What To Expect From VMware Through FY’19 After A Strong First Half
VMware (NYSE:VMW) announced its Q2 fiscal 2019 earnings on Thursday, August 23, reporting a 13% increase in net revenues to $2.2 billion. License revenues rose 15% on a y-o-y basis to $900 million for the quarter, while services revenues were up 10% to nearly $1.3 billion. The virtualization and cloud computing provider has demonstrated strength in its business in recent years, with fast-growing segments such as network virtualization, hybrid cloud, hyper converged software and vSAN driving growth. The growth spree has continued in the first half of the current year, with the trend likely to continue in the coming quarters. As a result of a strong quarter, the company has revised its guidance for its full year results. Accordingly, we have created an interactive full year earnings forecast dashboard for VMware, where we have summarized our expectations for VMware’s segment revenues, margins and resulting net income and EPS. If you disagree with our forecasts, you can change expected revenue, operating margin and income margin figures for VMware to gauge how it will impact expected EPS.
Key Growth Trends
The company has reported sustained top line growth in recent years owing to strength in key domains such as hybrid cloud, network virtualization, end-user computing. Hybrid cloud subscription and SaaS comprised 10% of total revenue in the most recent quarter, with a healthy double digit growth rate in revenues. The company’s vSAN license bookings, including both standalone vSAN software and vSAN software components of the VxRail, were up 70% on a y-o-y basis with over 60% of vSAN customers using the product for business critical applications. Similarly, end-user computing license bookings were also up in mid-teens with Workspace ONE primarily driving growth.
In terms of margins, non-GAAP operating margin stood at 33.8%, roughly flat over the comparable prior year period. This trend is expected to continue through the end of the year with margins expected to remain flat over FY’18. We forecast license revenues to increase 15% to over $3.7 billion for the year, while services revenues are expected to increase at around 10-11% to $5.1 billion. In recent quarters, VMware’s operating profit margin (non-GAAP) has been at record high levels of around 33%. This trend is expected to continue through FY’19 due to a limited increase in SG&A expenses. As a result, net income and EPS should increase by around 25-30% on a y-o-y basis to $2.5 billion and $6.14, respectively.
See Full Analysis For VMware Here
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
Like our charts? Explore example interactive dashboards and create your own