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The Cloud Control Room That Got Reset With The AI Trade |
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This company is not trying to be the loudest name in AI. It is trying to be the operating layer that keeps messy enterprise infrastructure from breaking when companies mix on-prem, multiple clouds, and security requirements that never stop expanding. |
The stock has taken a valuation hit after softer growth and guidance, but the underlying story still looks great. |
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| What Nutanix Actually Does | Nutanix Inc (NASDAQ: NTNX) sells software that helps companies run apps and data across hybrid environments without needing a pile of disconnected tools. | At its core, it started with hyperconverged infrastructure, which bundles compute, storage, and virtualization into a simpler building block. | Over time, it evolved into a broader hybrid multicloud platform: a consistent way to operate infrastructure across private data centers and public clouds. | Why that matters in 2026: most enterprises are not fully cloud-native. | They are stuck in the middle, modernizing slowly, dealing with compliance, and running workloads that cannot just be lifted and shifted. | Nutanix's value proposition is reducing operational friction: fewer moving parts, faster provisioning, and more predictable performance across environments. |
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Why The Stock Has Been So Weak | NTNX is down roughly a third over the past year and is sitting near its 52-week lows. The drawdown looks like a mix of fundamentals and expectations management: | Growth came in soft relative to what investors wanted in a market that has been rewarding clear acceleration. One recent quarter showed solid year-over-year revenue growth, but it still landed slightly below expectations and came with cautious forward guidance. A key subscription metric has been scrutinized. In fiscal Q4 2025, subscription ARR growth remained healthy, but it missed estimates and was framed as decelerating versus prior quarters, which tends to hit sentiment fast in subscription software. Guidance has not been aggressive enough to keep the multiple elevated. Even when revenue and earnings beat in spots, investors have treated the setup as show-me until visibility improves.
| So the reset is not just about whether Nutanix is a good business. It is about whether it can deliver consistent, confidence-building execution that earns a premium multiple again. |
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Trivia: What year was the U.S. $2 bill last redesigned (current design)? | |
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The Bull Case |
1) This is turning into a real cash flow story |
The cleanest support for Nutanix right now is cash generation. Management has guided to substantial free cash flow for fiscal 2026, implying a high margin profile for a company still viewed by many as mid-transition. |
That cash matters because it changes the conversation from survival to optionality: invest in product, support go-to-market, and still return capital. |
2) Management is acting like the stock is cheap |
In December, Nutanix announced a $300 million accelerated share repurchase funded with cash on hand, with the final settlement expected before the end of January 2026. |
Buybacks do not fix fundamentals, but an ASR is not a casual gesture. It signals urgency and conviction, and it can help stabilize the stock when sentiment is shaky. |
3) Hybrid cloud is not a fad, it is the default |
The most realistic enterprise architecture for the next several years is hybrid by necessity. |
Companies keep sensitive workloads close, push elasticity to public cloud where it makes sense, and then spend the next decade trying to manage the complexity they created. |
Nutanix is positioned right in that operational pain point. If CIOs keep prioritizing simplification, standardization, and cost control, the platform pitch stays relevant even if the AI hype cycle cools. |
4) The upside is a re-rating, not hero growth |
A lot of the near-term upside does not require Nutanix to suddenly grow like a top-decile SaaS name. It requires steadier execution, cleaner guidance, and proof that the cash flow profile is repeatable. |
When a stock is already down 30%+ from prior levels, the bar for a bounce can be lower than the bar for a full narrative rebuild. |
5) A renewal and conversion cycle can quietly lift bookings |
When customers standardize infrastructure tooling, they tend to renew and expand in waves. |
If Nutanix can ride a multi-year renewal/conversion cycle, it can create a steadier bookings cadence, which is exactly what the market is currently demanding. |
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The Bear Case |
1) Guidance risk is the whole game right now |
When a stock gets hit for outlook, it becomes hypersensitive to the next outlook. If management stays cautious, investors may keep the multiple capped even if execution is fine. |
2) Subscription momentum can look good and still disappoint |
In subscription software, you can post solid growth and still get punished if ARR, net expansion, or bookings trends do not match the market's mental model. |
The fiscal Q4 2025 setup showed how quickly sentiment can turn when a key metric misses. |
3) The valuation is not "cheap cheap" |
Even after the drawdown, the market is still pricing Nutanix as a profitable growth software name, not as a distressed turnaround. |
If growth stays in the low-to-mid teens and the market rotates toward cheaper cash flow names, the stock may struggle to expand its multiple. |
4) Competitive pressure can creep in through pricing and cycles |
Hybrid infrastructure is strategic, which attracts competition and aggressive pricing in certain cycles. |
Even if Nutanix wins on product, pricing discipline across the category can influence how quickly margins expand. |
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What I'd Watch Next | ARR and bookings trajectory: not just the number, but whether the trend line stabilizes after recent scrutiny. Forward guidance tone: the market wants clearer line of sight, not conservative hedging. Free cash flow delivery vs guidance: if fiscal 2026 FCF prints near the guided range, the valuation debate gets much easier. Share repurchase follow-through: how quickly the ASR settles and whether buybacks continue after it. Enterprise demand signals: anything that suggests budgets are loosening for infrastructure modernization versus staying frozen.
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My Take | NTNX feels like a reset: a company that has done real work on profitability and cash flow, but is still being judged on whether growth and guidance can become more predictable. | The stock is not priced for perfection anymore, yet it is also not a no-brainer deep value situation. You are buying into a middle ground where execution and tone matter as much as the product. | The bull path is straightforward: stabilize subscription momentum, keep delivering high free cash flow, and let buybacks support the floor while investors regain confidence in the forward curve. | If that happens, Nutanix does not need a massive growth surprise to work. It needs the market to believe the hybrid cloud platform can compound steadily, without constant story changes, and that the cash engine is now permanent. | |
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That's all for today. Thank you for reading. If you have any feedback, please reply to this email. | Best Regards, | — Adam Garcia
Elite Trade Club |
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