Is The Maintenance And Professional Services Segment 50%, 60%, Or 70% Of VMware’s Top Line?

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As per Trefis estimations VMware’s (NYSE: VMW) Maintenance and Professional services business is expected to contribute $5.8 billion to VMware’s 2020 revenues, making up 57.5% of VMware’s $10.1 billion in expected revenues for 2020 (ended January 2020). The Maintenance and Professional services segment contribution is nearly 1.3x more than from Software License revenue. The Maintenance and Professional services segment will provide $745.8 million, that is 35.6% of $2.1 billion in total revenue the company is expected to add between 2017 to 2020. This Maintenance and Professional services revenue growth has been key to VMware’s 176% price appreciation since the start of FY 2017, further helped by better margins. We discuss VMware’s valuation analysis in full, separately.

Below we discuss VMware’s business model, followed by sections that review past performance and 2020 expectations for VMware’s revenue drivers and competitive comparisons of its revenue with Microsoft and Cisco.

You can look at our interactive dashboard analysis ~ VMware’s Revenues: How Does VMware Make Money? ~ for more details.

 

VMware’s Business Model

What Need Does It Serve?

VMware makes money from the sale of software and services for data center management, hybrid cloud computing, remote access and desktop virtualization.

Has 2 Operating Segments

  • Software License: Segment revenue is derived from the sale of licenses and subscriptions for the company’s products.
  • Maintenance and Professional Services: Segment revenue is derived from software maintenance and support, professional services, and an allocated portion of subscription revenue.

What Are The Alternatives?

VMware competes with Cisco, Microsoft, and Nutanix among others. For how its revenue compares to its peers please visit our interactive dashboard – VMware‘s Revenue.

 

Revenue growth expected in 2020 is primarily from growth in the Software License segment. (In the image and numbers below: 2017 data includes the 1 month gap for year change that was provided.)

  • Total Revenue has grown from $8 billion in 2017 to $9 billion in 2019 driven primarily by the Software License segment. Trefis estimates further growth of about 12.2% and Revenue to reach $10.1 billion in 2020 (ended January 2020).
  • Software License Division revenue has grown from $2.9 billion in 2017 to $3.8 billion in 2019. Revenue is expected to grow further to $4.3 billion in 2020 (ended January 2020), the growth is likely to be driven by the company’s entry in the security market as well as its move toward cloud-based offerings.
  • Maintenance and Professional Services Division revenue has grown from $5 billion in 2017 to $5.2 billion in 2019. Revenue is expected to grow further to $5.8 billion in 2020 (ended January 2020), the growth is likely to be driven by increasing adoption of the company’s product offerings.

 

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