VMware Earnings Preview: Growth Spree To Continue Driven By Robust Product Demand

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VMware (NYSE:VMW) is scheduled to announce its Q4 fiscal 2018 earnings on March 1. The virtualization and cloud computing provider has demonstrating strength in its business through the fiscal year, with fast-growing segments such as network virtualization, hybrid cloud, hyper converged software and vSAN driving growth. VMware’s license business and services business have both grown at a steady pace this year – a trend consistent with recent years.

We have summarized the company’s guided segment revenues and operating margin on our interactive dashboard platform. You can change expected revenue, operating margin and income margin figures for VMware to gauge how it will impact expected EPS. It should be noted that all year-over-year comparisons made by the company in its press releases and in this note compare Q4 FY’18 (November 2017 to January 2018) with the corresponding previous year quarter (October 2016 to December 2016), due to the company changing its fiscal calendar in early 2017.


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VMware’s net revenue through the first three quarters of the year was up 11% to $5.6 billion, with a similar increase in non-GAAP gross profit. A limited increase in operating costs (particularly SG&A expenses) led operating income to increase 14% to $1.8 billion with the operating margin (non-GAAP) expanding by almost a percentage point to 31.5%. Net income and earnings per share rose in the mid-to-high teens to $1.5 billion and $1.34, respectively, through the first three quarters of the year. This trend is also likely to sustain in the January quarter. As a result we forecast the company-wide operating profit margin to be around a percentage point higher for the full year. Resulting non-GAAP diluted earnings per share could also be up in double digits for the fiscal fourth quarter and full year.

We maintain our $97 price estimate for VMware’s stock, which is around 20% lower than the current market price. VMware’s stock has risen by over 50% in the last year following successive quarters of robust growth and a strong future outlook.

See Full Analysis For VMware Here

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