Shares of hybrid cloud software provider Nutanix (NTNX) rallied 25.1% in the month of August, according to data from S&P Global Market Intelligence.

Nutanix's fiscal fourth-quarter earnings report, released on Aug. 28, outpaced analyst estimates and also gave solid guidance for the year ahead.

A beat and raise with healthy free cash flow

In the quarter, Nutanix grew revenue 11% to $548 million while posting adjusted (non-GAAP) earnings per share of $0.27, with both numbers coming in ahead of analyst estimates. The company also guided for $570 million in revenue for the first quarter at the midpoint, showing nice sequential growth, and $2.345 billion to $2.465 billion for the year ahead. The forward annual guidance signals an 11.7% growth rate at the midpoint of the just-completed year, so that acceleration relative to the fourth quarter's growth rate likely encouraged investors.

Of note, the company's annual recurring revenue (ARR) grew an even higher 22%. And free cash flow showed a big acceleration in the quarter to $224.3 million, up from just $45.5 million in the year-ago quarter.

Encouragingly, CEO Rajiv Ramaswami said the company saw the highest number of "new logos," or new customer wins, than the company has seen in three years. That could be because Nutanix's hyperconverged software goes up against VMware, which was acquired last year by Broadcom (AVGO -2.27%). Broadcom has concentrated more on the biggest companies since the acquisition and has raised prices, which appears to have opened up opportunities with small and medium businesses for Nutanix. That being said, Nutanix also noted some large customer wins.

Nutanix is reasonably priced for an AI software stock

Nutanix isn't a direct artificial intelligence (AI) stock, but it should benefit from the AI trend, as its software helps businesses manage their hybrid cloud offerings, unifying data between the cloud and on-premises data centers. It's highly likely many businesses will want more of that as they manage AI training in the cloud but also seek to protect their data and run inference workloads on-premises. At 6.9 times trailing sales and 24.8 times trailing free cash flow, Nutanix looks reasonably priced, especially in the software world, where valuations tend to be higher.