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

Aniruddha Ganguly

VMware VMW is set to release first-quarter fiscal 2020 results on May 30.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 5.9%.

In the last reported quarter, VMware benefited from strong top-line growth that was primarily driven by robust performance from NSX, VeloCloud and vSAN product lines.

For first-quarter fiscal 2020, management anticipates revenues to be $2.25 billion, up 11.8% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for revenues currently stands at $2.24 billion, indicating 11.8% growth from the figure reported in the year-ago quarter.

Non-GAAP earnings are anticipated to be $1.27 per share. The consensus mark for earnings has remained steady over the past 30 days and suggests growth of 0.8% from the figure reported in the year-ago quarter.

VMware, Inc. Price and EPS Surprise

VMware, Inc. Price and EPS Surprise

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


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

Factors to Watch

VMware is benefiting from continued enterprise deal wins that are expected to drive growth in the to-be-reported quarter. The company closed 23 deals in the last reported quarter that were worth more than $10 million.

During the quarter, Abu Dhabi Smart Solutions and Services Authority (ADSSSA) announced a collaboration with VMware that will enable the former to use a number of VMware solutions.

The company’s dominance in software-defined data center (SDDC) space along with expanding customer base in cloud, driven by partnerships with the likes of IBM, Amazon Web Services (AWS) and Alibaba, is a positive.

VMware’s NSX solution has also gained significant adoption due to strong demand for automation and cloud-native workloads for SD-WAN. Further, strong End-User Computing (EUC) license bookings, driven by Workspace ONE, are a major growth driver.

Notably, VMware exited fourth-quarter fiscal 2018 with $147 million of license backlog, which was $3 million higher on a sequential basis.

Expanding Portfolio

During the to-be-reported quarter, the company launched an updated VMware vRealize cloud management platform, targeting the hybrid cloud computing space. The company also announced updates to VMware Cloud Foundation, VMware vCloud Director and CloudHealth.

The company also announced increased access to Cloud Foundation-based services through the new VMware Cloud in AWS regions in Canada, Paris and Singapore, and for VMware Cloud Verified partners globally.

The company also launched a new VMware Service-defined Firewall in the quarter.

Microsoft Partners Dell & VMware

Microsoft MSFT extended a partnership with Dell Technologies DELL that now involves VMware.  Notably, Dell has a majority stake in VMware.

The deal will enable VMware customers to move their technology systems to Microsoft Azure cloud-computing platform. The partnership will help Microsoft fight AWS in the rapidly growing hybrid cloud computing market.

VMware and Microsoft also agreed to integrate their networking software.

However, since the deal was signed late in the quarter, it will have no material impact on VMware’s to-be-reported quarterly results.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

VMware has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stock with a Favorable Combination

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

Science Applications International SAIC has an Earnings ESP of +8.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.


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