Nutanix poached nearly 700 VMware customers during its most recent fiscal quarter, which helped the vendor post results above expectations and project continued strength moving forward.

Nutanix CEO Rajiv Ramaswami during a post-earnings call interview said the vendor added “roughly about 700 customers in this quarter,” and that “the vast majority of them are probably VMware customers.” The executive added that these are customers are “largely moving away from those legacy VMware stacks.”

That result builds on the 630 new customers Nutanix added during the previous quarter. Equity research firm William Blair at that time noted in a report that Nutanix was “seeing steady VMware displacements amid high customer dissatisfaction.”

Nutanix’s results for its latest second-fiscal quarter outpaced expectations, with revenues surging 16% year over year to $655 million, and net income growing 70% to $56.4 million.

VMware customer migration progress

Nutanix has put several programs in place with other vendors to help migrate disgruntled VMware customers, including work with Amazon Web Services (AWS), Cisco, and Dell Technologies.

Ramaswami during the earnings call said that the vendor was seeing “early traction” with customers migrating from VMware Cloud on AWS to the AWS-powered Nutanix offering, and from running in an on-premises environment to the public cloud. These migrations are happening “within a matter of months because one of the things that we don’t have to worry about in a cloud-to-cloud migration is the hardware refresh is not an issue anymore,” Ramaswami explained.

Nutanix’s work with Cisco was a “been a good contributor for us in new logos, especially this quarter, as well as over the last couple of quarters,” Ramaswami said, adding that, “we expect to see that partnership continue to grow and are working very closely with them as we go to market.”

Nutanix did see a “small contribution” during the most recent quarter from some of its reseller work with Dell, with expectations that the more integrated work will start showing up in its next calendar quarter.

Ramaswami had previously explained that “on the easy side” of these migrations were current VMware vSphere customers “and they’re willing to replace their hardware, it’s a very easy migration. We can migrate that within a month or two off a relatively small scale.”

Ramaswami noted that a lot of that migration is automated and that a similar timeframe could be had for customers moving between public cloud providers.

However, more complex and larger migrations “can be many years.”

“At the other end of the spectrum are these large customers that use multiple VMware products with massive estates,” Ramaswami said. “It can be three years to do a migration just because they can’t migrate all of it at once. There is a requirement for professional services engagements to convert over some of their more complex custom scripts that they have written and custom investments they’ve made on top of the VMware portfolio. So those migrations tend to be more complex, require professional services, and take a few years.”

Forrester Research Principal Analyst Naveen Chhabra previously told SDxCentral that this complexity is a significant challenge for those customers due to how engrained VMware products have become in the enterprise.

“When I talk to the clients, I’m telling them that with dependencies it might not be easy to simply replace or swap a VMware hypervisor with another hypervisor because of the ecosystem impact, because of the ecosystem effect,” Chhabra said. “I think the power of VMware is not because of the VMware technology, it is because of the network effect. It’s both the north and south ecosystem partnerships that VMware had developed over the years, and that brings power to the VMware options.”

Does Nutanix have a solid VMware-related pipeline?

Ramaswami noted that many of those potential customers remain on multi-year contracts with VMware, which will delay opportunities for Nutanix. That opportunity could also be delayed as “hardware refreshes are needed in many cases to convert them over.”

The William Blair report did note that while “immediate migration remains an operational challenge for many customers,” those wondering eyes were glancing toward “top alternatives” like Nutanix, Red Hat, Microsoft, and Scale Computing. However, migration plans could take several years due to legacy VMware customers having either extended deals prior to the Broadcom acquisition or signing up for shorter renewals post-acquisition.

This notion was echoed by Woo Jin Ho, senior industry analyst at Bloomberg Intelligence, who told SDxCentral that a number of large VMware customers made early moves to renew their contracts prior to Broadcom closing on the VMware acquisition. “They all knew Hock’s playbook and saw what happened to Symantec and those security deals and they signed up the VMware deals for three to five years,” Ho said.

Ramaswami also tapped into recent analyst concerns over Broadcom squeezing long-time VMware go-to-market partners.

“I think that's very real,” Ramaswami said. “All our business pretty much goes through the partner community, and we have continued to make enhancements to our channel programs and the incentives. For example, we have new logo incentives for these partners to bring us business. They may not be new logos for them, but they're new logos to Nutanix and so we've been working very hard to make it worthwhile for the channel to do business with us, and that certainly helps.”

Is Broadcom concerned?

Broadcom, for its part, appears to be good with its management of VMware. It reported robust growth from its VMware-infused software infrastructure business during its most recent earnings call, with CEO Hock Tan stating the vendor booked 21 million total CPU cores during the latest quarter compared to 19 million cores posted in the previous quarter. More significantly, Tan said that 70% of those new booked cores were on its flagship VMware Cloud Foundation (VCF) platform, “virtualizing the entire data center.”

Tan also noted that Broadcom had signed up 4,500 of its largest 10,000 customers to its VCF platform, and that the platform generated $2.7 billion in annualized booking value (ABV) during the latest quarter. Those numbers are significant improvements from the 3,000 resigned customers and $1.9 billion in ABV Tan noted during the vendor’s Q2 results.

Prashanth Shenoy, VP of cloud platform, infrastructure, and solutions marketing at Broadcom, recently explained to SDxCentral that the vendor is focused this year on “acceleration and adoption” of its VMware business. That focus is expected to ride momentum coming out of a hectic 2024, which saw Broadcom overhaul VMware’s platforms and licensing models.

“Last year was a year of cleaning up, simplifying our route to market, our offer, our product, giving them the direction, the confidence, and building the product,” Shenoy said of Broadcom’s updates to VMware’s halo Cloud Foundation (VCF) platform. “This year is all about making sure the product gets deployed, consumed, all of the advanced services work on that, and our partners and our route to market are fully operationalized to go deliver on that.”