A month has gone by since the last earnings report for VMware (
VMW Quick Quote VMW - Free Report) . Shares have added about 2.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is VMware due for a pullback? 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 drivers.
VMware Q1 Earnings Miss Estimates, Revenues Rise Y/Y
VMware’s first-quarter fiscal 2023 non-GAAP earnings of $1.28 per share missed the Zacks Consensus Estimate by 18.47% and declined 27.3% year over year.
Revenues of $3.09 billion lagged the consensus mark by 3.08% but improved 3.1% on a year-over-year basis. Suspension of business operations in Russia and foreign currency transactions negatively impacted the first quarter top and bottom lines. Top-Line Details
Region-wise, U.S. revenues (49.2% of revenues) increased 3.5% year over year to $1.52 billion. International revenues (50.8%) grew 2.7% from the year-ago quarter to $1.57 billion.
Services revenues (52.4% of revenues) rose 0.6% year over year to $1.62 billion. Software Maintenance revenues (81% of Services revenues) dipped 0.8% to $1.31 billion. Professional Services revenues (19% of Services revenues) were $307 million, up 7.3% year over year. Total License and Subscription & SaaS revenues (47.6% of revenues) increased 6.1% from the year-ago quarter to $1.47 billion. License revenues (38.9% of License and Subscription & SaaS revenues) decreased 11.5% year over year to $572 million due to the transition to subscription and SaaS. Subscription & SaaS revenues (68.6% of segment revenues) increased 21.3% year over year to $899 million. Operating Details
Research & development (R&D) expenses as a percentage of revenues increased 140 basis points (bps) year over year to 20.7%.
Sales & marketing (S&M) expenses as a percentage of revenues increased 210 bps on a year-over-year basis to 30.9%. General & administrative (G&A) expenses as a percentage of revenues increased 30 bps to 6.4%. Non-GAAP operating margin contracted 590 bps on a year-over-year basis to 25%. Balance Sheet & Cash Flow
As of Apr 29, 2022, VMware’s cash & cash equivalents were $3.72 billion compared with $3.63 billion as of Jan 28, 2022.
Total debt (including the current portion of long-term debt) was $11.93 billion as of Apr 29, 2022 compared with $12.67 billion as of Jan 29, 2022. Operating cash flow was $1.01 billion in first-quarter 2022 compared with $1.14 billion reported in the previous quarter. Free cash flow was $899 million in the reported quarter compared with $1.01 billion reported in the previous quarter. Revenue Performance Obligation increased 5% year over year to $11.56 billion. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -10.05% due to these changes.
At this time, VMware has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, VMware has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.