Nutanix, Inc. (NTNX) Earnings Call Transcript & Summary

[indiscernible] for a Tech Talk on cloud native capabilities of the Nutanix Cloud platform. Sarah, VP Of investor relations for Nutanix. And I'd like to introduce your 2 presenters for today. First, Thomas Cornely. He's our SVP of Product Management, Thomas joined Nutanix about 5 years ago and leads product strategy and product management across our portfolio, reporting to Rajiv, our CEO. He's been in Silicon Valley for close to 25 years in a variety of product leadership roles at Veritas. Symantec, Greenplum EMC, Nexenta DDN and Rubrik. And our other speaker is Dan Ciruli, Senior Director of Product Management. Dan joined Nutanix 18 months ago via the acquisition of D2iQ where he led product management and design. During the 7 years prior at Google Cloud, he worked extensively in Open Technologies, including founding the Open API initiative. The format today will be roughly a half hour presentation by Thomas and Dan, followed by a Q&A session. Please feel free to submit questions through the Q&A panel throughout the presentation, and we'll answer them live after the presentation is finished. With that, I'd like to turn it over to Thomas to kick things off.

All right. Thank you, Rich. Thank you, everyone, for joining. Looking forward to a great discussion with you. And thank you, Dan, for joining me on this webinar. So I kick this off and kind of add a bit of context in terms of where we are at Nutanix in terms of our portfolio story, and where does [indiscernible] fit in, and then I will have Dan give you more details in terms of our current portfolio, current market dynamics and current wins that we're driving in the market. So as you might have seen, and this was kind of the key topic at our customer conference just about a month ago. Nutanix delivers 1 platform for all apps, data and AI, allow you to go and run all this anywhere. That's really the core foundation of what we've been doing as a company. Now we've always known as being a platform that allows customers to go and modernize their existing VM-based infrastructure. But the reasons why we actually want customers to select Nutanix and move to Nutanix is for what we were doing for them for the next 10 years. It's about modernizing what you have and giving you a platform that allows you to move faster to the future, whether that's hybrid multi-cloud, whether it's [indiscernible] and modern applications, and more and more enterprise AI. So this is really the crux of where we see ourselves in terms of market dynamics. We can help to modernize, but truly [indiscernible] platform to help to accelerate towards the future. And this is really built on the last 15 years of innovation. For those of you who we have been kind of been looking at the company from the very beginning, you would remember, we started as an appliance company. And back then, we basically put hyperconverged infrastructure on the map, right? And the key workload back then was virtual infrastructure, [indiscernible] computing, and we differentiate based on the fact that we had strong software to deliver a server-centric web-scale architecture for all of your virtual desktops. Now we knew at the time that the technology could do much more. And so we eventually moved on to a different positioning around helping customers modernize infrastructure for all workloads. At that point, we switch from being a appliance vendor to a software subscription vendor. We actually opened up our software to a broad ecosystem of platform vendors from Dell to HP to Lenovo and more recently, Cisco. At this point in our journey, all of these vendors are not actual OEMs of our software, able to resell complete solutions, we need to have software built in to their servers. The key workload was targeted back then, that's proved that ACI can run anything. And so we basically made the solution for the most business-critical applications, the most critical databases. We did this on the foundation of our core cloud infrastructure products. We complemented for operations, automation and governance with our cloud manager, product NCM. And then we wrapped all this with more data that was simply to add on to your platform. Unified Storage, NUS and database automation and services and NDB. And this today's is the core of our portfolio still. Back in 2019, 2020, we look to the cloud and we took a whole portfolio and made it a foundation for hybrid multi-cloud, allowing customers to simply extend what they had on-premises and to run into any region in AWS, in Azure, we just announced Google as the next cloud platform that we support, allowing customers to go and complement on-premises with elastic solution, cloud-based or disaster recovery, or for bursting use cases. This is something we refer to as our Cloud Clusters, NC2, Its a Cloud Clusters offering. And this is really kind of the core of what we mean by modernizing infrastructure. Get something that's more automated, simple to manage, more resilient and it allows you to get a lot more agility in terms of where you choose to run your applications. A lot of this, however, centralized on VM-based virtual machine-based applications. The next wave and what we talk about this morning is about this next generation of applications, cloud-native applications, container-based applications. And again, here, we're bringing the same unique take that Nutanix has done for the last 15 years, the new stage of applications by looking at the compute side, automating management and [ spend ] management, but really bringing data into the equation. And for this, we'll get new products. We announced back in August, NKP, a Nutanix Creative platform, really based on the acquisition that's we did 18 months ago of D2iQ. We just announced a new offering, again, focusing on the data services aspect for cloud native applications called Cloud Native AOS, allowing our core data management platform to run natively into containers and complements the Creative platform. And we've been in the market now for almost a year with our enterprise AI software with end customer to go and automate, how they deploy, manage and secure models in a simple fashion for all of their GenAI and [indiscernible] applications. Here again, we set of partners from cloud, AWS EKS for their [ virtual ] service in Public Cloud from Azure to NVIDIA for all of those AI use cases. So rich, very busy 15 years, we're currently on this top wave of innovation. We've got a lot of work to do, obviously, other things that we can do in the market. But this gives you a quick summary of our journey and what got us to this point. Now one thing that's driving a lot of this innovation and a lot of the conversations in the market is enterprise AI. And what we believe Nutanix Enterprise AI is going to drive a complete rethink of customers' infrastructure. We talk a lot about new databases, new data lakes because Enterprise AI is all about bringing your own data, on-premises data to this new crop of AI-based and [indiscernible] applications. You're going to have to go actually manage models and protect them, set up and configure interest endpoints. And again, this is where this comes in. But what to us is more fundamental even is everything that has to do with AI today runs on containers. And so more fundamentally, when you think about this new infrastructure, it goes beyond getting servers with those GPUs that NVIDIA, AMD and others provide. It's about giving the right software infrastructure to support this new crop of applications and getting a container-based Kubernetes platform to run those applications. And you cannot see this in the data, looking at market data around [indiscernible] about Kubernetes adoption. A lot of market today, growing at a very healthy clip from now to 2028, close to 20% CAGR and getting to $30 billion plus in terms of full TAM. But what I'd like to draw your attention to is our other quotes on the right-hand side. By 2026, 80% of our division will have a platform engineering team from engineers. Platform engineers or the teams that design this infrastructure for containers that deliver and maintain this to be ready to run container applications in production. By 2028, we see 80% of software running at the Edge in containers. So again, contributing the foundation for doing things further out to the Edge. And 2029, and this is really the key point here, 95% of organizations will be running container applications in production, going beyond just developing and building new application, but actually running them in production, supporting our business. So with that, let me turn it over to Dan, so he can give you more of his own experience, his own expertise, building those platforms over the last 10-plus years and now helping us at Nutanix drive this platform into the market. Dan, let's go and try out this remote control and make sure that you can control this.

All right. Thank you very much, Thomas. So before I talk too much about the solution that we brought to market, I do want to take a step back and remind people why this is happening and why this is going without me. Can you go back a slide, Thomas, I don't seem to be able to -- there we go. About why this is happening? And why Kubernetes is going from something that was in a kind of a small experiment 10 years ago. And as Thomas said, 95% of companies will be running it before the end of the decade. And it starts with what we call digital agility. And that means the ability to respond quickly with technology. Companies that are adopting Kubernetes that are deploying containers instead of VMs go from deploying maybe once a year or twice a year to deploying maybe once or twice in an hour is -- that is the fundamental driver in a world in which software has eaten the world. And whether you are a bank or whether you are an insurance company, you do retail, it doesn't matter, you're using software to run your business and people who can move faster will be able to innovate faster than their competitors and they'll end up winning in the market. So that's the #1 reason. Second, it is really designed for resiliency. Containers were put on the map by companies like Google and Twitter, Airbnb, early adopters of containers. People who really define what modern scalability and performance are. And nowadays, it's become very clear that when you're building the world's most resilient software, if you want something that you need to be running, you can do that. And you can do it with a tremendous efficiency when containers are adopted properly and adopted at scale, you reduce your cost, not just your hardware costs but your people cost, it's very efficient to manage large numbers of containers and that's what we saw in those big adopters at scale, that's what becoming possible now with Kubernetes. So that reduced cost is a big deal. And then finally, I'd like to point out that the thing that sometimes goes unsung which is the innovation that's happening in open source. Kubernetes is part of the Cloud Native Computing Foundation, which hosts over 200 open source projects which at last report, I saw over 200,000 developers have contributed to those projects. When you look at it that way, this set of technologies, Kubernetes and the technologies that surround it, represent kind of the largest software development project in history. And the innovation that's going on there is incredible. And companies that build on top of Kubernetes and say, "Hey, we're going to deploy that way from now on." They're building on that wave of innovation. Companies that don't are not building on that wave of innovation. So there's really a bunch of reasons. They all point in the same direction, and they all point towards how Native really becoming the default way. As we see that, however, we do see some interesting things. Now this survey is is just over a year old. Although I would say all of these numbers are very indicative and are all pointing in a positive direction going up from where they are. And the first one is the really important one, and one to me, which is 10 years into running containers of companies, this survey was of companies running Kubernetes in production. 9 in 10 say that developers shouldn't manage infrastructure. And that's big news because 10 years ago, when Kubernetes started, developers ran it themselves. If a developer wanted to deploy the Kubernetes, they ran Kubernetes themselves. And what we've seen in the learnings as an industry we've had since then is that, that doesn't scale well. It doesn't lead to great security practices. No one has any idea what's going on. So while -- as the verbiage says 1 and 3 are still running their own clusters, the industry has moved away from that. And that other number also very large, almost 9 in 10 surveyed said they want VMs and containers on the same infrastructure platform. And the reasoning behind this is very simple. VM's virtualization, that is not going away. It's going to be running for a long, long time. And I'd like to think of this as in the '90s when server architecture really -- X86 became dominant, and we stopped running applications for mainframes anymore, everything since then got written for running on Linux, running on servers in the data center, but those mainframes never went away. Once software is written, it runs forever. And so VMs are going to be running for a long, long time. And if you are now managing the infrastructure for an enterprise, you're going to be managing both. Some other great numbers up there. Storage is becoming more and more important for what's running containers. Of course, Nutanix at its heart, data is what we're all about from our earliest product, AOS. Most companies running Kubernetes are doing this in a hybrid or multi-cloud fashion. And so that's another issue. And Thomas talked about AI at the Edge. He talked about how containers are taking over at the Edge. We know, almost half of companies are looking at using Kubernetes at the Edge. And as the stat said, that's going to go up tremendously by the end of the decade. So we see many things that are showing that Kubernetes is rising. And I'm going to emphasize again that VMs and containers really do complement each other. And I anticipate for the next decade, 2 decades, we will see them running side by side in nearly every enterprise, maybe still continuing to deploy some things into VMs, certainly keeping and deploying their existing software in VMs, but for places that they do need agility, places they do need to develop quickly, containers are going to be there. And so we anticipate going forward for quite a long time side by side in nearly every enterprise, we're going to have a whole host of VMs and containers. But adopting Kubernetes isn't always easy. As I said, as we -- as Kubernetes began to be mainstream, this culture of DevOps occurred, DevOps developer operations, developers managing their own Kubernetes infrastructure really has been proven to be -- while it was the dominant mode of Kubernetes, it's really difficult for enterprises to manage. I've talked to enterprises with literally hundreds of Kubernetes clusters managed by individual teams. It's extremely expensive. Justin Garrison, who was a -- worked in Amazon, and he worked in Disney. He had a blog post a couple of years ago that says, DevOps is a very expensive org chart because when an organization does that, they are duplicating personnel all over the place. And worse than that, they've got inconsistency. They're securing things differently. Different teams are doing different things for observability. And the real problem there is the risk when there's a vulnerability, no one has any idea of how that affects them what their security posture is. I do see customers who run VMs and containers in different silos, literally different physical clusters on-premises. And that's of course, it's very expensive. It's very inefficient and it really can keep you from moving quickly if one is growing fast and the other isn't? And finally, storing data for containers has been difficult. It's an evolving field. Not all companies do it well. Many companies are kind of assembling solutions from different vendors cobbling them together. So there are a lot of challenges out there. And it's the need to address those challenges that drove Nutanix 18 months ago to buy D2iQ where I was a -- was running product management. D2iQ, formerly known as Medosphere, really by bringing D2iQ into the fold, what Nutanix did was get a team of people who have been solving problems in Kubernetes and in container management for years, and it allowed us to to get a complete product, bring that into market. And so rather than build up Kubernetes experience over time, Thomas, Rajiv and team brought in a fully production, ready in production generally available for years product. It was a product that's been proven in the field, we've a product that is used in the federal government, both in civilian and Department of Defense, and across enterprise. So something that came in with existing customers came in with a track record proven in the field. Also allowed Nutanix to get a bunch of cloud native expertise, get a bunch of engineers, people who are there at the founding of the CNCF, at the founding of the OpenAPI Initiative, the ESDO project really gave us a bunch of expertise. And I think also, allowed us to bring in a team that shared a vision of how Kubernetes helps -- I mean how Nutanix helps the enterprise. Nutanix helps people who run infrastructure and platform engineers who are the second wave of Kubernetes management, not DevOps, so let infrastructure teams handle Kubernetes. We were at D2iQ early champions of that model. It's really being proven out in what customers see and what analysts see. And so it really aligned with the vision that Nutanix has. NKP, our product, which we released about 10 months ago, is differentiated in the market. First in that it's open and second, that it's complete. Open in that, we really emphasize we distribute a pure upstream Kubernetes. We use the Kubernetes open source APIs, we allow it to run anywhere. It doesn't run on a single operating system. It run son many different versions of Linux. It runs on Nutanix. It runs on on vSphere, on Bare Metal, on all 3 major clouds. So that openness really distinguishes it from much of what's available out there in the competition? And second, it is something that is complete most enterprises can go to production with what we ship in NKP. It really fits in the way that Nutanix has approached open source for over a decade now. Nutanix has really made quite a successful history of taking things in open source, things like the KVM hypervisor or things like Open vSwitch, the open source technology that is behind Flow network. And adding to that enterprise capabilities, things like security, things like scalability and making sure that what's available in open source is wrapped in capabilities that allow enterprises to comfortably adopt it. And finally, putting great experience around it, good user interfaces, good automation, good life cycle management. And so what we are doing with not just Kubernetes, but a whole host of projects from the from the Cloud Native Computing Foundation is doing what Nutanix has been very successful at, which is making sure that, that innovation happening in open source is consumable by the enterprise. And what it allows is, it allows our customers to manage Kubernetes consistently wherever it is running. And this is a really important point. When we go back to the statistics that show 69% of companies running Kubernetes are running it in multiple locations, having consistency and saying, you can have the same people, the same UIs, the same APIs on-premises that you do in the cloud is really an enormous deal. Now some customers really like the experience of using EKS and AKS and KAP can work with those engines. It can install and manage them from a single dashboard. It can also ensure that they are running consistently with what companies are running on-premises. So the same automation, the same APIs allow companies to adopt new platforms more quickly and allow them to do it a lot more inefficiently without having to build a separate team to manage what's going on in the cloud. And of course, it really builds on the lifeblood of Nutanix, which is AOS and the fantastic data services. that we're building. So AOS has been a distributed file system that has proven itself in the market time and time again for 15 years. Now it's -- we're starting -- we're in EA running that in-cloud native that is running in-containers itself. It also works very well with our NDB product, which allows management of databases. So we are really helping our customers with with more point -- parts of that infrastructure stack from the storage layer itself to the databases running on that storage layer. And of course, now the container automation as well. All of this makes a fantastic platform for Agentic AI. Like all new applications, all of these new AI applications are being written to go to go into containers. And I will remind everyone that we will be taking questions at the end. There is a Q&A tool. So if you have any questions, you can queue them up right now in just a few minutes, we're going to open it up. So please do, if you have questions as we go along, add questions in there. So I'd like to talk a little bit about some of the customers that we have added since we joined Nutanix. As I said, we released NKP on Nutanix last August. So we had a good 9 or 10 months since then. One of the really exciting customers was CoLinx. CoLinxis a shipping and logistics company here in the United States. They were hit with a very large Broadcom bill and had, I think, less than 3 months to move off entirely. They didn't want to do even on renewal at the rates they saw. They had a fairly complex setup of hundreds of VMs, but they were also heavy into VMware Tanzu which was the VMware implementation of Kubernetes. They had less than 3 months to go through procurement as well as the actual installation of software and move, and they did that successfully. Their software that they write is all running on NKP. They also run a bunch of enterprise applications. So they were really, really proved -- people who proved out our -- my favorite SKU that we have, what we call NKP Full Stack. NKP Full Stack is 1 SKU that includes NCI, Nutanix Cloud Infrastructure, which has AOS, our storage and data tool as well as AHV, our virtualization tool. NKP Full Stack, when you add in the container management that NKP brings in, gave them everything they were getting from VMware and allowed them to move quickly and easily and a real success story. The next customer success story is a large fleet. And of course, one of the components of adopting Kubernetes at scale is managing a fleet of Kubernetes clusters. This is a European public health agency that has offices throughout their country. And they needed -- they have scores of offices needed to run Kubernetes clusters in every 1 of those locations. You can think of them like edge location almost like retail. They were looking for something that would help them. They looked across the industry. They looked at every solution out there and really liked that NKP emphasized open-source APIs. They weren't -- while they were adopting Kubernetes and they were adopting it from Nutanix, they were adopting a pure upstream Kubernetes, which means very little chance of lock-in, and we do like to talk to our customers about that. We try and let them adopt this because they like it and not tie them in. And so for them, that was a really, really big deal. Also the fact that it was full feature that it came with observability, that it came with policy management using upstream open source projects from the CNCF. They were able to get all the capabilities they need, but get that installed, supported life cycle managed by Nutanix. And I mentioned earlier that D2iQ, we had done quite a bit of business with the federal government and the Department of Defense. We have added a customer in Europe who is using NKP Full Stack. So everything that I talked about, AOS our virtualization, AOS, our storage, AHV, our virtualization and NKP. They have added the full set of technologies from Nutanix in order to do -- in order to adopt AI, I will say. And this includes products like Nutanix Unified Storage, which is fantastic for ML and AI workloads, great performance. NDB, which manages databases and vector databases are an important part of AI workloads. And, of course, our enterprise AI. So this is a customer who has seeing that Nutanix, a single vendor with everything that they need from storage virtualization, container management, database management, up through AI management itself, all from a single vendor. So very integrated, very easy for them to buy and really much more simple than engaging 5 or 6 vendors to get that whole thing. So we've got a lot of success. We're really excited about what our customers have done and more excited about what will be happening in the coming months and years as we go forward. And with that, I will turn it over to Thomas to close this out, and then we can open it up for questions.

All right. Thank you, Dan. So a great overview. And again, thank you for walking us through the product, your history at D2iQ. And the last few months here at Nutanix in terms of getting me to the market and seeing NKP just hit a sweet spot in what we've been seeing effectively. In terms of customer demand, we have a market that's going through a lot of different disruptions as we all know. Some of them just different market players. Continued disruption, a lot of it is the technology between AI, bringing up new questions for customers and the fact that you do want to invest for the future. And the topic of lock-in, which you brought up, right, is really front and center nowadays in terms of customers making decisions, when it comes to platforms for running their business. And so NKP is just very nicely positioned, and we produce had fantastic results so far with the product. So let's close on a quick overview of our portfolio. Most of you will be familiar with the version that we had before, which was very centered on over virtual machine, with our cloud infrastructure product as the foundation, extending to public cloud using our Cloud Clusters offering, and then complemented by data-centric solutions. What we're highlighting here is the next phase of evolution of our portfolio. NKP at the top here, giving you 1 pane of glass management for all of your cloud clusters wherever they may be running, whether that's running on NCI, Nutanix, either it's running natively in Public Cloud, AWS and Azure today, Google in the future or whether you're running Kubernetes and more and more people doing AI are doing this. As we talked about edge-use cases. We'll be doing this, which is running containers and Kubernetes directly on their Bare Metal servers. All of that is supported now with NKP. So again, a good extension of our own ability to go and reach new customers and address use cases that are doing now in terms of driving new innovation. And then in the middle section, what Dan called out and which is really kind of Nutanix core expertise. How do you make things easy, thinking out not just the compute aspect, the application, but the data that that application relies on. In the case of those next-gen AI build application to be data and models with our enterprise offering. And so all of that available in containers being able to run anywhere you're deploying those Kubernetes platforms. So that's in a nutshell where we are today, this in a nut shell, we talked about the last 15 years. And this really is the foundation for -- do we look at it in the next decade of innovation at Nutanix. We're going to keep on strengthening our position around but machines, but we're doubling down on investing for the future around Kubernetes and AI use cases. With that, I think it's time for us to turn over to questions and Q&A. Rich, hopefully you can join us back.

Yes. Thomas. So I'm not seeing any questions in the question panel right now. I mean, maybe I'll kick things off with just sort of a broad question. Something maybe to just talk about. Some of this was in your presentation, but maybe sort of dig into what's the competitive landscape, one for sort of just Kubernetes sort of management and run time and then two, more broadly for running both Kubernetes and VMs at the same time? And sort of how do you think we stack up in that landscape and how are we differentiated?

I'll take the first crack at this, Dan, and then maybe you can add in. The market is broad, right? When it comes to clientage because you got a lot of open source and emerging players. And so that's just a fact, so this is effectively getting to a space where there's lot of fragmentation in the market, right? But if you kind of look at the big players, when it comes to virtual machines and containers, of course, historically you've VMware, you're going to have Broadcom going forward, right? And we know what that would be with our portfolio in terms of consolidating, I mean more expensive, more unified packaging and then driving the customers to adopt that one offering, right? Red Hat has historically been quite strong at the top end of the market with our OpenShift offering. And we also know that this is also expanding with virtual machines. But again, this is very, very raw in that sense in terms of being able to bring those enterprise customers. The trick that we see here is, you have to kind of deliver on the core expectation in terms of resilience, scalability, management, security, being able to go and do all that. This is technical innovation that is hard to do. It takes time. But then you also have to reach your customers where they're at. And this is where we have this unique [indiscernible] at Nutanix in terms of with working on the virtual problem for the last 16 years, we understand what enterprise admins expect in terms of simplicity and what their job is about and how we can make that job easier, right? And allow them to go and run even large environments with the same set of resources again on automation. We're building a team expertise, and I think we're building on the innovation that Medosphere has D2iQ has built for Kubernetes. So it's a very different mindset. We're focusing on the needs of the operators. We're thinking in terms of what you need to actually run production environments and do this in a resilient, secure fashion and be ready for what your business will actually ask you next. I want to deploy at the Edge, I want to run in AWS natively in the cloud. And how do I do that without having to go and get a new host of teams and complexity into infrastructure and my operations and do this with the same set of governance rules that I had from my VMs. So we like where we are. We like the fact that we're building on innovation on the VM side, the last 15 years at Nutanix. Innovation on the container side, the last 10, 12 years, you made was on 12 years ago, Medosphere was probably 12 years ago, we did D2iQ. we got strong foundations here with this given mindset, let's focus on the need of the operators. Great. Dan, anything you want to add?

No, I think that was terrific. I think that -- I think you hit it really well.

Great. So we do have some questions in the Q&A panel. So I'll read them off and you guys can decide who's going to address them. First question from Abhi Gami. Which of your offerings will be in VMware refugees find most novel or differentiated compared to what they are accustomed to?

That's a great question. Thank you, Abhi. So we actually go and differentiate with our core offering. NCI and NCM, so clouding [indiscernible] manager, which is delivered as a bundle in a single SKU called Nutanix Cloud Platform, NCP. Now that in terms of what it does is very, very close to a VMware and VCF is currently delivery. Differentiation comes in on the fact that we can do more with your data. So Unified Storage, files and objects running [indiscernible] platform is unique in that space. So there you have strong differentiation. And again, we do see with this new applications coming in, file object or platform services. There should not be separate motions for you. You should be able to go and actually have a one-click button to enable the services. So [ files ], objects. The same is true for database automation. Very unique, something that we're using very effectively to breaking to some of the largest accounts in their most complex use cases because of what we can do, particularly around automating open source database deployments. Things that are new for customers. They want to go do [indiscernible] at scale, Mongo at scale. My [indiscernible] at scale, this is where we can help do this business in a very enterprise fashion given the innovation we bring. So those 2 products have historically been kind of key differentiators for us. NKP is a huge difference. And 1 thing that we learn -- Dan called out NKP open and complete. This openness in terms of not driving for [indiscernible] give you the option to deploy NKP anywhere you want. You want to deploy it on Nutanix. You at deploy it on Bare Metal, Great. You deploy it on VMware, you can do that. In public cloud, we support that too. So that openness here is a big differentiator, okay? And if you look at the next pages around the AI, what we're doing with enterprise AI, no one else has, all right? And so again, it takes innovation, it takes progress. We're working on these things. you can actually do a couple of things together to be almost like what we have. But that product, we don't see that from the Broadcom VMware. And it's not the focus in terms of go-to-market, and that's one key thing.

Great. And if I can add something there. Yes, I'll repeat what I've heard both from analysts as well as the early adopter customers who have moved from VMware Tanzu, which is that I think Nutanix has done a very -- we have done a very good job of integrating products together in a way that a VMware customer will be surprised when they see. our early adopters have been very -- they've have been thrilled with how we've been able to adopt our product in and really give them what feels like a unified product.

Great. So we'll move on to our next question from Param Singh. Does the shift to Kubernetes takeaway from Nutanix's value proposition vis-a-vis AHV?

If you don't mind, Thomas, I'd love to talk about this. I don't think it does at all. I think these are so complementary. As I said, while most new development is happening now to be deployed in containers and on Kubernetes and we see -- we even see [indiscernible] vendors come out of the off-the-shelf hardware being served, being shipped to run in Kubernetes. There is still the vast majority of the software that has been written in the last 30 years that is running in customer data centers and in the cloud today is running in VMs. They're very complementary. We -- when we deploy Kubernetes and Thomas mentioned, we can deploy in different architectures, including on bare metal, but for most customers, it's actually better to deploy Kubernetes within the VMS themselves. And the reason is that Kubernetes has some great features automatic scalability, the ability for a cluster to grow when it needs to and shrink when it needs to. You only get that when you're running in VM. So we anticipate -- I think it is very complementary. What it allows us to do is to give a platform to our customers that they are quite confident we'll run the software that they've been running for the last 20 years and the software that they're running for the next 20 years without a hard divide, being able to do that across the same hardware. So I think very complementary technologies.

Great. So now a few questions from [indiscernible]. And so first one, is there any infrastructure requirement differences when customers want to run Kubernetes? If so, does this require a hardware refresh.

And that's an easy one. The answer to that one is no.

Actually, when we look at the portfolio picture I should at the end. Look to us, we see Kubernetes actually extending our reach, right? You look at -- when we deliver our cloud infrastructure products, you have to run an [indiscernible] literally, right? We do a lot of work so that the compute, the storage, networking is all nicely supported with Nutanix, the whole stack because we deliver the opening system. We talk about AOS, but AOS actually is the main thing running on this hardware. In the case of NKP, I can run anywhere. As long as you have Linux and your server can support Linux, I can run on it, right? So you're running the Linux in a virtual machine, we deploy NKP, and now you get the benefit of container management and infra management in a virtual machine. But it want to go and run Kubernetes on Linux host running bare metal, you can do that. And this is what we expect to happen in edge use cases. This is what we see today happening in advanced AI use cases where customers are deploying very new hardware, pushing the performance to the max, and just don't need to be able to [indiscernible] -- much more things running on it, they just run containers actually on [indiscernible]. And there we can go and complement as should be needed.

Great. Moving on to part 2 of that question. Indicated some customers already started to use NKP. What percent of the 25,000-plus customers are using NKP today. So I'll answer that one. Very early days and a small percentage. We're not going to give anything more specific than that. And what does it take a customer to want to use NKP versus what they have been doing. And I think this hits the sort of core of why adopt containers if you've been running on VMs. So I don't know.

I think this is a great reminder of, look, we're not -- when I talk to customers. We talk to technologists. We talk to people that actually have technology questions, basically is an investor crowd. And so 1 thing I'd call out, NKP is a different SKU, right? It's a new product, right, effectively. So it is a new source of revenue for Nutanix. It's a new source of growth for Nutanix. When we talk about basically TAM there, That's a fantastic SAM for us. And it's one that we fully expect to be able to go and capture and draw from, right? So to be a source of new revenue, a new source of growth for us. That's what we actually like with the acquisition and it becomes -- given the platform strategy, we become a platforms to launch new things. When we talk about enterprise AI, NKP becomes the de facto substrate for doing more things around AI. And again, new source of revenue for us, right, and new opportunities for us to get capture some of these emerging and fast-growing markets. In terms of the price points, I will again defer back to Rich. What I will say is actually quite good. And compared to what we've been historically able to go and capture with our cloud infrastructure product, you see things in a very similar range, right? So if you were looking to get information on our list prices, I'm sure Rich can follow up with you directly. But -- there's a lot of value being delivered there, and there's a nice [indiscernible] to pay for customers, which is, again, what makes sense for a good business.

Thank you for that, Thomas. And yes, I think for the crux of that question, it is an incremental opportunity. So I think that Thomas is makes pretty clear on that. Next question from Michael Stark, is Kubernetes is a long-term threat to HCI as a category of business.

I'll take that one, Dan, first, if you're okay.

Go ahead. I'll chip in at the end.

Yes, because we actually -- I get a different question from our customers. When -- if you look at our last conference, right, we talked a lot about Nutanix is opening up the cloud platform to now external storage, right? Last year, we announced support for EMT PowerFlex. This year, we now support for Pure Storage coming in later this year. And to have more customers seeing with this change -- is there a threat to your hyperconverged infrastructure motion? Again, we're talking of how do we expand our SAM, right, end of the today. One thing that we see as being a common denominator and kind of core our vision is this notion from the get-go, we're going to use software and services to change the way you think about infrastructure. And if you stick to that motion of software and servers and embracing Kubernetes, taking our software assets and making them container-centric, very much double down on the vision that we had. We just started the VMs, and this was the initial phase of hyperconverged infrastructure which was a VM-based software and server for everything. We are not just going to the next phase of evolution and doing this with containers. So my view, totally complementary and something that we can do either containers on VMs. But given our vision of broader, using containers to go actually support infrastructure using software and servers to the compute storage networking security automation. Dan?

And yes, if I can chip in. Thanks for the question, Michael. What I think is really interesting is that Nutanix historically was founded by some engineers who left Google. They love the way Google stored data, which was effectively a distributed file system, storing data across commodity Linux hardware, which was very unusual at the time. And if you think about the workloads that was designed to support, it was designed to support a, containers because the way Google did and does deploy applications across that infrastructure is containers. And b, it was designed for machine learning, right? That's what the Google was effectively inventing big data at that time. So we have at Nutanix AOS, which is a distributed file system. In reality, I think that HCI is the platform of the future. It was designed to support Kubernetes. It was designed to support containers. It was designed to support AI and ML workload. So No, I don't think Kubernetes is a threat to HCI. I think this is the thing that allows us to really differentiate ourselves. And now we're really hitting the use cases for which HCI was originally designed.

Thanks for that, Dan. So we'll move on to the next question from Frederick Gooding. How does Nutanix think about the go-to-market strategy with the cloud portfolio, which capability has the most attractive entry point to new customers or has had the most traction?

That's a great question. So if you look -- the cloud portfolio can mean many things for us, right? So -- and actually, we think of the entire portfolio of Nutanix as cloud portfolio. But in this particular instance, we're talking on the Cloud Native portfolio, our containers and community-centric portfolio, which, as we discussed with NKP for management of any cluster running anywhere, cloud-native AOS that data layer right? And then we complement with our 5 objects and [indiscernible] automation and AI contribution. In terms of go-to-market, we're seeing actually a very healthy mix right now in terms of NKP adoption of existing Nutanix customers that actually want to complement because they know they have container applications coming that they have to go and run on production. And brand-new logos to Nutanix. I think then give you some examples of customer wins. Some of those were customers that were new to Nutanix and started with containers first. And very often, what happens is you start with containers and then you basically open up the discussion of what else can I do here with Nutanix because I like what I'm seeing. And so it's -- again, from a go-to-market perspective, it's been proving to be quite complementary in terms of customers that have been either long users of Nutanix for the VM infrastructure, knowing that they had to do something else and basically expand and complement and move up the stack with these containers. And seeing now this that we can offer, liking the way we design products and what we deliver in terms of user experience. That's been a key motion. But we're seeing new customers come from either the VM side on the container side and even container side now coming in from NKP and then embracing more Nutanix given what we can do in terms of automating the full stack. So in terms of our go-to-market, we are -- the other thing that we talked about -- Dan talked about the second wave of adoption, focused on platform and platform teams, that are thinking production. What is great about those teams is the set of challenges that they have, what they care about is very similar to the set of things that we've been selling to using our core cloud infrastructure products. There are people that care about scale, performance, resilient security, governance. These are [ cons ] that we're used to having. We know how to have with customers. We know how we can pitch our differentiation in those conversations using the cloud products. And now what we're finding is we can do the same thing within the container-based products. So our core teams are able to at least open the door when it comes to client team discussions and creative discussion. And then we follow through with teams of specialists that we've been ramping up both on the technology side and on the selling side to kind of take it to the next level in terms of driving the proof of concepts and driving the adoption discussions. But what you find is that second wave and it's focused on production, great environment. It has been super helpful for us because we're no longer having to go and convince somebody to do something new, they are asking for infra solutions for production requirements.

Thanks for that, Thomas. We will move on what at this point is our final question. How is AI helping facilitate migrations from VMware Tanzu? Is it a clean lift and shift? That one is made for Dan.

It is a really clean lift and shift in general for companies, especially many -- I said, I had a stat about the percentage of Kubernetes deployments that are using storage. For deployments that are not using storage. It's -- it is simply a matter of pointing your CD tool at the new clusters and that are on running on Nutanix and pointing there is very easy. And even for those that are using storage, we have an open source backup tool that's proven years of experience in the field, [indiscernible] you back up 1 cluster, you restore from that on Nutanix, and then you move over there. So as I said, we have customers doing it by themselves, the customer that I talked about, CoLinx, they didn't even use our professional services for this. So it is -- one of the things about Kubernetes is it was designed to be a universal API for deploying software on the computers, one of the original goals. And so it actually tends to be a much easier move than for things that were designed to run in VMs when all the networking involved. So yes, very, very happy with the state of the world there. And as of yet, not needing to use technologies like AI to facilitate it because it's just not that complicated at this point.

Actually, Dan, if I can add, I think we got a bit more time here. One point you made when he talked about the differentiation in a market where with NKP was the simplicity of the product, right? And then you talked about simple to deploy. You also mentioned the example of deploying cumulative Kubernetes in dark site environment, but which is kind of just let you go put all of the hardest constraints we can have and can you do this. We've got examples of customers that were struggling for weeks and months with some of the biggest name in the market when it comes to container and Kubernetes platforms just because of the fact that Kubernetes actually can be complex and will be, right? That in a matter of [indiscernible] I'll keep it singular, got NKP deployed in those environments, right? And so there's so many different ways to go and differentiate in this market. But the first one is, okay, what's my time to value? And the first value is can I actually start using this infrastructure. In the case of NKP, we can do this because of all the work that the D2iQ team and [indiscernible] team did it back in the day, right, in not one click, but almost. And in all of Kubernetes tremendously simpler than the alternatives on the market.

Great. And with that, it looks like there are no more questions, and we're going to wrap things up. So Dan and Thomas, thank you very much for joining us and for for presenting and answering those questions. And thank everyone for joining and for the good or great questions. And just a reminder, there will be a replay of this available on our IR website, if you want to go back and take a look. With that, thanks, everybody, and we're going to wrap there.

Thank you. Goodbye.