VMware’s VMW second-quarter fiscal 2024 non-GAAP earnings of $1.83 per share beat the Zacks Consensus Estimate of $1.66 and grew 11.6% year over year.
Revenues of $3.41 billion surpassed the consensus mark by 0.58% and improved 2.2% on a year-over-year basis.
Top-Line Details
Region-wise, U.S. revenues (47.6% of revenues) decreased 1.6% year over year to $1.62 billion. International revenues (52.4%) grew 5.9% from the year-ago quarter to $1.79 billion.
Services revenues (44.9% of revenues) declined 4.2% year over year to $1.53 billion. Software Maintenance revenues (79.9% of Services revenues) fell 5.9% to $1.22 billion. Professional Services revenues (20.1% of Services revenues) came in at $308 million, up 3.4% year over year.
VMware, Inc. Price, Consensus and EPS Surprise
VMware, Inc. price-consensus-eps-surprise-chart | VMware, Inc. Quote
Total License and Subscription & SaaS revenues (55.1% of revenues) improved 8% from the year-ago quarter to $1.88 billion.
License revenues (33% of License and Subscription & SaaS revenues) declined 22.2% year over year to $619 million.
Subscription & SaaS revenues (67% of segment revenues) increased 33.5% year over year to $1.26 billion.
At the end of the fiscal second quarter, ARR for Subscription & SaaS was $5.31 billion, up 36% year over year.
Operating Details
Research & development expenses, as a percentage of revenues, increased 50 basis points (bps) year over year to 20.1%.
Moreover, sales & marketing expenses, as a percentage of revenues, decreased 20 bps on a year-over-year basis to 28.9%.
However, general & administrative expenses, as a percentage of revenues, decreased 60 bps to 6%.
Non-GAAP operating margin contracted 30 bps on a year-over-year basis to 28.7% in the reported quarter.
Balance Sheet & Cash Flow
As of Aug 4, 2023, VMware’s cash & cash equivalents were $6.8 billion compared with $6.5 billion as of May 5, 2023.
Total debt (including the current portion of long-term debt) was $10.45 billion as of Aug 4, 2023 compared with $10.4 billion as of May 5.
Operating cash flow was $444 million in the fiscal second quarter compared with $1.75 billion reported in the previous quarter.
Free cash flow was $350 million in the reported quarter compared with $1.65 billion in the previous quarter.
Revenue Performance Obligation increased 6% year over year to $12.88 billion.
Zacks Rank & Stocks to Consider
VMware carries a Zacks Rank #3 (Hold).
Shares of VMware have gained 37.5% year to date compared with the Zacks Computer & Technology sector’s growth of 40.7%.
Salesforce CRM, Freshwork FRSH, and Splunk SPLK are some better-ranked stocks that investors can consider in the broader sector. While both Salesforce and Freshwork carry a Zacks Rank #2 (Buy) each, Splunk sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Salesforce shares have gained 67% year to date. The long-term earnings growth rate is pegged at 21.47%.
Freshwork shares have gained 48.7% year to date. The long-term earnings growth rate is pegged at 30%.
Splunk shares have gained 40.9% year to date. The long-term earnings growth rate is pegged at 24.71%.
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