VMware Q4: Broad Based Momentum Likely To Continue Into Fiscal 2020

VMware (NYSE:VMW) reported its fourth quarter and full year earnings on Thursday, February 28. The company beat consensus expectations on revenue and EPS. VMware’s Q4 growth points towards broad-based momentum in its underlying business, which is expected to continue into fiscal 2020 on the back of continued cloud adoption.

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Key takeaways from VMware’s Q4 are below:

• Total revenue grew to $2.59 billion (+16% y-o-y) with license revenue growing to $1.23 billion (+21% y-o-y)
• VMware on AWS appeared to be showing sustained momentum, with the company reporting its first ever deal at $20 million. Hybrid cloud subscriptions and SaaS revenue grew 35% y-o-y and accounted for nearly 10% of the total revenue versus 8% in the same period last year.
• The company also saw momentum in CloudHealth, closed its Heptio deal (for Kubernetes) and announced additional support for Microsoft Azure.
• VMware also appears to be gaining traction across telecom deployments with growth in its relationships with Vodafone, AT&T, Ericsson and T-Systems.
• The deal momentum was also evident on a broader level with 23 deals of over $10 million in Q4 vs 16 deals in the prior year period.

In light of the company’s view on IT spending and nature of how VMware views its users consuming its solutions, the management guided for:

• Fiscal 2020 revenue of $10.03 billion (+11.8% y-o-y)
• Fiscal 2020 license revenue of $4.275 billion (+12.8% y-o-y)
• Q1 2020 revenue of $2.245 billion (+11.8% y-o-y)
• Q1 2020 license revenue of $865 billion (+11.7% y-o-y)

Notably, the company’s management highlighted that while VMware has relationships with over 4000 cloud players, its relationship with AWS is unique. While VMware’s alignment with the leader in public cloud (AWS) is likely to be a tailwind for VMware’s hybrid revenues, we will continue to monitor the company’s progress in extending its reach with other public cloud vendors as well.

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