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VMware (VMW) to Report Q1 Earnings: What's in the Cards?

VMware VMW is set to release first-quarter fiscal 2019 results on May 31.

In the last reported quarter, VMware’s non-GAAP earnings of $1.68 per share beat the Zacks Consensus Estimate by a nickel and increased 17.5% from the year-ago quarter.

Revenues of $2.31 billion also topped the consensus mark of $2.26 billion and rose 13.6% on a year-over-year basis. Strong top-line growth was primarily driven by robust performance from NSX and vSAN product line.

For first-quarter fiscal 2019, revenues are expected to be $1.955 billion, up 10.1% year over year. Non-GAAP earnings are anticipated to be $1.14 per share.

The Zacks Consensus Estimate for revenues and earnings currently stands at $1.95 billion and $1.14, in line with management’s guidance.

Vmware, Inc. Price and EPS Surprise

Vmware, Inc. Price and EPS Surprise | Vmware, Inc. Quote


Let’s see how things are shaping up for this announcement.

Factors at Play

VMware has underperformed the industry on a year-to-date basis. The stock has returned 8.8% compared with the industry’s gain of 13.1%.



Nevertheless, we believe expanding product portfolio, partnerships with the likes of Amazon AMZN, International Business Machines IBM, Pivotal and Alphabet, along with continuing enterprise deal wins, will continue to drive growth in the to-be reported quarter.

Moreover, robust demand for NSX and vSAN product lines is likely to drive top-line growth. These factors will eventually help the stock rebound in the rest of fiscal 2019.

VMware has collaborated with Amazon Web Services (“AWS”) to offer an integrated hybrid cloud solution, functioning much like a software-defined data center (SDDC). Apart from the internal servers, this contract enables users to run VMware software (vSphere, Virtual SAN and NSX) on the Amazon cloud.

The company has also expanded VMware Cloud on AWS to Europe. The expansion will allow European users to access a broad range of innovative AWS services including compute, databases, analytics, Internet of Things (IoT), security, mobile, application services and more.

VMware also has a similar deal with IBM, which enables the company’s VSphere customers to initiate workloads on the IBM SoftLayer cloud infrastructure.

Moreover, during the quarter, VMware expanded its portfolio of cloud services that now include VMware Hybrid Cloud Extension Service for Private Cloud, Wavefront by VMware Service, Log Intelligence Service and Cost Insight Service.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

VMware has an Earnings ESP of 0.00% and a Zacks Rank #3. Consequently, the company is unlikely to deliver a positive surprise this quarter.

A Stock With Favorable Combination

Here is a stock you may also want to consider as our model shows that it has the right combination of elements to post an earnings beat.

On Assignment ASGN has an Earnings ESP of +0.24% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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