VMware’s second-quarter fiscal 2023 non-GAAP earnings of $1.64 per share beat the Zacks Consensus Estimate by 1.86%. However, the same declined 6% year over year.
Revenues of $3.34 billion beat the consensus mark by 0.78% and improved 6% on a year-over-year basis.
While the top line benefited from strong Subscription and SaaS revenue growth, rising operating expenses and contracting operating margin contributed to the decline in bottom-line growth.
Top-Line Details
Regionwise, U.S. revenues (49.4% of revenues) increased 7.1% year over year to $1.65 billion. International revenues (50.6%) grew 5.6% from the year-ago quarter’s level to $1.69 billion.
Services revenues (47.9% of revenues) declined 1.7% year over year to $1.60 billion. Software Maintenance revenues (81.3% of Services revenues) dipped 2.8% to $1.30 billion. Professional Services revenues (18.7% of Services revenues) were $298 million, up 3.5% year over year.
Total License and Subscription & SaaS revenues (52.1% of revenues) increased 14.9% from the year-ago quarter’s level to $1.74 billion.
License revenues (45.8% of License and Subscription & SaaS revenues) increased 7.9% year over year to $796 million.
Subscription & SaaS revenues (72.6% of segment revenues) increased 21.5% year over year to $943 million owing to the transition to subscription and SaaS.
Operating Details
Research & development (R&D) expenses as a percentage of revenues decreased 20 basis points (bps) year over year to 19.6%.
Sales & marketing (S&M) expenses as a percentage of revenues decreased 20 bps on a year-over-year basis to 29.1%.
General & administrative (G&A) expenses as a percentage of revenues increased 20 bps to 6.6%.
Non-GAAP operating margin contracted 50 bps on a year-over-year basis to 28.9%.
Balance Sheet & Cash Flow
As of Jul 29, 2022, VMware’s cash & cash equivalents were $3.24 billion compared with $3.72 billion as of Apr 29, 2022.
Total debt (including the current portion of long-term debt) was $11.18 billion as of Jul 29, 2022, compared with $11.93 billion as of Apr 29, 2022.
Operating cash flow was $397 million in second-quarter fiscal 2023 compared with $1.01 billion in first-quarter 2023.
Free cash flow was $284 million in the reported quarter compared with $899 million reported in the previous quarter.
Revenue Performance Obligation increased 8% year over year to $12.10 billion.
Guidance
VMware entered into a definitive agreement to be acquired by Broadcom (AVGO).
Broadcom is set to acquire VMware for approximately $61 billion in cash and stock. VMware will not provide any financial guidance for the third quarter of fiscal 2023 and the full fiscal.
Zacks Rank & Stocks to Consider
VMware has a Zacks Rank #3 (Hold).
VMW’s shares have risen 4.9% in the year-to-date period against the Zacks Computer - Softwareindustry’s and the Computer and Technology sector’s decline of 19.9% and 23%, respectively.
Here are some better-ranked stocks in the broader Computer and Technology Sector.
ASE Technology (ASX - Free Report) carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ASX’s shares have slumped 22.4% in the year-to-date period against the Zacks Electronics - Semiconductors industry’s decline of 21.8%.
Monolithic Power Systems (MPWR - Free Report) carries a Zacks Rank of 2, currently.
MPWR’s shares have risen 3.5% in the year-to-date period compared with the Zacks Semiconductor - Analog and Mixedindustry’s decline of 11.4%.
Arista Networks (ANET - Free Report) presently sports a Zacks Rank of 1.
ANET’s shares have dropped 12.9% in the year-to-date period compared with the Zacks Communication - Components industry’s decline of 12.7%.
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VMware’s second-quarter fiscal 2023 non-GAAP earnings of $1.64 per share beat the Zacks Consensus Estimate by 1.86%. However, the same declined 6% year over year.
Revenues of $3.34 billion beat the consensus mark by 0.78% and improved 6% on a year-over-year basis.
While the top line benefited from strong Subscription and SaaS revenue growth, rising operating expenses and contracting operating margin contributed to the decline in bottom-line growth.
Top-Line Details
Regionwise, U.S. revenues (49.4% of revenues) increased 7.1% year over year to $1.65 billion. International revenues (50.6%) grew 5.6% from the year-ago quarter’s level to $1.69 billion.
Services revenues (47.9% of revenues) declined 1.7% year over year to $1.60 billion. Software Maintenance revenues (81.3% of Services revenues) dipped 2.8% to $1.30 billion. Professional Services revenues (18.7% of Services revenues) were $298 million, up 3.5% year over year.
Total License and Subscription & SaaS revenues (52.1% of revenues) increased 14.9% from the year-ago quarter’s level to $1.74 billion.
License revenues (45.8% of License and Subscription & SaaS revenues) increased 7.9% year over year to $796 million.
Subscription & SaaS revenues (72.6% of segment revenues) increased 21.5% year over year to $943 million owing to the transition to subscription and SaaS.
Operating Details
Research & development (R&D) expenses as a percentage of revenues decreased 20 basis points (bps) year over year to 19.6%.
Sales & marketing (S&M) expenses as a percentage of revenues decreased 20 bps on a year-over-year basis to 29.1%.
General & administrative (G&A) expenses as a percentage of revenues increased 20 bps to 6.6%.
Non-GAAP operating margin contracted 50 bps on a year-over-year basis to 28.9%.
Balance Sheet & Cash Flow
As of Jul 29, 2022, VMware’s cash & cash equivalents were $3.24 billion compared with $3.72 billion as of Apr 29, 2022.
Total debt (including the current portion of long-term debt) was $11.18 billion as of Jul 29, 2022, compared with $11.93 billion as of Apr 29, 2022.
Operating cash flow was $397 million in second-quarter fiscal 2023 compared with $1.01 billion in first-quarter 2023.
Free cash flow was $284 million in the reported quarter compared with $899 million reported in the previous quarter.
Revenue Performance Obligation increased 8% year over year to $12.10 billion.
Guidance
VMware entered into a definitive agreement to be acquired by Broadcom (AVGO).
Broadcom is set to acquire VMware for approximately $61 billion in cash and stock. VMware will not provide any financial guidance for the third quarter of fiscal 2023 and the full fiscal.
Zacks Rank & Stocks to Consider
VMware has a Zacks Rank #3 (Hold).
VMW’s shares have risen 4.9% in the year-to-date period against the Zacks Computer - Softwareindustry’s and the Computer and Technology sector’s decline of 19.9% and 23%, respectively.
Here are some better-ranked stocks in the broader Computer and Technology Sector.
ASE Technology (ASX - Free Report) carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ASX’s shares have slumped 22.4% in the year-to-date period against the Zacks Electronics - Semiconductors industry’s decline of 21.8%.
Monolithic Power Systems (MPWR - Free Report) carries a Zacks Rank of 2, currently.
MPWR’s shares have risen 3.5% in the year-to-date period compared with the Zacks Semiconductor - Analog and Mixedindustry’s decline of 11.4%.
Arista Networks (ANET - Free Report) presently sports a Zacks Rank of 1.
ANET’s shares have dropped 12.9% in the year-to-date period compared with the Zacks Communication - Components industry’s decline of 12.7%.
Just Released: Zacks Top 10 Stocks for 2024
Hurry – you can still get in early on our 10 top tickers for 2024. Hand-picked by Zacks Director of Research, Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly TRIPLING the S&P 500’s +340.1%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2024. You can still be among the first to see these just-released stocks with enormous potential.
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