Rukmini Sivaraman: Yes, it’s a good question, Mike. And you’re right. These larger deals are inherently more unpredictable, which is why I think my point on your previous question, right was renewals is generally more predictable, although, of course, in as with everything, there is some variability there, but definitely more predictable, right than the new and expansion portion. And so I won’t give you a specific number, Mike, I know you were looking for like some percentage or size or something like that. What I will say is when we look at our pipeline of opportunities, and we look at the mix of that, meaning how much is coming from deals of a certain size versus larger size. And if you think, you know, you may have buckets of, you know, deal sizes, what we’re seeing in the data is that a larger proportion is coming from those higher, larger deal size buckets, than we’ve seen previously.
So — and that’s in addition to the pipeline growing or just into the mix of it is also changing, to be weighted more towards larger deals. So that’s sort of the first part of part of the answer to your question. Now, in terms of just how do we get comfortable, we look at what’s in the pipeline, we’re looking at a lot of other things that we in terms of conversion rates and things like that. And it is related to the pipeline. And we put a probability on how many of those we think we can convert during a period of time. And so that’s sort of a little more color into the methodology of how we’re approaching this. And all that is factored into the guide that we provided. But Rajiv, did you want to add anything?
Rajiv Ramaswami: Yes, just a couple of things. First of all, I think one of the reasons we’re seeing these large deals is because we of course for a while we’ve been working on a portfolio, that product portfolio, which we think is ready for large scale enterprise deployments. And so we have segmented our focus a bit further up the market in terms of our own sales for segmentation, and then on top of that, we’ve got the industry disruption with VMware where many large customers, of course, who are not necessarily engaged with us before are now engaging with us. So that’s the reason for why we’re seeing more of these large deals in our pipeline. Now, I think with respect to prosecuting these deals, I would say we keep getting better at going after these deals.
I mean, we have a whole 360 approach towards going after this. We have executed sponsors on the big accounts where we have large deals, we have a full team assembled to go pursue these deals. And now having said that, so it’s still going to be timing is going to be a bit unpredictable. And the size of the things also tends to vary over time. So it doesn’t completely replace the unpredictability. But it does. It’s a sea of engagement, when you have these types of deals between both companies, we are investing resources, customers investing a lot of resources as well, because there’s a lot of testing certifications, go into contract negotiations, security audits, a whole bunch of things that get through this process. And so I would say we as a company are getting better and better at going after these types of opportunities.
Operator: Thank you. One moment for our next question. Our next question will come from the line of Meta Marshall from Morgan Stanley. Your line is open.
Meta Marshall : Great, thanks. A couple questions for me. Maybe just on, you noted, clearly, some macro headwinds still. Just wanted to get a sense of any of the shape of that is it still things that are just a long game lead times? Are you seeing it on larger deals, smaller deals, certain verticals, certain types of projects, kind of just any change in color from the past couple of quarters, if there are any? And then maybe on the second question, you know, I would imagine you guys are getting a number of resumes in your inbox right now just kind of given the disruption, just any notable hires, or how you’re finding kind of the pool of talent to add in terms of some of your OpEx ads? Thanks.
Rajiv Ramaswami: Yes, Rukmini why don’t you take number one, and I’ll take the number two question.
Rukmini Sivaraman: Yes, sure, Rajiv, so on macro, Meta, which I think was your first question. It’s more or less remained stable, relative to what we’ve seen in the last few quarters are fairly consistent with what we’ve seen in the last few quarters. And we characterize that as somewhat uncertain, but stable. And, that’s sort of what we continue to see. So no significant change from that, which again, as we talked about, did show up in the continued modest elongation of sales cycles compared to what historical levels. Now, some of that could also be driven by this high, you know, larger mix of higher, larger deal sizes in our pipeline. So that’s sort of showing up now. But again, that is also a factor of just the fact that we’ve gone up market, it’s not necessarily a macro point.
So on macro, nothing else I would call out in terms of specific verticals, seeing strength or weakness that we’re noticing at this point. Somewhat uncertain, but stable is how I would characterize it.
Rajiv Ramaswami: And then Meta on the talent questions, there’s no doubt this is –two years ago, it was a difficult market for talent, right, everybody was hiring. And it was a tough market as we tend to hire at the top of the pyramid in terms of software developers, now, that has changed quite significantly for us, right, in this market today, we’re able to attract the best talent from every place, not just you know, VMware or other places, you might think, but also from hyperscalers, for example. And, so we see a good tenant environment, we have been using that, of course, we have been hiring carefully, but selectively in both R&D and sales. And we are seeing really good talent come in the door. And overall, it’s helping uplevel the talent that we have in the company and I’m very happy about that. And that’s happening at the individual contributor levels, but also at the management levels, as well. So across the Board.
Meta Marshall: Great, thanks.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Erik Suppiger from JMP. Your line is open. Eric, your line is open.
Erik Suppiger: Sorry, there, sorry.
Operator: One moment. Let me go ahead and bring him back up. Okay, Eric, your line is open again.
Erik Suppiger: All right. Sorry about that. I want to just touch on the subject of larger deals in elongated sales cycles. As previously noted, there have been other vendors that have seen similar trends and there was some discussions around consolidation, customers that are getting more focused on consolidating onto a single or a few vendors as opposed to a lot of tools out there. Is that one of the things that could be contributing to the elongated sales cycle? Or is it more of an economic uncertainty issue?
Rajiv Ramaswami: I’m not sure as much, Erik, whether it’s because people are consolidating, whether they’re — in our case, for example, certainly, there’s a lot of like, okay, I’ve got an incumbent vendor that I need to rethink my strategy and bring on an automated vendor. And that’s how we’re playing very much for us, right, very much in play. So, they were happy with the vendor prior, and now they don’t feel happy. So they got to look at an alternative. And we are a very solid infrastructure alternative. That’s one factor that’s clearly play. The second factor, as I mentioned a little earlier, that that we ourselves as a company, have gotten to a point where we have a portfolio that can address, pretty much across the enterprise, all the applications that customers are running.
So all applications that you know, from small scale to very large scale. And that makes us a bigger player in our customers’ minds, right? It’s not that they’re thinking about it as a vendor for just one use case anymore. They’re thinking about as a platform vendor for them that can run other applications. And so that typically leads to a more larger strategic engagement with the customer, which also takes longer. So that I think is what’s playing in our — for us — playing out for us now.
Erik Suppiger: Okay, very good. And then just on the ChatGPT in-a-box. Just curious if you have seen particular groups or segments of your customer base that are adopting that, who is doing AI in a private cloud these days?
Rajiv Ramaswami: Yes. First of all, I’d say it’s early days for us, Erik on that for sure. But we are seeing traction across all kinds of verticals. Financial services, defense, federal, in fact, one of our first events was with the federal agency, manufacturing, pharma or medical devices, so there’s just many different verticals. But the use cases tend to be somewhat similar. Document summarization, search, analytics, co-piloting, customer service, enhanced fraud detection, these are some of the same sort of same use cases, but across a range of verticals.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Ben Bollin from Cleveland Research Company. Your line is open.
Ben Bollin : Thank you. Good afternoon, everyone. Thanks for taking the question. Rukmini, you made a comment about investing carefully for the growth in front of you. And there’s been a few questions on hiring. I’m curious about how your hiring plans have evolved since the start of the year, when you look at — what you see out there, in particular, how you’re managing the amount of inbound activity that you are seeing from partners and customers? And then I had a follow up.
Rajiv Ramaswami: So maybe I think Ben, so I think there’s a couple of points. One is related to hiring the other this inbound activity from partners, customers, et cetera. So slightly different questions there. So, I think, on the hiring we, you know, we, if you look at our history here, we’ve been very, very tight on OpEx, apart few years for the right reasons. As we consolidated our portfolio, got some more focus into the company, and got our execution going. And now this is the year where we are investing, our OpEx is going up as based on what we talked about, and what we’re investing, judiciously continuing to drive both growth and leverage to our bottom line. But we’re certainly investing, we’re investing in terms of building out our portfolio from an R&D perspective, we’re investing in terms of our go-to-market, so that we can be more effective in terms of getting — handling the demands that we started to see.
And to your point over the last, I would say, a year or two years, we’ve seen more than coming from customers, partners, and managed service providers. And we are — we now have focused efforts in terms of addressing all of those, whether it be a larger set of customer engagement, whether it be more focus in terms of the partners, which was one of the priorities that I said very early on when we started here three years ago. So more focus on the channel, enabling them recruiting partners, giving them incentive, making them more autonomous. And extending that to our managed service provider partners where we continue to add more of them to our partner network over time.
Ben Bollin: Okay, that’s great. Rajiv, one other question for you is, you commented earlier about some CIO scrutiny as it relates to the data center investments and public cloud investments. I’m curious if you’re seeing any change in how customers are thinking about their longer term infrastructure planning, from an investment perspective, notably, because of what’s happened with Broadcom and VMware? That’s it for me. Thank you.
Rajiv Ramaswami: Well, I mean, certainly, Ben, so the bottom wave, I think, absolutely, it is, right. I mean, again, VMware was a great technology vendor with a lot of innovation, and customers and with a large footprint of customers, and now they have to rethink whether that’s the right long term strategy for them. And so that says, okay, well, we got to either look at alternative providers, of which we are an easy alternative. Or they could say, well, I could go more to the public cloud, okay, which is not an easy thing for existing workloads, to just take everything and move to the public cloud, that’s not easy to do. And then they factor into the fact, cost regulatory aspects of it, and so forth. So, so clearly, I think, for us as a vendor, there’s certainly, we see customers continue to invest in infrastructure modernization, in terms of digitization, in terms of running modern applications, not just in the public cloud, but also on prem.
And like some of these new cycles that are happening now, like AI, for example. We’ll also find this path down the same route, right, which is, you know, it’s starting out with a lot of training happening in the public cloud, but it’s moving towards, okay, I’m going to run my AI, I’m going to preach — I’m going to fine tune the training on my own data sets, which are proprietary that I want to keep carefully. And I’m going to have to potentially look at slightly different solutions for inferencing, which are going to be running closer to my edge locations. So these things are driving what we call hybrid multi cloud. And I think that’s very much I think, the world that many of our customers are here for the next several years.
Operator: Thank you one moment for our next question. Our next question comes from line of Dan [indiscernible], from RBC Capital Markets. Your line is open.
Unidentified Analyst : Hey, it’s Dan [indiscernible] for Matt Hedberg. Appreciate you taking a question here. To build off a recent answer that mentioned that 360 approach around VMware deals. Could you go into some of the mechanics and processes involved in migration over from VMware? I guess, you know, specifically, what tools are in place to facilitate migrations? And then how long does a typical migration take?
Rajiv Ramaswami: Yes, I mean, and the answer to that varies, but I’ll go through the process Dan. So, there’s clearly an assessment of what the workloads are, that our applications are, that are running on that infrastructure. That’s one part of it and making sure that we can run all those workloads with good performance, which by and large is the case these days. The second is what elements of the stack have been deployed. And the more of the elements that they have deployed, the stickier or the more complex the migration becomes. So for example, for a customer that definitely deployed a hypervisor, it’s a largely automated move away from the hypervisor to our hypervisor, we have automated tools. In fact, our tools called move, we’ve done a lot of the VM migrations all day long.
And so that’s a relatively simple migration that can be done automated. Now, at the other end of the spectrum, if they’ve invested a lot of custom automation work, custom security work on top of the stack, then some of those will have to be converted over that requires a professional services engagement, which also as part of our offering, to help convert over some of those onto our platform or on to more open type of platform. For example, automation, people are looking at Terraform as an example. So in those cases, it’s a more complex migration. I’ll give you some examples, though, in a lot of cases, actually, what happens is that the migration planning takes some time, the actual execution of the migration is very quick. There was a case study that we published recently of a healthcare system that we’ve been engaged with for the past three years or so.
The name of pediatrics is public this point, and they plan this migration for a few years. But when they actually came around to doing the migration, they were done within 90 days. So that’s a typical example as a cycle of selling and engagement and everything and then getting everything ready. And then once it’s very, they were able to migrate in 90 days, and I would call them as a medium complexity environment, they’re not at the high end of the complexity, but they’re not necessarily the lower, the simplest type.
Unidentified Analyst : That’s very helpful. Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Simon Leopold from Raymond James. Your line is open.
Victor Chiu: Hi, guys, this is Victor Chiu for Simon Leopold. Just really quickly, can you help us understand what’s baked into your full year outlook specifically, just, you know, the current guidance reflects gains from VMware at a similar rate, or you expecting this accelerates from here?
Rukmini Sivaraman: Thank you, Victor, for the question. So the full year guide, assume some benefit from the VMware being acquired by Broadcom as we said at the beginning of the year, and no, it does not expect any acceleration at this point, right? It just assumes it has some benefit in there. It also assumes a small benefit, as we’ve talked about before, towards the end of the year, from the Cisco partnership, as well, but that, again, as Rajiv said, we expect that to grow over time, and certainly in fiscal year ’25. But there’s a small benefit from that baked in, as well, in addition to sort of all the other dynamics we’ve talked about on this call, including modest elongation, average sales cycles, unpredictability with regard to large deals in the pipeline, et cetera.
Victor Chiu: Okay, great. That’s helpful. And just lastly, I wanted to follow up on the macro question. We’ve been hearing through the channel that the sentiment on, you know, the HCI market overall has turned slightly more cautious. Can you help us understand what you’re thinking for HCI growth overall this year, and how Nutanix performs relative to that?
Rajiv Ramaswami: Yes, maybe I’ll take that. I don’t think, we haven’t seen a slowdown or caution around its adoption, I think it’s been the same kind of dynamic that we’ve seen in the past. There’s a legacy infrastructure out there. The HCI capabilities are continuously gotten better over time where HCI they can run pretty much all enterprise workloads on the platform, and in many cases can do so with better performance even than legacy architectures. So better performance, better TCO, much simpler to operate. So, but I think what we’ve always had to overcome as inertia. We’ve got a set way of doing things that customers have been doing for a long time. And here is a shift to a more modern software defined architecture and that shift we have to do, and we have to overcome that with all the — but that’s been what we’ve been doing the entire existence of the company.
So I wouldn’t see that there’s been a bunch of change in how our customers are thinking about it. Certainly, or not in the last year or so that I’ve seen.
Victor Chiu: Great, and, you know, how the growth, you know, what you’re thinking for growth and kind of how Nutanix is growing relative?
Rajiv Ramaswami: Yeah, I think we, I don’t have much to add beyond what we comment at Investor Day, just last September, where we provided both your TAM and SAM opportunities and our growth outlook in terms of, you know, 20% ARR growth in terms of what we could drive through FY ’27 is what we said there.
Operator: Thank you. And with that, this will conclude our question and answer session today. Thank you for your participation in today’s conference. This does conclude the program you may now disconnect. Everyone, have a great day.
