Nutanix (NASDAQ: NTNX) reported its first quarter financial results after the closing bell on Monday. The Company reported better-than-expected earnings and revenue, which sent shares higher by 20% on Tuesday morning.

For the quarter, Nutanix reported earnings loss of USD 0.71 per share on revenue of USD 314.8 Million. FactSet analysts expected a loss of USD 0.75 per share on revenue of USD 306 Million.

Despite the beat, Nutanix reported that its net losses continued to widen, while revenue marginally gained year-over-year. First quarter GAAP net losses totaled USD 229.3 Million compared to USD 94.3 Million a year ago.

Meanwhile, revenue only grew by USD 1.5 Million from USD 313.3 Million the same period a year ago. The Company said the slower growth is due to revenue compression from the Company’s ongoing transition to subscription and the significant reduction of hardware revenue from the prior year. Nutanix reported billings of USD 380.0 Million versus USD 383.6 Million in the first quarter a year ago.

Software and Support revenue totaled USD 305.0 Million, increasing by 9% year-over-year. Software and Support billings reached USD 370.3 Million increasing by 5% year-over-year.

“Our solid Q1 performance, particularly in the Americas, gives us confidence that we have the right formula for global sales leadership as demonstrated by improved productivity and sales hiring over the last six months,” said Dheeraj Pandey, Chairman, Founder and Chief Executive Officer of Nutanix. “We have also seen momentum in key areas of our business, including the transition to subscription and an improved 28% attach rate of new products onto our core HCI platform.”

Nutanix is transitioning towards a subscription-based model now. And in the first quarter, the Company reported that subscription billings increased by 41% year-over-year to USD 276 Million, representing 73% of total billings. Subscription revenue grew by 72% year-over-year to USD 218 Million, accounting for 69% of the total revenue.

“We continued to make progress towards our goal of more than 75% of billings coming from subscription by the end of the fiscal year, further demonstrating that customers want the freedom and flexibility that a subscription software model offers,” said Duston Williams, Chief Financial Officer of Nutanix. “Our last two quarters of solid execution position us well to deliver on our growth plans for fiscal 2020.”

Despite the earnings beat, Nutanix shares are still down 17.1% this year.