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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.
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.
Image: Bigstock
VMware (VMW) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
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.
VMware, Inc. Price, Consensus and EPS Surprise
VMware, Inc. price-consensus-eps-surprise-chart | VMware, Inc. Quote
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%.