Nutanix’s stock fell back to earth following the release of its latest earnings, with the vendor being hammered on Wall Street due to a dour outlook hampered by a possible impact from the coronavirus on the Asia-led hardware supply chain. All of this despite the vendor’s most recent earnings coming in ahead of expectations.

Nutanix’s stock began trending downward just prior to its earnings release, which coincided with an overall drop in the market. However, the vendor’s stuck plunged following release of its numbers and was down around 25% in Thursday trading.

That plunge was tied to a warning from Nutanix’s management about the anticipated impact from the coronavirus. The company cut the high-end of full-year projections for software and support billing from $1.75 billion to $1.67 billion, and software and support revenue from $335 million to $320 million.

“We have to be cautious about the next three to six months especially when it comes to [Asia-Pacific and Japan], and Japan is a meaningful market for us and they have a fiscal close in March, and we are tracking some large deals so we have to cautious about the guide,” Nutanix CEO Dheeraj Pandey said in an interview with SDxCentral following its earnings release.

While Nutanix is mainly a software-driven company, Pandey explained that supply chain issues on the hardware side could impact its ability to sell into certain regions.

“There's a second-order effect on supply and because our software runs on servers and a lot of that ends up in China, so there’s obviously some effects on verticals, not the least of which is manufacturing, but also travel, hospitality, transportation, and retail,” Pandey explained of the warning. “They are all being affected because of the lack of travel, so we just have to be cautious.”

Obviously the forecast concern impacted investors as Wall Street’s reaction was diametrically opposed to what happened in Nutanix’s previous quarter where the vendor’s stock surged more than 21% after its numbers were released.

Nutanix was not the only vendor to have warned about a possible coronavirus-linked impact. Microsoft late yesterday said that it did not expect to meet recently provided guidance for its More Personal Computing segment.

And who can forget about that large trade show that was supposed to be happening this week in Barcelona, Spain.

As for the actual results for its second fiscal quarter of 2020, Nutanix’s revenues increased 3% year over year to $346.8 million, which was ahead of expectations. However, operating expenses surged 31% over the same time frame, which nearly doubled is quarterly operating loss to $217.6 million. But, that again came in ahead of expectations.

Digging into its operations, Pandey noted that customer adoption of its new pricing model was much faster during the quarter than expected. He noted that Nutanix expected to hit the 80% conversion mark by the end of fiscal 2020, but instead hit it at the end of its latest fiscal quarter.

“I think the subscription transition had to go through the belly of the fish as we call it and we are pretty hopeful that this is going to be the right thing for our customers, the right thing for the channel, and the right thing for Nutanix because renewals bring along levels of leverage,” Pandey said. “The cost of business is very different when it comes to renewals versus new business, so we are pretty bullish about the next two to three years.”

Nutanix has also been targeting its transition to a subscription model at its biggest rival VMware, which sells its software via licenses as well as cloud-based services.

“VMware is postponing the inevitable,” Pandey previously told SDxCentral. “With having two or three different silos of spend, you can’t call yourself a hybrid cloud company.”

Pandey also said the Nutanix continues to see accelerated business through its deal with Hewlett Packard Enterprise. The vendor scored 117 new customers through that agreement in its latest quarter compared with 25 new customers in the previous quarter. That deal was initially struck last April, and called for plans to sell hybrid cloud as a service and HPE servers running Nutanix’s software stack.

The company remains confident it’s heading in the right operational direction, though it will obviously need to maintain that direction in a potentially more challenging near-term environment.