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Can VMware Achieve Its License Revenue Outlook in Fiscal Q2 2019?

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Fiscal Q2 2019 License revenue guidance

VMware (VMW), the leading virtual enterprise operator, anticipates fiscal Q2 2019 revenue for its License segment to expand 19.5% YoY (year-over-year) to $875 million. The segment, which contributes 39% to the company’s total revenue, generated double-digit growth in each quarter, driven by a strong demand for its licensing products.

In the above graph, you can see the revenue growth for the License segment for the last five quarters. During the period, revenue grew at a CAGR (compound annual growth rate) of 4.8%. In fiscal Q4 2018, the total revenue for the segment improved 20.7% YoY to $875 million.

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Strong bookings driving growth

VMware remains optimistic about its License segment revenue in the upcoming quarter, buoyed by strong bookings growth. The company finished fiscal Q1 2019 with $122 million in license backlog, which should help it achieve its License revenue outlook for the quarter.

Its License bookings were particularly driven by vSAN license bookings, which improved 70% YoY in Q1 2019 and may continue to generate solid bookings in Q2 2019 as well. VMware believes that better performance, scalability, and deeper integration with vSphere has led to the higher acceptance of vSAN across the industries. Most of the top ten deals struck by VMware in Q1 2019 came from vSAN product orders.

VMware’s partnership with Amazon (AMZN) AWS (Amazon Web Services) cloud service is also contributing to higher customer renewal rates. Both the renewal amount and the duration were on the higher side, thus helping License revenue growth.

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