VMware surpasses Q3 estimates with 11% sales increase

VMware released its third-quarter financial results Tuesday, exceeding market expectations, delivering 25% growth in subscriptions and SaaS ARR. While moving to a subscription and SaaS-based model, the company saw stronger-than-expected licensing revenue with deals in excess of $10 million.

The company’s third quarter non-GAAP net income was $725 million, or $1.72 per diluted share. Revenue for the third quarter was $3.19 billion, an increase of 11% from the third quarter of fiscal 2021.

Analysts expected earnings of $1.54 per share on revenue of $3.12 billion.

“We are pleased with our continued strong performance in the third quarter. This quarter, as we unveiled many new offerings at VMworld, we showed how we are helping customers transform their businesses today and that our innovation engine is thriving,” said CEO Raghu Raghuram in a statement. “Our mission is to be the trusted software foundation to accelerate our customers’ innovation without compromise. We are committed to helping organizations unlock the full potential of multi-cloud.”



The combination of subscriptions and SaaS and license revenue in the third quarter was $1.53 billion, up 16% from the third quarter of fiscal 2021.

Subscription and SaaS revenue for the third quarter was $820 million, up 21% year over year. Subscriptions and SaaS annual recurring revenue (ARR) for the third quarter was $3.31 billion, up 25% year-over-year.

Subscriptions and SaaS accounted for 26% of total revenue, up from 24.7% in the second quarter.

While SaaS and subscription revenues fell short of expectations, as did licensing revenues, VMware executives said during a phone call on Tuesday that the company was on the right track. Raghuram described the three categories of SaaS and subscription products: First, the “pure offering” includes products built expressly for a SaaS model. “We expect this to reach scale and have a much greater impact on growth,” Raghuram said.

Subsequently, “customer choice” products can be delivered via a license or subscription. The third category includes products that are primarily licensed and that VMware will gradually ship next year as subscription and SaaS products.

“The combination of these three will bring the product portfolio even more towards subscriptions and SaaS,” said Raghuram.

VMware’s third quarter non-GAAP operating income was $935 million, up 5% from a year earlier.

Operating cash flow for the third quarter was $1.09 billion. Free cash flow for the third quarter was $984 million.

For the fourth quarter, VMware expects revenue of $3.51 billion.

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