Revenue, Deferred Revenue and Deferred Commissions

12 Months Ended

Jul. 31, 2022

Revenue Recognition and Deferred Revenue [Abstract]

Revenue, Deferred Revenue and Deferred Commissions

NOTE 2. REVENUE, DEFERRED REVENUE AND DEFERRED COMMISSIONS

Disaggregation of Revenue and Revenue Recognition

We generate revenue primarily from the sale of our enterprise cloud platform, which can be delivered pre-installed on an appliance that is configured to order or delivered separately to be utilized on a variety of certified hardware platforms. When the software license is not portable to other appliances, it can be used over the life of the associated appliance, while subscription term-based licenses typically have a term of one to five years. Configured-to-order appliances, including our Nutanix-branded NX hardware line, can be purchased from one of our OEMs or, in limited cases, directly from Nutanix. Our enterprise cloud platform typically includes one or more years of support and entitlements, which provides customers with the right to software upgrades and enhancements as well as technical support. A substantial portion of sales are made through channel partners and OEM relationships.

The following table depicts the disaggregation of revenue by revenue type, consistent with how we evaluate our financial performance:

	Fiscal Year Ended July 31,
	2020		2021		2022
	(in thousands)
Subscription	$	1,030,180	$	1,243,621	$	1,433,773
Non-portable software		208,158		71,390		49,694
Hardware		23,455		6,259		5,585
Professional services		45,889		73,094		91,744
Total revenue	$	1,307,682	$	1,394,364	$	1,580,796

Subscription revenue — Subscription revenue includes any performance obligation which has a defined term and is generated from the sales of software entitlement and support subscriptions, subscription software licenses and cloud-based software as a service ("SaaS") offerings.

•Ratable — We recognize revenue from software entitlement and support subscriptions and SaaS offerings ratably over the contractual service period, the substantial majority of which relate to software entitlement and support subscriptions. These offerings represented approximately $508.8 million, $639.3 million and $770.4 million of our subscription revenue for fiscal 2020, 2021 and 2022, respectively.

•Upfront — Revenue from our subscription software licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer. These subscription software licenses represented approximately $521.3 million, $604.3 million and $663.4 million of our subscription revenue for fiscal 2020, 2021 and 2022, respectively.

Non-portable software revenue — Non-portable software revenue includes sales of our enterprise cloud platform when delivered on a configured-to-order appliance by us or one of our OEM partners. The software licenses associated with these sales are typically non-portable and can be used over the life of the appliance on which the software is delivered. Revenue from our non-portable software products is generally recognized upon transfer of control to the customer.

Hardware revenue — In transactions where the hardware appliance is purchased directly from Nutanix, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis. We consider the amount allocated to hardware revenue to be equivalent to the cost of the hardware procured. Hardware revenue is generally recognized upon transfer of control to the customer.

Professional services revenue — We also sell professional services with our products. We recognize revenue related to professional services as they are performed.

Significant changes in the balance of deferred revenue (contract liability) and deferred commissions (contract asset) for the periods presented are as follows:

	Deferred Revenue			Deferred Commissions
	(in thousands)
Balance as of July 31, 2020	$	1,183,441		$	215,528
Additions (1)		1,523,846			310,966
Revenue/commissions recognized		(1,394,364	)		(183,074	)
Balance as of July 31, 2021		1,312,923			343,420
Additions (1)		1,713,411			229,524
Revenue/commissions recognized		(1,580,796	)		(205,354	)
Balance as of July 31, 2022	$	1,445,538		$	367,590

(1)Includes both billed and unbilled amounts.

During the fiscal year ended July 31, 2021, we recognized revenue of approximately $488.2 million pertaining to amounts deferred as of July 31, 2020. During the fiscal year ended July 31, 2022, we recognized revenue of approximately $592.6 million pertaining to amounts deferred as of July 31, 2021.

Many of our contracted but not invoiced performance obligations are subject to cancellation terms. Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized ("contracted not recognized"), which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenue in future periods and excludes performance obligations that are subject to cancellation terms. Contracted not recognized revenue was approximately $1.6 billion as of July 31, 2022, of which we expect to recognize approximately 54% over the next 12 months, and the remainder thereafter.