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VMware (VMW) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

VMware VMW is set to release second-quarter fiscal 2020 results on Aug 22.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 4.3%.

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

For second-quarter fiscal 2020, the company anticipates revenues to be $2.425 billion, up 11.5% year over year.

The Zacks Consensus Estimate for revenues currently stands at $2.43 billion, indicating 11.6% growth from the figure reported in the year-ago quarter.

VMware projects non-GAAP earnings of $1.55 per share. The consensus mark for earnings is in line with management’s guidance and has remained steady over the past 30 days.
 

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 Consider

VMware is benefiting from continued enterprise deal wins, which are expected to drive growth in the to-be-reported quarter. The company closed 16 deals worth more than $10 million in the last reported quarter.

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

VMware and AWS have expanded their partnership that now enables the latter to resell VMware Cloud on the platform. In the to-be-reported quarter, NHS Digital, the national information and technology partner for the U.K. health and care system, adopted VMware Cloud on AWS and made it available across the NHS.

VMware’s NSX solution has also gained significant adoption owing 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.

Acquisitions are also playing a key role to improve VMware’s performance. In the first quarter, the company acquired Bitnami, a leader in application packaging solutions providing the largest catalog of click-to-deploy applications and development stacks for major cloud and Kubernetes environments. The company also completed the acquisition of AetherPal.

During the to-be-reported quarter, VMware announced its plan to acquire Avi Networks, a well-known provider of multi-cloud application delivery services.

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.

Stocks With a Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Nutanix NTNX has an Earnings ESP of +4.80% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Smartsheet SMAR has an Earnings ESP of +11.11% and a Zacks Rank #3.

 

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