VMware Revenue Jumps 12%, Beats Estimates

The Q2 results "were driven by broad-based strength across the product portfolio in all three geographies," the company's CEO says.
Matthew HellerAugust 25, 2017

Virtualization and cloud computing provider VMware reported revenue and profit that beat estimates as it continues its transition from primarily a software license vendor to a services-based model.

The company said it earned non-GAAP net income of $489 million, or $1.19 a share, in the second quarter, compared to the consensus estimate of $1.15. Revenue rose 12.2% to $1.9 billion, ahead of consensus estimate of $1.88 billion.

In after-hours trading on Thursday, VMware shares initially rose 2.5% to $103.40 before dropping back to below the regular session close. So far this year, the stock is up about 28%.

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“We are very pleased with our Q2 results, which were driven by broad-based strength across the product portfolio in all three geographies,” CEO Pat Gelsinger said in a news release.

“As we continue our multi-year journey from a compute virtualization company to offer a broad portfolio of products driving efficiency and digital transformation, customers are increasingly turning to VMware to help them run, manage, secure and connect their applications across all clouds and all devices,” he added.

As Forbes reports, VMware has generated strong growth in recent quarters, driven by such areas as network virtualization, hybrid cloud, hyper converged software, and end-user computing. Amid the transition to a services-based model, the contribution of software licenses to net revenues has fallen from around 50% to 40% over the past five years.

During the second quarter, license revenue increased 13.6% while services revenue was up 13.4%. Forbes had predicted growth of 10% for both segments.

VMware’s hyper-converged software suites include VSAN, which saw a 150% increase in year-over-year bookings. “At the rate it is climbing it should hit over 10,000 customers next week when VMworld 2017 is taking place in Las Vegas,” Storage said.

For the full year, the company is expecting net revenues to rise 10% to $7.8 billion and non-GAAP earnings per share of $5.08, compared to the analysts’ estimate of $5.01.