related assets
We determine if an arrangement is or contains a lease at inception by evaluating various factors including whether a vendor s right to substitute an identified asset is substantive Lease classification is determined at the lease commencement date when the leased assets are made available for our use Operating leases are included in operating lease right of use assets operating lease liabilities current and operating lease liabilities non current in our consolidated balance sheets Finance leases are included in property and equipment net accrued expenses and other current liabilities and other liabilities non current in our consolidated balance sheets
Right of use assets ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make payments arising from the lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term Lease payments consist primarily of fixed payments under the arrangement less any lease incentives such as rent holidays Variable lease payments not dependent on an index or a rate are expensed as incurred and are not included within the ROU asset and lease liability calculation Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance property taxes and utilities We use an estimate of our incremental borrowing rate IBR based on the information available at the lease commencement date in determining the present value of lease payments unless the implicit rate is readily determinable In determining the appropriate IBR we consider information including but not limited to our credit rating the lease term and the currency in which the arrangement is denominated Our lease terms may include renewal options which are not included in the lease terms for calculating our lease liability unless we are reasonably certain that we will exercise the renewal option at the time of the lease commencement Lease costs are recognized on a straight line basis as operating expenses within our consolidated statements of operations We present lease payments within cash flows from operations within our consolidated statements of cash flows
Goodwill represents the future economic benefits arising from other assets acquired in a business combination or an acquisition that are not individually identified and separately recorded The excess of the purchase price over the estimated fair value of net assets of businesses acquired in a business combination is recognized as goodwill
Intangible assets consist of identifiable intangible assets including developed technology customer relationships and trade names resulting from business combinations Finite lived intangible assets are recorded at fair value net of accumulated amortization Finite lived intangible assets are amortized on a straight line basis over their estimated useful lives Amortization expense is included as a component of cost of product revenue and sales and marketing expense in our consolidated statements of operations Amounts included in sales and marketing expense relate to customer relationships and trade names
Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but instead tested for impairment at least annually in the fourth quarter of each fiscal year Such goodwill and other intangible assets may also be tested for impairment between annual tests in the presence of impairment indicators such as but not limited to i a significant adverse change in legal factors or in the business climate ii a substantial decline in our market capitalization iii an adverse action or assessment by a regulator iv unanticipated competition v loss of key personnel vi a more likely than not expectation of the sale or disposal of a reporting unit or a significant portion thereof vii a realignment of our resources or restructuring of our existing businesses in response to changes to industry and market conditions viii testing for recoverability of a significant asset group within a reporting unit or ix a higher discount rate used in the impairment analysis as impacted by an increase in interest rates
Goodwill is tested for impairment by comparing the reporting unit s carrying value including goodwill to the fair value of the reporting unit We operate under one reporting unit and for our annual goodwill impairment test we determine the fair value of our reporting unit based on our enterprise value We may elect to utilize a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying value If after assessing the qualitative factors we determine that it is more likely than not that the fair value of our reporting unit is less than its carrying value an impairment analysis will be performed We compare the fair value of our reporting unit with its carrying amount and if the carrying value of the reporting unit exceeds its fair value an impairment loss will be recognized
Long lived assets such as property and equipment and finite lived intangible assets subject to depreciation and amortization are evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable Among the factors and circumstances we consider in determining recoverability are i a significant decrease in the market price of a long lived asset ii a significant adverse change in the extent or manner in which a long lived asset is being used or in its physical condition iii a significant adverse change in legal factors or in the business climate that could affect the value of a long lived asset including an adverse action or assessment by a regulator iv an accumulation of costs significantly in excess of the amount originally expected for the acquisition and v current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long lived asset Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset If the carrying amount of an asset exceeds its estimated future cash flows an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset
The core principle of ASC 606 is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services This principle is achieved by applying the following five step approach
Contracts with multiple performance obligations The majority of our contracts with customers contain multiple performance obligations For these contracts we account for individual performance obligations separately if they are distinct The transaction price is allocated to the separate performance obligations on a relative SSP basis For deliverables that we routinely sell separately such as software entitlement subscriptions and support subscriptions on our core offerings we determine SSP by evaluating the standalone sales over the trailing 12 months For those that are not sold routinely we determine SSP based on our overall pricing trends and objectives taking into consideration market conditions and other factors including the value of our contracts the products sold and geographic locations
Contract balances The timing of revenue recognition may differ from the timing of invoicing to customers Accounts receivable are recorded at the invoiced amount net of an allowance for credit losses A receivable is recognized in the period in which we deliver goods or provide services or when our right to consideration is unconditional This includes situations where revenue recognition occurs before invoicing and an unbilled receivable is created The balance of unbilled accounts receivable included in accounts receivable net on our consolidated balance sheets was 41 1 million and 83 5 million as of July 31 2024 and 2025 respectively
Our customers are typically invoiced upfront including invoices for multi year subscriptions with payment terms of 30 45 days We assess credit losses on accounts receivable by taking into consideration past collection experience the credit quality of the customer the age of the receivable balance current and future economic conditions and forecasts that may affect the collectability of the reported amount The balance of accounts receivable net of allowance for credit losses as of July 31 2024 and 2025 is presented in the accompanying consolidated balance sheets
Costs to obtain and fulfill a contract We capitalize commissions paid to sales personnel and the related payroll taxes when customer contracts are signed These costs are recorded as deferred commissions in our consolidated balance sheets current and non current We determine whether costs should be deferred based on our sales compensation plans if the commissions are incremental and would not have been incurred absent the execution of the customer contract Commissions paid upon the initial acquisition of a contract are recognized over the estimated period of benefit which may exceed the term of the initial contract if the commissions expected to be paid upon renewal are not commensurate with that of the initial contract Accordingly deferred costs are recognized on a systematic basis that is consistent with the pattern of revenue recognition allocated to each performance obligation over the entire period of benefit and included in sales and marketing expense in our consolidated statements of operations We determine the estimated period of benefit by evaluating the expected renewals of customer contracts the duration of relationships with our customers customer retention data our technology development lifecycle and other factors Deferred costs are periodically reviewed for impairment
Deferred revenue Deferred revenue primarily consists of amounts that have been invoiced but not yet recognized as revenue and primarily pertains to software entitlement subscriptions support subscriptions and professional services The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet date
Cost of revenue consists of cost of product revenue and cost of support entitlements and other services revenue Personnel costs associated with our operations and global customer support organizations consist of salaries benefits and stock based compensation Allocated costs consist of certain facilities depreciation and amortization recruiting and information technology costs allocated based on headcount
We generally provide a 90 day warranty on software licenses which provides for bug fixes With respect to hardware we have a warranty agreement with our contract manufacturers under which the OEMs are generally required to replace defective hardware within three years of shipment Furthermore our post contract customer support PCS agreements provide for the same parts replacement that customers are entitled to under the warranty program except that replacement parts are delivered according to targeted response times to minimize disruption to the customers critical business applications Substantially all customers purchase PCS agreements
Our research and development expense consists primarily of product development personnel costs including salaries and benefits stock based compensation and allocated facilities IT and recruiting costs Research and development costs are expensed as incurred Currently we expense software development costs as incurred as from the inception of the product development our software products are primarily intended to be marketed and sold to customers on premises either standalone and or with other product offerings
Stock based compensation expense is measured based on the grant date fair value of share based awards The fair value of the purchase rights under our 2016 Employee Stock Purchase Plan 2016 ESPP is estimated using the Black Scholes Merton Black Scholes option pricing model which is impacted by the fair value of our common stock as well as changes in assumptions regarding a number of subjective variables These variables include the expected common stock price volatility over the term of the awards the expected term of the awards risk free interest rates and expected dividend yield The fair value of restricted stock units RSUs is determined using the fair value of our common stock on the date of grant The fair value of awards with a market based condition is measured using a Monte Carlo simulation which requires the use of various assumptions including the stock price volatility and risk free interest rate as of the valuation date corresponding to the length of time remaining in the performance period and expected dividend yield
We grant stock awards with service conditions only and with both service and performance or market based conditions We recognize stock based compensation expense for employee stock awards with a service condition only using the straight line method over the requisite service period of the awards which is generally the vesting period We use the graded vesting attribution method to recognize stock based compensation expense related to employee stock awards that contain both service and performance or market based conditions The fair value of the 2016 ESPP purchase rights is recognized as expense on a straight line basis over the offering period We account for forfeitures of all share based awards when they occur
The functional currency of our foreign subsidiaries is the U S dollar Transactions denominated in currencies other than the functional currency are remeasured at the average exchange rate in effect during the reporting period At the end of each reporting period all monetary assets and liabilities of our subsidiaries are remeasured at the current U S dollar exchange rate at the end of the reporting period Remeasurement gains and losses are included within other expense net in our consolidated statements of operations During the fiscal years ended July 31 2023 2024 and 2025 we recognized foreign currency losses of 1 6 million 4 3 million and 0 9 million respectively 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 managing our risk relating to fluctuations in currency rates
Our chief operating decision maker is our Chief Executive Officer This individual allocates resources and assesses financial performance based upon discrete financial information at the consolidated level Accordingly we have determined that we operate as a single operating and reportable segment For additional details refer to Note 13 of Notes to Consolidated Financial Statements
We account for income taxes using the asset and liability method Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date The measurement of deferred tax assets is reduced if necessary by a valuation allowance on amounts that are more likely than not to be realized
We record a liability for uncertain tax positions if it is not more likely than not to be sustained based solely on its technical merits as of the reporting date We consider many factors when evaluating and estimating our tax positions and tax benefits which may require periodic adjustments and may not accurately anticipate actual outcomes
In May 2023 we sold our Frame Desktop as a Service business As consideration for the sale the buyer paid 7 0 million in cash adjusted by increases for the closing cash balance of the Frame business and the amount by which the closing working capital exceeded the working capital target and reductions for closing expenses the amount by which the closing working capital target exceeded the working capital and any severance expenses associated with Frame employees who were terminated at or following the close of the transaction at the direction of the buyer and a 5 0 million interest bearing convertible note which had a fair value of 5 7 million as of the closing date of the transaction The fair value of all consideration received exceeded the carrying amount of the Frame business upon closing resulting in a gain of 11 0 million which is included within other expense net in our consolidated statement of operations for the fiscal year ended July 31 2023
In November 2024 the Financial Accounting Standards Board the FASB issued accounting standards update ASU 2024 04 Debt Debt with Conversion and Other Options Subtopic 470 20 Induced Conversions of Convertible Debt Instruments which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion We early adopted the new standard during the fiscal quarter ended January 31 2025 and applied it on a prospective basis
In November 2023 the FASB issued ASU 2023 07 Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures which requires disclosure of incremental segment information on an annual and interim basis We adopted this standard during the fiscal quarter ended July 31 2025 and applied it on a fully retrospective basis
In December 2023 the FASB issued ASU 2023 09 Income Taxes Topic 740 Improvements to Income Tax Disclosures which provides for improvements to income tax disclosures The standard requires disaggregated information about a reporting entity s effective tax rate reconciliation as well as information on income taxes paid The amendments in this update are effective for fiscal years beginning after December 15 2024 with early adoption permitted This new ASU will be effective for us beginning in fiscal 2026 We do not expect this new standard to have a material impact on our disclosures
In November 2024 the FASB issued ASU 2024 03 Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures Subtopic 220 40 Disaggregation of Income Statement Expenses which requires additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the statement of operations This new ASU is effective for fiscal years beginning after December 15 2026 and interim reporting periods within annual reporting periods beginning after December 15 2027 with early adoption permitted This new ASU will be effective for us beginning in fiscal 2028 We are currently evaluating the impact this new standard will have on our disclosures
The Nutanix Cloud Platform can be deployed in core data centers at the edge or in public clouds running on a variety of qualified hardware platforms including out Nutanix branded NX hardware line in popular public cloud environments such as Amazon Web Services and Microsoft Azure through Nutanix Cloud Clusters or in the case of our cloud based software and software as a service SaaS offerings via hosted service Our subscription term based licenses are sold separately or can also be sold alongside configured to order servers Our subscription term based licenses typically have durations ranging from one to five years Our cloud based SaaS subscriptions generally have durations extending up to five years
Other non subscription product revenue Other non subscription product revenue includes approximately 37 4 million 27 9 million and 10 8 million of non portable software revenue for fiscal 2023 2024 and 2025 respectively and approximately 2 8 million 3 3 million and 4 2 million of hardware revenue for fiscal 2023 2024 and 2025 respectively
Many of our contracted but not invoiced performance obligations are subject to cancellation terms Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized contracted not recognized which includes deferred revenue and non cancelable amounts that will be invoiced and recognized as revenue in future periods and excludes performance obligations that are subject to cancellation terms Contracted not recognized revenue was approximately 2 692 6 million as of July 31 2025 of which we expect to recognize approximately 49 within 12 months approximately 36 over the subsequent 13 to 36 month period and the remainder thereafter
Our money market funds are classified within Level I due to the highly liquid nature of these assets and have unadjusted inputs quoted prices in active markets for these assets at the measurement date from the financial institution that carries these investment securities Our investments in available for sale debt securities such as commercial paper corporate bonds and U S government securities are classified within Level II The fair value of these securities is priced by using inputs based on non binding market consensus prices that are corroborated by observable market data quoted market prices for similar instruments or pricing models such as discounted cash flow techniques
In May 2023 we sold our Frame Desktop as a Service business As part of the consideration for the sale we received a 5 0 million interest bearing convertible note We have elected the fair value option for the convertible note and will record the changes in its fair value at each reporting period As of July 31 2025 the fair value of the convertible note was determined to be approximately 5 5 million We consider this convertible note to be classified within Level III The fair value is determined by considering the convertible note s principal and accrued interest as well as the convertible note s option to convert into equity securities using inputs including debt yields volatility data and the value of the underlying equity into which the convertible note could be converted
We report our financial instruments at fair value with the exception of the 2027 Notes and 2029 Notes collectively the Notes Financial instruments that are not recorded at fair value on a recurring basis are measured at fair value on a quarterly basis for disclosure purposes The carrying values and estimated fair values of financial instruments not recorded at fair value are as follows
The amortized cost of our short term investments approximates their fair value Unrealized losses related to our short term investments are generally due to interest rate fluctuations as opposed to credit quality However we review individual securities that are in an unrealized loss position in order to evaluate whether or not they have experienced or are expected to experience credit losses that would result in a decline in fair value As of July 31 2024 and 2025 unrealized gains and losses from our short term investments were not material and were not the result of a decline in credit quality As a result as of July 31 2024 and 2025 we did not record any credit losses for these investments
Amortization expense related to our intangible assets is recognized in our consolidated statements of operations within product cost of revenue for developed technology and sales and marketing expense for customer relationships and trade name Amortization expense was 10 7 million 3 7 million and 2 5 million for the fiscal years ended July 31 2023 2024 and 2025 respectively
On September 22 2021 we consummated privately negotiated exchanges with certain holders of the outstanding 2023 Notes pursuant to which such holders exchanged approximately 416 5 million in aggregate principal amount of 2023 Notes for 477 3 million in aggregate principal amount of 2027 Notes We also entered into privately negotiated transactions with certain holders of the 2023 Notes pursuant to which we repurchased approximately 12 8 million in aggregate principal amount of 2023 Notes for cash Following the closing of these exchanges and repurchases approximately 145 7 million in aggregate principal amount of 2023 Notes remained outstanding with terms unchanged
In September 2020 we issued 750 0 million in aggregate principal amount of the 2026 Notes to BCPE Nucleon DE SPV LP an entity affiliated with Bain Capital LP Bain the 2026 Notes The 2026 Notes bore interest at a rate of 2 50 per annum with such interest paid in kind PIK on the 2026 Notes held by Bain through an increase in the principal amount of the 2026 Notes and that would have been paid in cash on any 2026 Notes transferred to entities that are not affiliated with Bain Interest on the 2026 Notes accrued from the date of issuance September 24 2020 and was added to the principal amount on a semi annual basis on March 15 and September 15 of each year
On June 6 2024 Bain delivered a notice of conversion to convert 817 6 million aggregate principal amount of the 2026 Notes representing all of the outstanding principal amount as of that date Under the terms of the indenture governing the 2026 Notes the conversion was settled by paying the 817 6 million principal amount in cash and delivering the conversion spread of approximately 16 9 million shares of our Class A common stock The cash portion was settled using a portion of our existing cash cash equivalents and short term investments
The 2026 Notes were converted in accordance with their original terms and conditions Upon conversion because the carrying amount of the conversion option was previously reclassified to equity the unamortized discount remaining at the date of conversion was recognized as interest expense The remaining carrying amount of the 2026 Notes was reduced by the cash transferred and then recognized in equity such that no gain or loss was recognized In addition the accrued and unpaid interest as of the conversion date was forgiven pursuant to the terms of the indenture and recognized in equity
Non cash interest expense was related to the 2 5 PIK interest that we accrued from the issuance of the 2026 Notes through the conversion date and was recognized within other expense net in our consolidated statement of operations and other liabilities non current in our consolidated balance sheet The accrued PIK interest was converted to the principal balance of the 2026 Notes at each payment date
In September 2021 we issued 575 0 million in aggregate principal amount of 0 25 convertible senior notes due 2027 consisting of i approximately 477 3 million principal amount of 2027 Notes in exchange for approximately 416 5 million principal amount of the previously outstanding 0 convertible senior notes due 2023 the 2023 Notes and ii approximately 97 7 million principal amount of 2027 Notes for cash
In December 2024 we issued 862 5 million in aggregate principal amount of 0 50 convertible senior notes due 2029 discussed below 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 The repurchase of 75 0 million aggregate principal amount of the outstanding 2027 Notes for approximately 95 5 million was accounted for as an induced conversion in accordance with ASU 2024 04 Debt Debt with Conversion and Other Options Subtopic 470 20 The induced conversion resulted in the recognition of an inducement expense of 11 3 million within other income expense net in our consolidated statement of operations and a reduction to equity of 9 7 million Subsequent to the completion of this transaction we had outstanding 500 0 million aggregate principal amount of the 2027 Notes
The 2027 Notes are convertible into cash shares of our Class A common stock or a combination of cash and shares of Class A common stock at our election Each 1 000 of principal of the 2027 Notes is initially convertible into 17 3192 shares of our Class A common stock which is equivalent to an initial conversion price of approximately 57 74 per share subject to customary anti dilution adjustments Holders of these 2027 Notes may convert their 2027 Notes at their option at any time prior to the close of the business day immediately preceding July 1 2027 only under the following circumstances
The conversion rate will be subject to adjustment in certain events but will not be adjusted for any accrued or unpaid interest Holders who convert their 2027 Notes in connection with certain corporate events that constitute a make whole fundamental change as defined in the indenture governing the 2027 Notes are under certain circumstances entitled to an increase in the conversion rate In addition if we undergo a fundamental change as defined in the indenture governing the 2027 Notes prior to the maturity date holders of the 2027 Notes may require us to repurchase for cash all or a portion of their 2027 Notes at a repurchase price equal to 100 of the principal amount of the repurchased 2027 Notes plus accrued and unpaid interest thereon
In accounting for the exchange of convertible notes we evaluated whether the transaction should be treated as a modification or extinguishment transaction The partial exchange of the 2023 Notes and issuance of the 2027 Notes were deemed to have substantially different terms due to the significant difference between the value of the conversion option immediately prior to and after the exchange and consequently the 2023 Notes partial exchange was accounted for as a debt extinguishment The 64 9 million difference between the total reacquisition price paid and the net carrying amount of the 2023 Notes was recognized as a debt extinguishment loss within other expense net in our consolidated statement of operations
In December 2024 we issued 862 5 million in aggregate principal amount of 0 50 convertible senior notes due 2029 including the exercise in full by the initial purchasers of the 2029 Notes of their option to purchase an additional 112 5 million principal amount in a private offering to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 as amended The total net proceeds from the offering were approximately 844 6 million after deducting the initial purchasers discount and other debt issuance costs
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 and approximately 200 0 million of the net proceeds from the offering to repurchase approximately 3 1 million shares of our Class A common stock
The 2029 Notes are convertible into cash shares of our Class A common stock or a combination of cash and shares of Class A common stock at our election Each 1 000 of principal of the 2029 Notes is initially convertible into 11 6505 shares of our Class A common stock which is equivalent to an initial conversion price of approximately 85 83 per share subject to customary anti dilution adjustments Holders of these 2029 Notes may convert them at their option at any time prior to the close of the business day immediately preceding September 15 2029 only under the following circumstances
The conversion rate will be subject to adjustment in certain events but will not be adjusted for any accrued or unpaid interest Holders who convert their 2029 Notes in connection with certain corporate events that constitute a make whole fundamental change as defined in the indenture governing the 2029 Notes are under certain circumstances entitled to an increase in the conversion rate In addition if we undergo a fundamental change as defined in the indenture governing the 2029 Notes prior to the maturity date holders of the 2029 Notes may require us to repurchase for cash all or a portion of their 2029 Notes at a repurchase price equal to 100 of the principal amount of the repurchased 2029 Notes plus accrued and unpaid interest thereon
In February 2025 we entered into a revolving credit agreement the Revolver 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 Revolver matures in February 2030 subject to earlier springing maturity under certain circumstances
Borrowings if any under the Revolver will bear interest at our option at a base rate plus an applicable margin ranging from 0 25 to 1 25 based upon our total leverage ratio or a term Secured Overnight Financing Rate or an alternative currency term rate plus an applicable margin ranging from 1 25 to 2 25 based upon our total leverage ratio We are also required to pay a commitment fee on the unused portion of the Revolver on a quarterly basis equal to 0 175 to 0 30 depending on our total leverage ratio
The Revolver contains customary affirmative and negative covenants including a financial covenant and restrictions on liens investments indebtedness fundamental changes restricted payments transactions with affiliates prepayments of subordinated debt and other matters all subject to certain exceptions The financial covenant requires us to maintain a total leverage ratio of less than or equal to 3 75 1 00 tested at the end of each fiscal quarter The financial covenant is subject to a 0 50 1 00 step up for four fiscal quarters following a material
We have operating leases for offices research and development facilities and data centers and finance leases for certain data center equipment Our leases have remaining lease terms of one year to approximately five years some of which include options to renew or terminate We do not include renewal options in the lease terms for calculating our lease liability as we are not reasonably certain that we will exercise these renewal options at the time of the lease commencement Our lease agreements do not contain any residual value guarantees or restrictive covenants
Total operating lease cost was 42 4 million 38 6 million and 37 7 million for the fiscal years ended July 31 2023 2024 and 2025 respectively excluding short term lease costs variable lease costs and sublease income each of which were not material Variable lease costs primarily include common area maintenance charges Total finance lease cost was 3 9 million 4 8 million and 4 5 million for the fiscal years ended July 31 2023 2024 and 2025 respectively
During fiscal 2023 we signed agreements to early exit certain office spaces in the United States and the Netherlands The reductions in the lease terms resulted in decreases to the carrying amounts of the operating lease liabilities and the operating lease right of use assets on our consolidated balance sheet as of July 31 2023 In addition we recorded 1 7 million of expense in our consolidated statement of operations for the fiscal year ended July 31 2023
In the normal course of business we make commitments with our contract manufacturers to ensure them a minimum level of financial consideration for their investment in our joint solutions These commitments are based on performance 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 July 31 2025 we had approximately 146 5 million of non cancelable purchase obligations and other commitments pertaining to our daily business operations and approximately 106 9 million in the form of guarantees to certain of our contract manufacturers
We have entered into agreements with some of our Partners and customers that contain indemnification provisions in the event of claims alleging that our products infringe the intellectual property rights of a third party The scope of such indemnification varies and may include in certain cases the ability to cure the indemnification by modifying or replacing the product at our own expense requiring the return and refund of the infringing product procuring the right for the partner and or customer to continue to use or distribute the product as applicable and or defending the partner or customer against and paying any damages from third party actions based upon claims of infringement Other guarantees or indemnification arrangements include guarantees of product and service performance
We have also agreed to indemnify our directors executive officers and certain other officers for costs associated with any fees expenses judgments fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is or is threatened to be made a party by reason of the person s service as a director or officer including any action by us arising out of that person s services as a director or officer of our company or that person s services provided to any other company or enterprise at our request We maintain director and officer insurance coverage that may enable us to recover a portion of any future amounts paid
We have one class of outstanding common stock consisting of Class A common stock As of July 31 2025 we had 1 0 billion shares of Class A common stock authorized with a par value of 0 000025 per share As of July 31 2025 we had 269 0 million shares of Class A common stock issued and outstanding As of July 31 2025 we had 0 2 million shares of preferred stock authorized with a par value of 0 000025 per share and no shares issued and outstanding
In August 2023 our Board of Directors authorized the repurchase of up to 350 0 million of our Class A common stock In August 2025 our Board of Directors approved a 350 0 million increase to the share repurchase authorization Repurchases may be made from time to time through open market purchases in through privately negotiated transactions or by other means including through the use of trading plans intended to qualify under Rule 10b5 1 under the Exchange Act in accordance with applicable securities laws and other restrictions The authorization has no expiration date may be modified suspended or discontinued at any time and does not obligate us to repurchase any minimum number of shares
During the fiscal year ended July 31 2024 we repurchased approximately 2 6 million shares of Class A common stock in open market transactions at a weighted average price of 50 77 per share for an aggregate purchase price of approximately 131 1 million During the fiscal year ended July 31 2025 we repurchased approximately 1 6 million shares of Class A common stock in open market transactions at a weighted average price of 68 25 per share for an aggregate purchase price of approximately 107 4 million As of July 31 2025 approximately 111 5 million remained available for future share repurchases under the authorization
In December 2024 we used approximately 200 0 million of the net proceeds from the 2029 Notes offering to repurchase approximately 3 1 million shares of our Class A common stock in privately negotiated transactions at a purchase price equal to 64 78 per share This share repurchase was executed outside of the existing share repurchase program that was authorized by our Board of Directors in August 2023 described above For additional details on this transaction refer to Note 5
We have one active equity incentive plan the 2016 Equity Incentive Plan the 2016 Plan and two inactive equity incentive plans the 2010 Stock Plan 2010 Plan and the 2011 Stock Plan 2011 Plan collectively the Stock Plans Our stockholders approved the 2016 Plan in March 2016 and it became effective in connection with our initial public offering IPO As a result at the time of the IPO we ceased granting additional stock awards under the 2010 Plan and 2011 Plan and both plans were terminated Any outstanding stock awards under the 2010 Plan and 2011 Plan remain outstanding subject to the terms of the applicable plan and award agreements until such shares are issued under those stock awards by exercise of stock options or settlement of RSUs or until those stock awards become vested or expired by their terms
Under the 2016 Plan we may grant incentive stock options non statutory stock options restricted stock RSUs and stock appreciation rights to employees directors and consultants We initially reserved approximately 22 4 million shares of our Class A common stock for issuance under the 2016 Plan The number of shares of Class A common stock available for issuance under the 2016 Plan also includes an annual increase on the first day of each fiscal year beginning in fiscal 2018 equal to the lesser of 18 0 million shares 5 of the outstanding shares of all classes of common stock as of the last day of our immediately preceding fiscal year or such other amount as may be determined by our Board of Directors Accordingly on August 1 2023 and 2024 the number of shares of Class A common stock available for issuance under the 2016 Plan increased by approximately 12 0 million and 13 3 million shares respectively pursuant to these provisions As of July 31 2025 we had reserved a total of approximately 48 7 million shares for the issuance of equity awards under the Stock Plans of which approximately 32 4 million shares were still available for grant On August 1 2025 the number of shares of Class A common stock available for issuance under the 2016 Plan increased by approximately 13 5 million shares pursuant to the automatic increase provisions
RSUs settle into shares of Class A common stock upon vesting During the second quarter of fiscal 2024 we began funding withholding taxes due on the vesting of employee RSUs by net share settlement rather than our previous approach of selling shares of Class A common stock to cover taxes upon vesting of such awards The payment of the withheld taxes to the tax authorities is reflected as a financing activity within the consolidated statements of cash flows
From time to time we grant RSUs that have both service and performance conditions to our executives and employees PRSUs Vesting of PRSUs is subject to continuous service and the satisfaction of certain performance targets While we recognize cumulative stock based compensation expense for the portion of the awards for which both the service condition has been satisfied and it is probable that the performance conditions will be met the actual vesting and settlement of PRSUs are subject to the performance conditions actually being met
In January 2024 the Compensation Committee of our Board of Directors approved the grant of approximately 0 3 million PRSUs to our President and CEO These PRSUs have a grant date fair value per unit of 45 86 and will vest up to 200 based on achievement of specified annual recurring revenue and free cash flow hurdles over a performance period of approximately 3 6 years subject to his continuous service as CEO through the vesting date
We also grant RSUs that have both service and market based conditions to our executives and employees MSUs Vesting of MSUs is subject to continuous service and the satisfaction of certain market based performance targets While we recognize cumulative stock based compensation expense for the portion of the awards for which the service condition has been satisfied regardless of achievement of the specified targets the actual vesting and settlement of MSUs are subject to the market based conditions actually being met
During fiscal 2023 2024 and 2025 the Compensation Committee of our Board of Directors approved the grant of approximately 1 3 million 0 8 million and 0 4 million MSUs respectively to certain of our executives These MSUs have a weighted average grant date fair value per unit of approximately 27 89 47 65 and 93 40 respectively and will vest up to 200 of the target number of MSUs based upon our total shareholder return relative to the total shareholder return of companies in the Nasdaq Composite Index over a performance period of approximately 3 1 years 3 0 years and 3 0 years respectively subject to continuous service on each vesting date
In January 2024 the Compensation Committee of our Board of Directors approved the grant of approximately 0 2 million MSUs to our President and CEO These MSUs have a weighted average grant date fair value of 62 85 per unit and will vest up to 200 based on achievement of specified stock price hurdles at any time during a performance period of approximately 3 6 years subject to his continuous service as CEO through the vesting date
Our Board of Directors determines the period over which stock options become exercisable and stock options generally vest over a four year period Stock options generally expire 10 years from the date of grant The term of an ISO grant to a 10 stockholder will not exceed five years from the date of the grant The exercise price of an ISO will not be less than 100 of the estimated fair value of the shares of common stock underlying the stock option or 110 of the estimated fair value in the case of an ISO granted to a 10 stockholder on the date of grant The exercise price of an NSO is determined by our Board of Directors at the time of grant and is generally not less than 100 of the estimated fair value of the shares of common stock underlying the stock option on the date of grant
The aggregate intrinsic value of stock options exercised during the fiscal years ended July 31 2023 2024 and 2025 was 12 1 million 37 8 million and 13 9 million respectively Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of our common stock Cash received from option exercises was 3 7 million 4 2 million and 2 8 million for the fiscal years ended July 31 2023 2024 and 2025 respectively There were no stock options that vested during the fiscal years ended July 31 2023 2024 or 2025 We did not grant any stock options during the fiscal years ended July 31 2023 2024 or 2025
In December 2015 our Board of Directors adopted the 2016 Employee Stock Purchase Plan which was subsequently amended in January 2016 and September 2016 and approved by our stockholders in March 2016 the Original 2016 ESPP The Original 2016 ESPP became effective in connection with our IPO Our stockholders subsequently approved amendments to the Original 2016 ESPP in December 2019 and December 2022 as amended the 2016 ESPP Under the 2016 ESPP the maximum number of shares of Class A common stock available for sale is 13 8 million shares
The 2016 ESPP allows eligible employees to purchase shares of our Class A common stock at a discount through payroll deductions of up to 15 of eligible compensation subject to caps of 25 000 in any calendar year and 1 000 shares on any purchase date The 2016 ESPP provides for 12 month offering periods generally beginning in March and September of each year and each offering period consists of two six month purchase periods
On each purchase date participating employees will purchase Class A common stock at a price per share equal to 85 of the lesser of the fair market value of our Class A common stock on i the first trading day of the applicable offering period or ii the last trading day of each purchase period in the applicable offering period If the stock price of our Class A common stock on any purchase date in an offering period is lower than the stock price on the enrollment date of that offering period the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period
In August 2022 we announced a plan to reduce our global headcount by approximately 270 employees which represented approximately 4 of our total employees following a review of our business structure and after taking other cost cutting measures to reduce expenses This headcount reduction was part of our efforts to drive toward profitable growth
We recognized total restructuring charges of approximately 16 3 million which consisted primarily of one time severance and other termination benefit costs directly related to this reduction in force Of the approximately 16 3 million recognized 0 4 million is included within support entitlements and other services cost of revenue 13 4 million is included within sales and marketing expense 2 3 million is included within research and development expense and 0 2 million is included within general and administrative expense on our consolidated statements of operations
During the fiscal year ended July 31 2023 we recognized restructuring charges of approximately 5 3 million and made cash payments of approximately 15 8 million During the fiscal year ended July 31 2024 we did not incur any charges and made cash payments of approximately 0 4 million During the fiscal year ended July 31 2025 we did not incur any charges or make any cash payments As of July 31 2025 we had no remaining restructuring liability
Basic net income loss per share is computed using the weighted average number of common shares outstanding during the period Diluted net income loss per share is computed by giving effect to potentially dilutive common stock equivalents outstanding during the period as their effect would be dilutive Potentially dilutive common shares include shares issuable upon the exercise of stock options the vesting of RSUs and PSUs each purchase under the 2016 ESPP and common stock issuable upon the conversion of convertible debt under the if converted method
Shares that will be issued in connection with our stock awards and shares that will be purchased under the employee stock purchase plan are generally automatically converted into shares of our Class A common stock Common stock issuable upon the conversion of convertible notes represents the antidilutive impact of the 2026 Notes and 2027 Notes under the if converted method
As of July 31 2025 we had approximately 1 8 billion of federal net operating loss carryforwards and 1 5 billion of state net operating loss carryforwards available to reduce future taxable income which will begin to expire in fiscal 2026 In addition we had approximately 219 0 million of federal research credit carryforwards 160 2 million of state research credit carryforwards and 63 6 million of foreign tax credit carryforwards available to reduce future tax liability The federal credits will begin to expire in fiscal 2035 and the state credits can be carried forward indefinitely The foreign credits will begin to expire in fiscal 2029
Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986 as amended and similar state provisions Any annual limitation may result in the expiration of net operating losses and credits before utilization If an ownership change occurred utilization of the net operating loss and tax credit carryforwards could be significantly reduced
As of July 31 2025 we held an aggregate of 331 2 million in cash and cash equivalents in our foreign subsidiaries of which 156 8 million was denominated in U S dollars We attribute net revenue costs and expenses to domestic and foreign components based on the terms of our agreements with our subsidiaries We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries as such earnings are to be reinvested offshore indefinitely It is not practicable to estimate the withholding tax liability if these earnings were to be repatriated
As of July 31 2025 if uncertain tax positions are fully recognized in the future it would result in a 17 5 million impact to our effective tax rate primarily relating to positions in foreign jurisdictions and the remaining amount would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance
We file income tax returns in the U S federal jurisdiction as well as various U S states and foreign jurisdictions The tax years 2009 and forward remain open to examination by the major jurisdictions in which we are subject to tax These fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized We are subject to the continuous examination of income tax returns by various tax authorities We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the provision for income taxes We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations We do not anticipate a significant impact to the gross unrecognized tax benefits within the next 12 months related to these years
The Organisation for Economic Co operation and Development has established a framework for a global minimum corporate tax of 15 known as Pillar Two which will be applied on a country by country basis to companies with global revenues and profits above certain thresholds Although the United States has not enacted legislation to adopt Pillar Two and its future adoption is uncertain several countries where we operate have enacted such legislation and others are in the process of doing so We do not expect Pillar Two to have a material impact on our effective tax rate or our financial condition and results of operations
The One Big Beautiful Bill Act OBBBA includes significant changes to U S income tax laws including the repeal of mandatory capitalization of domestic research and development expenditures extensions of bonus depreciation and modifications to the international tax regimes We are currently evaluating the potential impact of OBBBA on our consolidated financial statements for future periods
Our chief operating decision maker CODM is our Chief Executive Officer who reviews financial information presented on a consolidated basis Accordingly we have a single operating and reportable segment The CODM uses net income as reported on our consolidated statements of operations as the measure of segment profit or loss to allocate resources and evaluate financial performance The significant expenses regularly provided to the CODM are those expenses presented in our consolidated statements of operations and related notes to consolidated financial statements There is no expense or asset information that is supplemental to the information disclosed in these consolidated financial statements
In August 2025 our Board of Directors approved a 350 0 million increase to the share repurchase authorization Repurchases may be made from time to time through open market purchases in privately negotiated transactions or by other means including through the use of trading plans intended to qualify under Rule 10b5 1 under the Exchange Act in accordance with applicable securities laws and other restrictions The authorization has no expiration date may be modified suspended or discontinued at any time and does not obligate us to repurchase any minimum number of shares
Our management with the participation of our principal executive officer and our principal financial officer has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a 15 e and 15d 15 e under the Securities Exchange Act of 1934 as amended Exchange Act as of the end of the period covered by this Annual Report on Form 10 K Based on our management s evaluation our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were in design and operation effective at the reasonable assurance level as of July 31 2025
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a 15 f and Rule 15d 15 f of the Exchange Act Internal control over financial reporting consists of policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets 2 are designed and operated to provide reasonable assurance regarding the reliability of our financial reporting and our process for the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of our assets that could have a material effect on the financial statements
Our management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission the COSO Framework Based on our management s evaluation our management concluded that our internal control over financial reporting was effective as of July 31 2025
Because of inherent limitations internal control over financial reporting may not prevent or detect misstatements and projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a 15 d and 15d 15 d of the Exchange Act that occurred during the most recently completed fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting
We have audited the internal control over financial reporting of Nutanix Inc and subsidiaries the Company as of July 31 2025 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO In our opinion the Company maintained in all material respects effective internal control over financial reporting as of July 31 2025 based on criteria established in Internal Control Integrated Framework 2013 issued by COSO
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated financial statements as of and for the year ended July 31 2025 of the Company and our report dated September 23 2025 expressed an unqualified opinion on those financial statements
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
On July 1 2025 Brian Martin our Chief Legal Officer entered into a trading plan that is intended to satisfy the affirmative defense conditions of Rule 10b5 1 c under the Exchange Act Mr Martin s plan provides for the sale from time to time during the period beginning on September 30 2025 through July 1 2026 of up to 100 of the net shares that Mr Martin may receive from the vesting of outstanding awards of restricted stock units and up to 50 of the net shares that he may receive from the vesting of performance based restricted stock units from time to time beginning with the September 15 2025 vesting date and ending on the June 15 2026 vesting date
On July 3 2025 Rajiv Ramaswami our President and Chief Executive Officer entered into a trading plan that is intended to satisfy the affirmative defense conditions of Rule 10b5 1 c under the Exchange Act Mr Ramaswami s plan provides for the sale from time to time during the period beginning on October 2 2025 through July 3 2026 of up to 388 920 shares and up to 25 of the net shares that Mr Ramaswami may receive from the vesting of outstanding awards of restricted stock units and performance based restricted stock units from time to time beginning with the September 15 2025 vesting date and ending on the June 15 2026 vesting date
On July 3 2025 Gayle Sheppard a member of our board of directors entered into a trading plan that is intended to satisfy the affirmative defense conditions of Rule 10b5 1 c under the Exchange Act Ms Sheppard s plan provides for the sale from time to time during the period beginning on October 2 2025 through July 3 2026 of up to 3 500 shares
On July 9 2025 Rukmini Sivaraman our Chief Financial Officer entered into a trading plan that is intended to satisfy the affirmative defense conditions of Rule 10b5 1 c under the Exchange Act Ms Sivaraman s plan provides for the sale from time to time during the period beginning on October 10 2025 through October 9 2026 of up to 60 000 shares and up to 40 of the net shares that Ms Sivaraman may receive from the vesting of outstanding awards of restricted stock units and performance based restricted stock units from time to time beginning with the December 15 2025 vesting date and ending on the September 15 2026 vesting date
Original Equipment Manufacturer OEM Purchase Agreement dated as of May 16 2014 by and among the Registrant Nutanix Netherlands B V and Super Micro Computer Inc as amended by Amendment One to Original Equipment Manufacturer OEM Purchase Agreement dated as of November 13 2017 and Amendment Two to Original Equipment Manufacturer OEM Purchase Agreement dated as of October 31 2018
These exhibits are furnished with this Annual Report on Form 10 K 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
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Rajiv Ramaswami and Rukmini Sivaraman jointly and severally his or her attorneys in fact each with the power of substitution for him or her in any and all capacities to sign any amendments to this report and to file the same with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission hereby ratifying and confirming all that each of said attorneys in fact or his substitute or substitutes may do or cause to be done by virtue hereof

Company Name	Nutanix, Inc. Vist SEC web-site
Category	SERVICES-PREPACKAGED SOFTWARE
Trading Symbol	NTNX