Nutanix has seen its shares jump 15 per cent in after-hours trading, after it reported better than expected earnings for its Q1 on Monday.
Sales for the US hyper-converged infrastructure (HCI) vendor were up 4.7 per cent year on year to $314.8m (€285.85m) for the quarter ending October 2019, beating the $306.4m expectation of investors.
However, Nutanix also logged a net loss of $229.3m, notably down from a Q1 2019 net loss of $94.3m.
Despite this, Wall Street was encouraged, as the company has topped consensus revenue estimates in three out of the last four quarters.
CEO Dheeraj Pandey hailed the storage vendor's move towards sole subscription recurring revenue billing as being both responsible for stronger than expected sales, and also for its net loss.
Subscription revenue in Q1 increased 72 per cent year on year to $218m, representing 69 per cent of total revenue.
In an earnings call transcribed by Seeking Alpha, Pandey said that the impact to Nutanix's balance sheet is worth it in the long term.
"[Our Q1] reflected billings compression from the company's ongoing transition to subscription and the significant reduction of hardware billings from the prior year," he said.
"In the last two years, we have transformed our business model from appliance to software and are now doing sole subscription.
"Subscription grew to 73 per cent of total billings up from 71 per cent last quarter as we move steadily towards the goal of more than 75 per cent which is our stated goal by the end of fiscal 2020."
Pandey claimed that this is a strategy to give Nutanix "a competitive edge in a world that is increasingly going hybrid."
Pandey also highlighted that the vendor won more than 66 deals in the quarter with a value of more than $1m.
"Our solid Q1 performance, particularly in the Americas, gives us confidence that we have the right formula for global sales leadership as demonstrated by improved productivity and sales hiring over the last six months," he said.
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