What Enabled VMware’s Double-Digit Growth in Fiscal Q1 2019

VMware’s segment revenues grew in the double digits

On May 31, VMware (VMW) released its fiscal Q1 2019 results, which exceeded analysts’ expectations. Its revenue rose ~13.8% to ~$2 billion. Its service and licensing revenues, which continued to rise, contributed to this growth.

In fiscal Q1 2019, VMware’s licensing revenue rose 20.7% to $774 million, which was more than analysts’ estimate of $727.3 million. The company’s service revenue, which rose 9.8% to $1.2 billion, was in line with analysts’ estimates. Its service and licensing revenues accounted for 38.5% and 61.5% of its total revenue, respectively.

What Enabled VMware’s Double-Digit Growth in Fiscal Q1 2019

As the above presentation shows, hybrid cloud subscriptions and software-as-a-service accounted for over 10% of VMware’s revenue for the first time in fiscal Q1 2019.

In the company’s recent earnings release, Zane Rowe, executive vice president and CFO of VMware, said that VMware’s fiscal Q1 2019 results “reflect the strength of our broad and increasingly integrated product and services portfolio.” He added, “The strong start to fiscal ’19 has us well positioned to execute on our strategy.”

VMware’s dynamic strategy

In the past two years, VMware has strategically expanded its presence from core virtualization offerings into a product portfolio that includes public cloud, private cloud, and networking and security. Strategic partnerships with leading cloud players such as Amazon (AMZN) and IBM (IBM) have also benefited the company’s ever-expanding product portfolio. Along with Amazon’s AWS (Amazon Web Services), VMware offers a cohesive hybrid cloud offering, VMware cloud on AWS.

In sync with its strategy and intended transition, last month, VMware announced its vision for an end-to-end networking layout that’s predominantly focused on security and virtualization.