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VMware (VMW) Q4 Earnings Beat Estimates, Revenues Rise Y/Y

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VMware’s VMW fourth-quarter fiscal 2022 non-GAAP earnings of $2.02 per share beat the Zacks Consensus Estimate by 2.5% but declined 8.6% year over year.

Revenues of $3.53 billion surpassed the consensus mark by 0.3% and improved 3.5% on a year-over-year basis.

Top-Line Details

Region-wise, U.S. revenues (46.6% of revenues) increased 2.2% year over year to $1.65 billion. International revenues (53.4%) grew 12% from the year-ago quarter to $1.89 billion.

Services revenues (46.1% of revenues) rose 3.5% year over year to $1.63 billion. Software Maintenance revenues (82.7% of Services revenues) climbed 3% to $1.35 billion. Professional Services revenues (17.3% of Services revenues) were $282 million, up 6% year over year.

VMware, Inc. Price, Consensus and EPS Surprise

VMware, Inc. Price, Consensus and EPS Surprise
VMware, Inc. Price, Consensus and EPS Surprise

VMware, Inc. price-consensus-eps-surprise-chart | VMware, Inc. Quote

Total License, and Subscription & SaaS revenues (53.9% of revenues) improved 10.6% from the year-ago quarter to $1.90 billion.

License revenues (54.4% of License, and Subscription & SaaS revenues) increased 2.1% year over year to $1.04 billion.

Subscription & SaaS revenues (45.6% of segment revenues) increased 22.8% year over year to $868 million.

Subscription & SaaS revenues were 25% of revenues in the reported quarter.

Operating Details

Research & development (R&D) expenses as a percentage of revenues increased 10 basis points (bps) year over year to 19.2%.

Sales & marketing (S&M) expenses as a percentage of revenues increased 90 bps on a year-over-year basis to 27.7%.

General & administrative (G&A) expenses as a percentage of revenues increased 30 bps to 5.9%.

Non-GAAP operating margin contracted 220 bps on a year-over-year basis to 32.2%.

Balance Sheet & Cash Flow

As of Jan 28, 2022, VMware’s cash & cash equivalents were $3.63 billion compared with $12.5 billion as of Oct 29, 2021.

Total debt (including the current portion of long-term debt) was $12.67 as of Jan 28, 2022 compared with $10.67 billion as of Oct 29, 2021.

Operating cash flow was $1.14 billion in fourth-quarter 2022 compared with $1.09 billion reported in the previous quarter.

Free cash flow was $1.01 billion in the reported quarter compared with $984 million reported in the previous quarter.

Revenue Performance Obligation increased 6% year over year to $11.996 billion.

Guidance

For first-quarter fiscal 2023, VMware expects revenues of roughly $3.185 billion, suggesting more than 6.5% year-over-year growth.

Subscription & SaaS and License revenues are expected to be $1.555 billion, indicating more than 12% growth year over year.

Subscription & SaaS revenues are expected to increase 23% year over year to $910 million.

Non-GAAP operating margin is anticipated to be 27%. Moreover, non-GAAP earnings are expected to be $1.56 per share for first-quarter fiscal 2023.

For fiscal 2023, VMware expects revenues of $13.75 billion, suggesting 7% year-over-year growth.

Subscription & SaaS and License revenues are expected to be $7.02 billion, indicating nearly 11% growth year over year.

Subscription & SaaS revenues are expected to increase 26% year over year to $4.040 billion.

Non-GAAP operating margin is anticipated to be 28%. Non-GAAP earnings are expected to be $6.97 per share for fiscal 2023.

Cash flow from operations, capital expenditure and free cash flow are expected to be $4.20 billion, $450 million and $3.75 billion, respectively.

Zacks Rank & Stocks to Consider

VMware has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are HP HPQ, Asana ASAN and Box BOX. All the three stocks carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HP shares have declined 8.3% year to date compared with the Zacks Computer & Technology sector’s decline of 17%.

HPQ is set to report first-quarter fiscal 2022 results on Feb 28.

Asana’s shares have returned 57% in the past year.

Asana is scheduled to report fourth-quarter 2022 results on Mar 9.

Box’s shares are down 3.6% on a year-to-date basis.

BOX is scheduled to report fourth-quarter fiscal 2022 results on Mar 2.


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