VMware Earnings: 5 Important Things To Know

Here’s what channel partners and investors should watch for during VMware’s third quarter financial earnings report on Tuesday.

VMware Q3 Earnings Preview

VMware will report its fiscal 2021 third quarter financial earnings on Tuesday as the virtualization superstar looks to continue sales momentum during the COVID-19 pandemic.

For its fiscal 2021 second quarter VMware reported total sales of $2.88 billion, up nearly 10 percent year over year, as the company has yet to feel any significant negative effects from the economic uncertainty stemming from the coronavirus pandemic. The Palo Alto, Calif.-based company is scheduled to report its fiscal 2021 third quarter earnings on Nov. 24 at 4:30 pm (EST).

Here are five important areas of interest that investors, customers and channel partners should watch for when VMware announces its financial results on Tuesday.

VMware Revenue Expected To Hit $2.81B

Zacks Consensus Estimate expects VMware to report total revenue of $2.81 billion for its fiscal third quarter, which would be more than a 14 percent sales increase compared to the $2.46 billion the company reported for the same quarter one year earlier.

Zacks projects quarterly earnings at $1.43 per share, which would be a decline of 4 percent compared to the same quarter one year before. VMware has beat Zacks Consensus Estimate in three of the past four quarters.

Sales of VMware’s innovation engine has been robust during the COVID-19 pandemic while sales from newly acquired companies like Pivotal Software, Carbon Black and SaltStack likely helped boost revenue in its third quarter.

Will Subscription And SaaS Sales Reach 25 Percent?

VMware has successfully been striving to make subscription and SaaS sales a large portion of its overall revenue. For its second fiscal quarter, VMware generated $631 million in SaaS and subscription sales, up a whopping 44 percent year over year, with SaaS and subscription sales now representing 22 percent of VMware’s total revenue.

Last month, VMware hired former Cognizant top executive Mike Hayes (pictured) as its new chief digital transformation officer to accelerate the company’s SaaS push and drive more sales.

“We expect our [SaaS] momentum to continue,” said VMware CEO Pat Gelsinger during the company’s second fiscal quarter earnings report in August. “The new areas like security and Pivotal, as we bring those into the company and we start having success in making those part of our bigger sales and bigger deals, we expect that’s going to be an area of acceleration and those are subscription and SaaS, [as well as] areas like EUC and VDI offerings.”

It will be interesting to see just how much VMware’s SaaS and subscription sales grew during third fiscal quarter and if it will account for 25 percent of total revenue.

VMware Cloud on AWS Sales Soaring

Over the past few years, VMware has doubled down on forming new or enhancing technology partnerships with cloud providers such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud and Oracle. VMware’s relationship with AWS, however, is arguably its most significant cloud partnership with high hopes to expand its cloud strategy for years to come.

VMware Cloud on AWS, which is a joint service combining VMware Cloud Foundation and AWS with optimized access to AWS services, has been growing at a triple-digit clip in 2020. This summer, VMware acquired Datrium, which previously partnered with VMware to offer end-to-end disaster recovery for workloads running VMware Cloud on AWS.

It is likely that VMware Cloud on AWS sales continued to grow at a triple-digit rate during VMware’s third fiscal quarter, showing just how important AWS has become to VMware’s hybrid cloud future.

Will VMware Provide Tanzu Sales Figures?

In 2020, VMware has unleashed a slew of updates for Tanzu support across Azure VMware Solution, Oracle Cloud VMware Solution and VMware Cloud on AWS. The company also launched new product releases for vSphere, vSAN, VxRail and VMware Cloud Foundation injected with VMware Tanzu.

VMware is seeking to dominate the Kubernetes market with its VMware Tanzu services designed to deliver enterprise-grade Kubernetes at scale. VMware’s growing portfolio includes Tanzu Application Service, its centralized management platform Tanzu Mission Control, as well as Tanzu Kubernetes Grid that enables customers to run a multi-cluster Kubernetes environment on any infrastructure with built-in security.

With VMware executives saying Tanzu Kubernetes Grid, Tanzu Mission Control and vSphere 7.0 are all starting to gain market momentum, it will be interesting to see if VMware discloses specific Tanuz sales financial figures on Tuesday.

Dell Technologies Earnings

VMware is majority owned by the $92 billion infrastructure Dell Technologies. VMware and Dell have a strong strategic go-to-market partnership and continue to drive integrations in many different market segments, from SD-WAN and hyperconverged infrastructure to 5G.

Dell will report its fiscal 2021 third quarter earnings on Tuesday at 5:30 p.m. EST just one hour after VMware. According to Zacks Consensus Estimate, Dell is on pace to generate $21.93 billion in total revenue during its third fiscal quarter, representing a roughly 4 percent sales decline year over year. During Dell’s fiscal 2021 second quarter, which ended July 31, the Round Rock, Texas-based company generated $23.73 billion in revenue, representing a sales decrease of 3 percent year over year.

VMware partners and investors should keep a keen eye on Dell’s results, especially since Dell is looking to eventually spin-off its 81 percent stake in VMware to Dell Technologies and VMware shareholders.