Nutanix (NTNX): Buy, Sell, or Hold Post Q3 Earnings?

Nutanix has gotten torched over the last six months - since July 2025, its stock price has dropped 34% to $50.84 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Following the drawdown, is now the time to buy NTNX? Find out in our full research report, it’s free for active Edge members.

Why Does NTNX Stock Spark Debate?

Originally pioneering hyperconverged infrastructure to break down traditional data center silos, Nutanix (NASDAQ:NTNX) provides a unified software platform that enables organizations to run applications and manage data across private, public, and hybrid cloud environments.

Two Positive Attributes:

1. ARR Growth Powers Predictable Revenues

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

Nutanix’s ARR punched in at $2.28 billion in Q3, and over the last four quarters, its year-on-year growth averaged 17.6%. This performance was solid, reflecting the company’s ability to maintain strong customer relationships and secure longer-term commitments. Its growth also contributes positively to Nutanix’s predictability and valuation, as investors typically prefer businesses with recurring revenue.

2. Elite Gross Margin Powers Best-In-Class Business Model

What makes the software-as-a-service model so attractive is that once the software is developed, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

Nutanix’s gross margin is one of the highest in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an elite 87% gross margin over the last year. Said differently, roughly $87.03 was left to spend on selling, marketing, and R&D for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Nutanix has seen gross margins improve by 4.1 percentage points over the last 2 year, which is very good in the software space.

One Reason to be Careful:

Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Nutanix grew its sales at a 14.9% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Nutanix.

Final Judgment

Nutanix has huge potential even though it has some open questions. With the recent decline, the stock trades at 5.1× forward price-to-sales (or $50.84 per share). Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.

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