Nutanix (NTNX) FY2026 10-K: The $1.18B Tax Benefit and the Slow VMware Migration
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The Hook
Nutanix $NTNX just reported $1,506.8M of net income on $2,853.5M of revenue. That is a 53% net margin for an infrastructure software company that lost $124.8M two years ago. It is also mostly an accounting event. $1,179.7M of it is an income tax benefit, created mainly when Nutanix released $1,208.2M of the valuation allowance against its U.S. deferred tax assets. The business earned $274.0M at the operating line.
The more interesting number is smaller. Fiscal 2026 was supposed to be the year Nutanix collected on Broadcom's takeover of VMware, its main competitor. The 10-K says in plain words that Broadcom's changes "have led many VMware customers to evaluate, adopt or consider alternatives." And in that year, Nutanix revenue growth slowed from 18% to 12%. The customers are moving. They are moving slowly, and the filing explains why.
Company Snapshot
Nutanix sells the software layer that turns ordinary servers into a private cloud: a hypervisor (AHV), storage, networking and management that compete directly with VMware's vSphere stack, plus Kubernetes and database services on top. It sells almost entirely through partners. Its two largest distributors accounted for 39% of fiscal 2026 revenue, and its software ships on hardware from Cisco, Dell, HPE, Lenovo and Fujitsu. It ended the year with "over 32,000" end customers.
This analysis covers the Form 10-K for the fiscal year ended July 31, 2026, filed September 18, 2026. Nutanix's fiscal year ends July 31, so fiscal 2026 runs from August 2025 through July 2026.
The Financial Story
The top line grew, but it decelerated in the year it should have accelerated. Revenue rose 12.4% to $2,853.5M, after 18% in fiscal 2025 and 15% in fiscal 2024. Annual recurring revenue grew faster, 16% to $2,548.8M, on a methodology the company changed at the start of fiscal 2026 and restated for prior years. The fourth quarter was stronger than the year: the Q4 earnings release (8-K, August 26, 2026) put quarterly revenue at $757.1M, up 16%, and says Nutanix added over 3,000 new customers during fiscal 2026.
| Fiscal year | Revenue | Growth | ARR | GAAP operating margin | Free cash flow |
|---|---|---|---|---|---|
| FY2024 | $2,148.8M | 15% | $1,873.3M | 0.4% | $597.7M |
| FY2025 | $2,537.9M | 18% | $2,201.7M | 6.8% | $750.2M |
| FY2026 | $2,853.5M | 12% | $2,548.8M | 9.6% | $840.7M |
The filing is candid about why the migration is slow. In a risk factor titled "We may not be able to capitalize on opportunities resulting from Broadcom's changes to VMware's products, pricing, licensing, business practices and broader ecosystem," Nutanix lists the reasons: customers locked into multi-year VMware commitments, customers waiting for their next hardware refresh, customers who decide migration is not worth the cost and "elect to continue operating VMware environments," and customers who move "only a portion of their workloads." It adds that these opportunities "may arise in multiple waves over an extended period." That is not a company describing a stampede.
Then the hardware got scarce. Nutanix's software runs on someone else's servers, and the 10-K discloses that "beginning in the second quarter of fiscal 2026, we have faced constraints affecting the availability of certain hardware components at manufacturers," which "have resulted in higher hardware pricing in the market and extended hardware lead times." A customer who cannot get the server cannot deploy the software. Management's fiscal 2027 revenue guidance of $3.18-3.23B (11-13% growth) reflects, per the Q4 call, a full year of those supply headwinds and an assumption that server prices keep rising modestly.
The other side of the trade looks different. When we covered Broadcom's Q3 FY2026 10-Q, its infrastructure software segment, chiefly VMware, grew 29% to $8,752M in the quarter. But $1,549M of that segment's $1,966M of growth came from license revenue now recognized upfront on contracts with no termination-for-convenience clause, a change in contract terms that pulls revenue forward. Put the two filings side by side and neither one shows a clean read on VMware demand: Broadcom's growth is partly contract terms, and Nutanix's share gain is real but paced by refresh cycles and server lead times.
The $1.5B profit is a vote of confidence written in the tax note. A valuation allowance says "we do not expect to earn enough to use these tax losses." Releasing it says the opposite. The release took the deferred tax asset from $17.0M to $1,215.8M, and it flipped the balance sheet: stockholders' equity went from a $694.5M deficit to $702.6M of positive equity in one year. That is meaningful information about management's and the auditors' view of future profits. It is not $1.5B of earnings. Pre-tax income was $327.1M. And the tax line was charged, not paid: against a $1,179.7M benefit, Nutanix paid $30.3M of income taxes in cash. The filing's jurisdiction table shows where it went: $13.4M to India, $5.2M to the Netherlands, $3.1M to US states, and no US federal line at all.
The cash is real, and a lot of it goes to the share count. Operating cash flow rose to $916.7M and free cash flow to $840.7M, a 29.5% margin. Stock-based compensation was $357.7M, 12.5% of revenue. Nutanix then spent $483.5M on buybacks (9.4M shares at a weighted average of $51.24) and $195.5M on taxes for net share settlement of employee awards: $679.0M in all, 81% of free cash flow. Class A shares outstanding still rose, from 269.0M to 270.8M, partly because Nutanix sold 4.1M new shares to AMD in May 2026 at $36.26 for $150.0M. The buyback is running to stand still.
The balance sheet is comfortable: $2,361.5M of cash and short-term investments against $1,348.7M of convertible notes ($500M due 2027 at 0.25% and $862.5M due 2029 at 0.50%), and nothing drawn on a $500M revolver. Deferred revenue grew 14.7% to $2,423.4M.
Valuation: What It Is Worth as a Normal Business
At $68.03 (September 25, 2026 close, per stockanalysis.com) Nutanix has a market capitalization of about $18.41B and an enterprise value of about $17.4B. The trailing P/E of 13.2 is an artifact of the tax release and should be ignored. On pre-tax income taxed at 21%, the P/E would be about 71. The more useful multiples: about 6.1 times trailing revenue, about 21 times free cash flow, and about 29 times forward earnings. The 15 analysts stockanalysis.com tracks rate it a Buy with a $76.41 average target.
We ran a five-year DCF two ways, because the answer depends almost entirely on whether stock compensation counts as a cost. Growth fades linearly to the terminal rate over the five years, net cash of about $1.0B is added, and 270.6M shares are used.
| Scenario | Year-1 FCF | Starting growth | WACC | Terminal growth | Per share (company FCF) | Per share (FCF less SBC) |
|---|---|---|---|---|---|---|
| Bear | $850M / $490M | 6% | 11% | 2.5% | ~$43 | ~$26 |
| Base | $900M / $540M | 12% | 10% | 3.0% | ~$59 | ~$37 |
| Bull | $950M / $590M | 18% | 9% | 3.5% | ~$85 | ~$54 |
The year-1 figures bracket management's fiscal 2027 free cash flow guidance of $850-950M; the second set subtracts roughly $360M of stock compensation. On company-defined free cash flow, $68 sits between the base and bull cases, and our model needs free cash flow growth starting near 22% and fading to reach it, against guidance that implies about 7% for fiscal 2027. On free cash flow after stock compensation, even the bull case falls short of the price.
A peer cross-check lands in the same place. NetApp, the closest listed infrastructure comparable, trades at about 23.3 times EV to free cash flow and 20.3 times forward earnings (stockanalysis.com, September 2026). At NetApp's cash flow multiple Nutanix would be worth about $76 a share; at its forward earnings multiple, about $47. The implied range is roughly $47-76 on peers and $37-59 on base-case DCF, with $68 at the upper end of both. The market is paying for the VMware migration to arrive faster than the filing says it will. This is implied value under stated assumptions, not a price target and not investment advice.
Risks
The risks are in the 10-K's own words. The VMware opportunity "may not result in customer commitments or revenue within the periods we anticipate," and Broadcom "may continue to compete aggressively." Hardware availability is outside Nutanix's control, and its OEM partners may not prioritize its orders. Revenue is concentrated in the channel, with two distributors at 39%. The $500M of 2027 convertible notes come due within about a year, which cash covers several times over. And the valuation-allowance release is a forecast as much as a fact: if profits disappoint, the $1,215.8M deferred tax asset can be written back down.
The Bottom Line
Nutanix is a genuinely better business than it was two years ago: GAAP operating margin went from 0.4% to 9.6%, free cash flow from $598M to $841M, and the balance sheet from a deficit to positive equity. But the headline $1.5B profit is a tax entry, the buyback does little more than absorb employee dilution, and growth slowed in the year the competitive window was widest. Watch three things: whether revenue growth re-accelerates as server lead times ease, whether ARR keeps growing faster than revenue, and whether the share count finally starts to fall.
No analyst wrote this. The tax benefit, the share count and the Broadcom comparison all came out of two companies' XBRL through the same pipeline that reads any SEC filer, and a private company reporting in the same format is the same job.
Every figure above comes from Nutanix's FY2026 Form 10-K (accession 0001193125-26-394793, filed September 18, 2026), read directly from its XBRL, except the Q4 results and fiscal 2027 guidance (Q4 FY2026 earnings release, 8-K exhibit 99.1), the market price, multiples and analyst consensus (stockanalysis.com), and the Broadcom figures (Broadcom Q3 FY2026 Form 10-Q, accession 0001730168-26-000080), each attributed inline. Filing data via RoboSystems.