Cloud computing has significantly reshaped the technological landscape in recent years. More than 90% of organizations rely on cloud services to enhance efficiency and drive innovation. This widespread adoption of cloud technology is fueling a digital revolution, impacting businesses and industries worldwide.

Moreover, Fortune Business Highlights forecasts the cloud computing market to hit $2.29 trillion by 2032, growing at a CAGR of 16.5%. These projections cement the cloud sector’s bright future.

In line with this, Nutanix, Inc. (NTNX) stands at the forefront of the cloud computing industry, owing to its aggressive expansion into AI capabilities and major partnerships in the pipeline. NTNX is well-positioned to benefit from the cloud computing market’s robust growth prospects and seems a wise choice for growth-focused investors.

The company’s impressive growth over the past year highlights its potential. The stock surged 3.4% in the past three months and 56.5% over the last year, closing at $65.02 in the latest trading session. These gains reflect NTNX’s ability to capitalize on the sector’s continued expansion.

So, let us take a closer look at the factors that could influence NTNX’s performance in the near future.

Recent Developments

On November 12, NTNX announced the expansion of its AI infrastructure platform with Nutanix Enterprise AI, a new cloud-native offering. This new offering can be deployed on any Kubernetes platform, at the edge, in core data centers, and on public cloud services like AWS EKS, Azure AKS, and Google GKE.

With AI involvement in cloud services thriving, new offerings like these are set to place NTNX in a dominant market position and enable stable growth prospects.

On November 7, NTNX announced an extended partnership with Amazon Web Services, Inc. (AWS) to facilitate cloud migration and provide options for customers managing workloads across on-premises and cloud environments.

With AWS at the forefront of cloud infrastructure, this partnership should benefit NTNX to capture a more involved role in the competitive cloud industry and enhance its future growth.

Strong Financials

For the fiscal 2025 first quarter that ended October 31, 2024, NTNX’s total revenue increased 15.6% year-over-year to $590.96 million. Its adjusted gross profit rose 17,7% from the year-ago value to $517.09. Moreover, the company’s adjusted income from operations increased 48.7% year-over-year to $118.22.

In addition, NTNX’s adjusted net income and adjusted net income per share rose 43.2% and 44.8% from the prior year’s quarter to $121.77 and $0.42. As of October 31, 2024, the company’s current total assets amounted to $1.52 billion, compared to $1.48 billion on July 31, 2023.

Favorable Analyst Estimates

Analysts predict NTNX’s revenue and EPS for the fiscal 2025 second quarter (ending January 2025) to rise by 13.5% and 2.5% year-over-year, reaching $641.76 million and $0.47, respectively. The company has consistently exceeded the consensus revenue and EPS estimates in each of the four trailing quarters, which is noteworthy.

For the full fiscal year ending July 2025, NTNX’s revenue and EPS are expected to grow 14.4% and 14.3% from the previous year, reaching $2.46 billion and $1.50, respectively. The impressive growth reflects the company’s strong performance and ongoing upward momentum.

Looking further ahead to the next fiscal year ending in July 2026, NTNX is projected to see additional growth, with revenue and EPS forecasted to rise by 16.3% and 24.4%, reaching $2.86 billion and $1.86, respectively.

High Profitability

NTNX’s trailing-12-month gross profit margin of 85.44% is 68.3% higher than the industry average of 50.76%. Its trailing-12-month levered FCF margin stands at 14.82%, 31.9% higher than the industry average of 11.23%.

Additionally, NTNX’s trailing-12-month asset turnover ratio of 0.94x outperforms the industry average of 0.61x by 53.3%. Moreover, the company boasts a trailing-12-month ROTC of 10.21%, which is 225% above the sector average of 3.14%.

POWR Ratings Reflects Optimism

NTNX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

NTNX has an A grade for Quality, which is in sync with its impressive profitability metrics that surpass the industry average. Moreover, it has a B grade for Sentiment, as shown by the optimistic analyst estimates.

Within the Software – Application industry, NTNX is ranked #10 out of 128 stocks. Beyond what is stated above, we have also given NTNX grades for Momentum, Value, Growth, and Stability. Get all NTNX ratings here.

Bottom Line

NTNX has marked its territory as a formidable force in the cloud computing industry, owing to its expansion into AI capabilities and major partnerships in the pipeline. With a consistent track record of profitability, the company is well-positioned to capitalize on the growing cloud technology market, further enhancing its competitive edge.

Given NTNX’s high profitability and optimistic analyst estimates, it could be an attractive buy for investors seeking growth potential.

How Does Nutanix, Inc. (NTNX) Stack Up Against Its Peers?

Although NTNX’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who currently exhibit strong POWR Ratings. So, consider these A (Strong Buy) and B-rated (Buy) stocks from the Software – Application industry:

Progress Software Corporation (PRGS)

Docebo Inc. (DCBO)

IBEX Ltd. (IBEX)

To explore more A or B-rated Software – Application stocks, click here.

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NTNX shares were trading at $66.45 per share on Monday afternoon, up $1.17 (+1.79%). Year-to-date, NTNX has gained 39.34%, versus a 28.21% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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