It has been about a month since the last earnings report for VMware . Shares have lost about 2.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is VMware due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
VMware Q3 Earnings & Revenues Beat Estimates
VMware’s third-quarter fiscal 2022 non-GAAP earnings of $1.72 per share beat the Zacks Consensus Estimate by 11.7% and increased 3.6% on a year-over-year basis.
Revenues of $3.188 billion surpassed the consensus mark by 2.1% and increased 11.3% on a year-over-year basis.
Top-Line Details
Region-wise, U.S. revenues (49.6% of revenues) increased 7.9% year over year to $1.582 billion. International revenues (50.4%) rose 14.9% from the year-ago quarter’s levels to $1.606 billion.
Services revenues (52% of revenues) rose 7% year over year to $1.658 billion. Software Maintenance revenues (81.7% of Services revenues) moved up 5.6% to $1.354 billion. Professional Services revenues (18.3% of Services revenues) were $304 million, up 13.9% year over year.
Total License and Subscription & SaaS revenues (48% of revenues) increased 16.3% from the year-ago quarter’s levels to $1.53 billion.
License revenues (46.4% of License and Subscription & SaaS revenues) increased 11.1% year over year to $710 million.
Subscription & SaaS revenues (53.6% of segment revenues) increased 21% year over year to $820 million, driven by strong growth in VCPP, Tanzu, end-user computing, Carbon Black and VMware Cloud on AWS.
At the end of the third quarter, ARR for Subscription & SaaS was $3.31 billion, up 25% from the year-ago quarter’s figures.
VMware continued to witness momentum in the Tanzu platform across key verticals, including financial services.
Operating Details
Research & development (R&D) expenses, as a percentage of revenues, increased 10 basis points (bps) year over year to 20.1%.
Sales & marketing (S&M) expenses, as a percentage of revenues, increased 70 bps on a year-over-year basis to 28.7%.
General & administrative (G&A) expenses, as a percentage of revenues, increased 30 bps to 6.3%.
Non-GAAP operating margin contracted 170 bps on a year-over-year basis to 29.3% in the reported quarter.
Balance Sheet & Cash Flow
As of Oct 29, 2021, VMware’s cash & cash equivalents were $12.5 billion compared with $5.86 billion as of Jul 30, 2021.
Total debt (including the current portion of long-term debt) was $10.67 billion as of Oct 29, 2021.
Operating cash flow was $1.09 billion compared with $864 million reported in the previous quarter.
Free cash flow was $984 million compared with $777 million reported in the previous quarter.
Revenue Performance Obligation increased 9% year over year to $11.12 billion.
Guidance
For fourth-quarter fiscal 2022, VMware expects revenues of nearly $3.51 billion. The projection suggests 7% year-over-year growth. Subscription & SaaS and License revenues are expected to be $1.875 billion, indicating nearly 9% growth year over year.
Non-GAAP operating margin is anticipated to be 30.4%, while non-GAAP earnings are expected to be $1.96 per share for the fiscal fourth quarter.
For fiscal 2022, VMware expects revenues of nearly $12.83 billion, suggesting 9% year-over-year growth.
Subscription & SaaS and License revenues are now expected to be $6.305 billion, indicating nearly 12% growth year over year. The company had projected Subscription & SaaS and License revenues to be $6.27 billion, indicating nearly 11.5% growth year over year.
Non-GAAP operating margin is now anticipated to be 30%, while non-GAAP earnings are expected to be $7.19 per share for fiscal 2022. The company had projected non-GAAP operating margin to be 29% and non-GAAP earnings to be $6.90 per share.
Cash flow from operations, capital expenditures and free cash flow is expected to be $4.10 billion, $380 million and $3.72 billion, respectively.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 12.5% due to these changes.
VGM Scores
At this time, VMware has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise VMware has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is VMware (VMW) Down 2.8% Since Last Earnings Report?
It has been about a month since the last earnings report for VMware . Shares have lost about 2.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is VMware due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
VMware Q3 Earnings & Revenues Beat Estimates
VMware’s third-quarter fiscal 2022 non-GAAP earnings of $1.72 per share beat the Zacks Consensus Estimate by 11.7% and increased 3.6% on a year-over-year basis.
Revenues of $3.188 billion surpassed the consensus mark by 2.1% and increased 11.3% on a year-over-year basis.
Top-Line Details
Region-wise, U.S. revenues (49.6% of revenues) increased 7.9% year over year to $1.582 billion. International revenues (50.4%) rose 14.9% from the year-ago quarter’s levels to $1.606 billion.
Services revenues (52% of revenues) rose 7% year over year to $1.658 billion. Software Maintenance revenues (81.7% of Services revenues) moved up 5.6% to $1.354 billion. Professional Services revenues (18.3% of Services revenues) were $304 million, up 13.9% year over year.
Total License and Subscription & SaaS revenues (48% of revenues) increased 16.3% from the year-ago quarter’s levels to $1.53 billion.
License revenues (46.4% of License and Subscription & SaaS revenues) increased 11.1% year over year to $710 million.
Subscription & SaaS revenues (53.6% of segment revenues) increased 21% year over year to $820 million, driven by strong growth in VCPP, Tanzu, end-user computing, Carbon Black and VMware Cloud on AWS.
At the end of the third quarter, ARR for Subscription & SaaS was $3.31 billion, up 25% from the year-ago quarter’s figures.
VMware continued to witness momentum in the Tanzu platform across key verticals, including financial services.
Operating Details
Research & development (R&D) expenses, as a percentage of revenues, increased 10 basis points (bps) year over year to 20.1%.
Sales & marketing (S&M) expenses, as a percentage of revenues, increased 70 bps on a year-over-year basis to 28.7%.
General & administrative (G&A) expenses, as a percentage of revenues, increased 30 bps to 6.3%.
Non-GAAP operating margin contracted 170 bps on a year-over-year basis to 29.3% in the reported quarter.
Balance Sheet & Cash Flow
As of Oct 29, 2021, VMware’s cash & cash equivalents were $12.5 billion compared with $5.86 billion as of Jul 30, 2021.
Total debt (including the current portion of long-term debt) was $10.67 billion as of Oct 29, 2021.
Operating cash flow was $1.09 billion compared with $864 million reported in the previous quarter.
Free cash flow was $984 million compared with $777 million reported in the previous quarter.
Revenue Performance Obligation increased 9% year over year to $11.12 billion.
Guidance
For fourth-quarter fiscal 2022, VMware expects revenues of nearly $3.51 billion. The projection suggests 7% year-over-year growth. Subscription & SaaS and License revenues are expected to be $1.875 billion, indicating nearly 9% growth year over year.
Non-GAAP operating margin is anticipated to be 30.4%, while non-GAAP earnings are expected to be $1.96 per share for the fiscal fourth quarter.
For fiscal 2022, VMware expects revenues of nearly $12.83 billion, suggesting 9% year-over-year growth.
Subscription & SaaS and License revenues are now expected to be $6.305 billion, indicating nearly 12% growth year over year. The company had projected Subscription & SaaS and License revenues to be $6.27 billion, indicating nearly 11.5% growth year over year.
Non-GAAP operating margin is now anticipated to be 30%, while non-GAAP earnings are expected to be $7.19 per share for fiscal 2022. The company had projected non-GAAP operating margin to be 29% and non-GAAP earnings to be $6.90 per share.
Cash flow from operations, capital expenditures and free cash flow is expected to be $4.10 billion, $380 million and $3.72 billion, respectively.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 12.5% due to these changes.
VGM Scores
At this time, VMware has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise VMware has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.