What happened

Shares of Nutanix (NTNX -1.18%) were climbing today after the hybrid cloud specialist posted better-than-expected results in its fiscal fourth quarter, showing the company's shift to an annual contract value (ACV) model is starting to pay off.

As of 10:17 a.m. EDT Thursday, the stock was up 11.3%.

A digital image of a cloud.

Image source: Getty Images.

So what

Nutanix, which provides hyper-converged infrastructure software to help companies seamless move applications between different clouds, posted revenue growth of 19% to $390.7 million, easily beating estimates at $362.9 million. Other key metrics also showed solid growth in the business, including ACV billings up 26% to $176.3 million, and run-rate ACV was also up 26% to $1.54 billion. Annual recurring revenue soared 83% from the year-ago quarter to $878.7 million, showing that the company's shift to a subscription model is paying off.

Average contract length also continued to decline, falling from 3.8 years to 3.4 years, a sign that the company is executing on the ACV strategy, which generates shorter, higher-value contracts, and makes it easier for the company to sell new products.

On the bottom line, Nutanix's loss per share shrunk from $0.39 to $0.26 as the company successfully controlled costs even as the business grew. That result beat the consensus of a per-share loss of $0.42.

CEO Rajiv Ramaswami said, "We have entered our fiscal 2022 with good momentum and a solid plan for growth, executing on the model we laid out at Investor Day and delivering on our vision of making clouds invisible."

Now what

For the current quarter, the company's guidance called for ACV billings of $172 million to $177 million, which compares to $137.8 million in the year-ago period. It also expects adjusted gross margin of 81.5%, down slightly from 81.9% in the first quarter of 2021.

Overall, the results show the cloud stock making progress in its turnaround strategy, and profitability should improve as the business grows and the company benefits from low-cost renewals and upselling new products.