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CA Technologies’ Services Segment Remains Stable

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Feb. 23 2018, Updated 7:30 a.m. ET

Services segment performance

CA Technologies’ (CA) Services segment is showing stable growth momentum. The segment’s revenue in fiscal 3Q18 grew 11% YoY (year-over-year) to $80 million, fueled by the professional services revenue generated from the acquisitions of Automic and Veracode. However, on a CC (constant currency) basis, it grew 9%.

In the graph above, you can see the revenue growth of CA’s Services segment in the last five quarters. During that period, it grew at a CAGR (compound annual growth rate) of 2.7%. You can also see that its revenue growth remained stable every quarter.

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In fiscal 3Q18, the operating margin of the Services segment was 3% compared to -4% in fiscal 3Q17. The expansion in its margin was mainly attributable to a decline in personnel-related costs due to severance actions in fiscal 3Q18. Better margins from services related to the Automic and Veracode acquisitions also supported the segment’s margin growth.

Factors driving growth

CA continues to benefit from its strong international market presence. In fiscal 3Q18, its international market witnessed 13% YoY revenue growth. The newly acquired Veracode saw growth, particularly outside the United States, driven by its easy-to-use products.

An improving economic market scenario around the globe may boost IT (information technology) spending globally. CA’s Services segment, which is involved in consulting, implementation, application management services, education, and support services to both commercial and government clients, could gain from a healthy IT environment.

These driving factors could help CA Technologies gain competitive strength against other IT players such as VMware (VMW) and Oracle (ORCL).

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