Rajiv Ramaswami: For sure, Jim, good question. And of course, very relevant, given what just happened with the transaction closing. So, even this last quarter, we did close some additional deals that I would consider to be influenced by the Broadcom VMware transaction. In fact, again, going back to that bank win that we talked about, the G2K bank, that was certainly influenced by this transaction. As we mentioned, it was a dual vendor strategy, but going forward, it’s going to be a single vendor strategy with us. Now, the timing and magnitude of these deals is unpredictable. And also attributing the primary motivation for these deals also can be a bit nuanced. Because we compete every day, right, even before all of the acquisition news, so.
But certainly it’s contributing. Now the transaction, of course, closed recently, but we don’t expect that to have an immediate impact for us in terms of timing of potential risk. Clearly, some — many customers have signed multiyear ELAs with VMware, prior to the deal closing. And for those that have signed that gives them some time to evaluate options going forward. There continues to be certainly a lot of concerns around all the stuff we’ve talked about in the past, pricing, increased pricing, potentially dropping support levels, et cetera. So we have a significant pipeline of opportunities, and it’s growing and a good degree of engagement with prospects, driven by these concerns. It’s just difficult to predict timing and magnitude of wins.
And we continue to expect some benefit from these influenced by this transaction, and we certainly factored that in — into our guidance for this fiscal year.
Jim Fish: Very helpful. And I’m surprised to hear a little bit about the Cisco partnership already picking up. I mean, we’re two months in. Understanding it’s easier with the installed base of HyperFlex to kind of sell or sell into that base. But, any way to think about if there are larger periods of renewals at certain times within that base, or if those renewals are accelerating, understanding you mentioned that the larger the wins there were more on the kind of customers evaluating HyperFlex and you guys get substituted in.
Rajiv Ramaswami: Yes. I mean, first of all, I think we’re happy that we are — our joint solution with Cisco became available this last quarter. So it’s now in the field, both sellers are selling it. And those deals — the initial deals, of course, naturally are ones where Cisco was either had already won them or was very close to winning them with HyperFlex, and now they’re simply converting those over to Nutanix going forward. So that’s one of the first parts. But with respect to new pipeline, really, I mean, we know that our pipeline takes 6 to 9 months to go close deals for us, right? So we don’t expect a huge amount of Cisco this year. We expect some and we factored that into our guidance this year. And then we expect that to continue growing next fiscal year and beyond.
Operator: Our next question will be coming from Matt Hedberg of RBC Capital.
Matt Hedberg: Great. Thanks for taking my question, guys. And I’ll offer my congrats as well. Really solid quarter and guide, especially given the uncertainty of the macro environment. Rukmini, I had a question for you. You noted strong renewals in the quarter and obviously, it’s becoming a bigger part of the mix. On the call, you talked about some new wins as well. But I’m curious, can you just step back and maybe double click a little bit more on the new business side of it. I know that, obviously, it’s been more of a renewals business of late. But just where are we in the new business sort of aspect of the story?
Rukmini Sivaraman: Hi Matt, thank you for the question. So, if we think about Q1, I’ll talk about Q1 performance versus maybe what you were alluding to, but then also maybe talk a little bit about the full year, Matt, to your point on just trends and so on. So in Q1, specifically, our overall sort of top line performance or outperformance really was driven by a combination of good execution across our new and expansion business. And within that, we talked specifically about our U.S. federal business, which had a really significant and nice year-over-year growth in new and expansion ACV bookings. So that was certainly something that we benefited from in Q1. Now for the full year, Matt, we’ve talked about, I think, some puts and takes that we are factoring into our outlook.
One is that we are expecting some improvement in our new and expansion ACV performance, compared to fiscal year ’23. We’ve talked about — Rajiv just touched upon like some things that we’re factoring in, in terms of benefits, whether it be a little benefit from our — from what’s happening in the competitive environment, some benefits from the fairly new Cisco partnership and so on. So we have some things that we’re optimistic and excited about. At the same time, as you started your question, Matt, there is also uncertainty in the macro, which just means that it’s harder for us to sit here and say exactly how the rest of the year is going to play out. So those are some of the things we’ve factored into our new and expansion performance for the year.
I will say, I think as you pointed out, right, renewals tends to be much more predictable portion of the business, just given our GRR, as you said before, is in the 90-plus percent range, and we know when those renewals are coming up for the next transaction. And so that part continues to be predictable and continues to perform well. And so hopefully, that gives you a sense of revenue and expansion.
Matt Hedberg: Super helpful. If I could ask one more. The gross margin performance has been great. And obviously, you guided to a really strong Q2 gross margin. Maybe could you double click there also, like what are some of the biggest factors driving that significant gross margin improvement?
Rukmini Sivaraman: Yes. So, I think a couple of points that I would make. Again, I’ll start with sort of the Q1 and maybe the Q2 guide, Matt, and then talk more broadly on gross margin. So for Q1, we attributed our gross margin outperformance, revenue coming in slightly higher, of course, because we beat on revenue. But we also had a mix of factors that led to COGS coming in lower. Now, there were a few things in there, Matt. I think that I would call out as one singular factor but a mix of things, some of which we believe will sustain and which is why we were happy to take up our full year gross margin number, last quarter when we gave you the first guide, we said approximately 84%, and we’re happy to take it up to approximately 85%.
So I would say it’s just a mix of good execution on a few different funds, and a reminder that our COGS has a good portion of it is our support teams like for our customer support folks are in there, we have services costs in there. And so across a few different dimensions, we were happy to see gross margin do better and take some of that across to the full year guide as well.
Operator: Our next question will be coming from George Wang of Barclays.
