VMware (NYSE: VMW) released their fiscal Q4 2020 earnings, posting results that beat top-line expectations but missed on the bottom line.
Sales for the cloud infrastructure and virtualization firm were reported as $3.07 billion for the quarter which came in above consensus estimates of $2.96 billion.
Revenues were up 11% over the same period last year thanks at least in part to a string of acquisitions over the past year. Most recently, the company acquired Pivotal Software for $2.7 billion which closed at the end of the quarter and Carbon Black for $2.1 billion which closed in the previous quarter.
Given the acquisitions, VMware for the first time this quarter broke out a new revenue line for sales of “hybrid cloud subscription and SaaS”.
| % of Q4 2020 Revenue | Year over Year Growth | |
| License | 33.7% | 0.7% |
| Hybrid Cloud Subscription and SaaS | 18.1% | 51.5% |
| Total Services: | 48.2% | 8.6% |
| Software Maintenance | 40.2% | 9% |
| Professional Services | 8% | 6.9% |
| Total Revenue | 100% | 11.4% |
On the bottom line, the company posted earnings of $2.05 per share which missed analyst expectations of $2.14 per share.
VMware is a stock that we’ve had on our radar since late last year when it was one of three stocks screened for free cash flow yield, revenue growth, return on equity in the software sector. While VMware wasn’t our top pick based on a recent decline in margins, there is a lot to like about a company growing revenue consistently in and around double digits.
VMware has also seen success with its strategy of partnering with all of the major cloud vendors including IBM (NYSE: IBM), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT) to build enterprise grade solutions on top of cloud computing platforms.
Furthermore, the company’s new focus on building incorporating Kubernetes into their cloud platforms is a step to continue to compete in the ever shifting cloud landscape and a pathway to potential future growth for the company.
VMware stock did not have the best of runs over 2019 as it was up and down throughout the year ending up 10% over the course of the year in a market which grew over 30%. The stock was off to a better start for 2020 performing comparatively well until the market turned this week on ongoing concerns around the economic impacts of the coronavirus. Thus far on the year VMware stock is down nearly 5% and during today’s trading prior to releasing earnings the company’s stock fell an additional 5%.
After releasing earnings, VMware stock was trading down 2.5% in after hours trading as of the time of publishing.
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