VMware Declines After Forecast Falls Short of Estimates

(Bloomberg) -- VMware Inc. shares declined after the company gave forecasts for sales and profit in the current quarter that fell short of analysts’ projections.

Earnings, excluding some items, will be $1.56 a share on revenue of $3.19 billion in the three months ending in April, the company said Thursday in a statement. Analysts, on average, projected profit of $1.65 on sales of $3.23 billion, according to data compiled by Bloomberg.

VMware rose to prominence by providing tools that help corporate tech leaders gain efficiencies from their on-premises data centers. However, like other software vendors, the company is pivoting to a subscription model as cloud infrastructure becomes increasingly more common. That transition has become more critical as businesses increasingly look to move some operations to the internet, while still running others locally on servers, a system commonly referred to as “hybrid cloud.”  

VMware effectively operates as the glue that can help companies run those on-premises applications more easily in the cloud. But the company has struggled to grow its software-as-a-service offering at the pace Wall Street wants.

The company said subscription and software-as-a-service revenue jumped 23% to $868 million in the fiscal fourth quarter while total sales increased 7% to $3.53 billion. Profit, excluding certain items, was $2.02 a share in the period ended Jan. 28. Both topped analysts’ estimates.

“As we look to our next fiscal year, we remain focused on accelerating growth of our subscription & SaaS portfolio and scaling our multicloud platform enabling us to deliver long-term revenue and profit growth,” Chief Financial Officer Zane Row said in the statement.

The results reported Thursday reflected the software vendor’s first full quarter as an independent company since spinning off from Dell Technologies Inc. last year. 

VMware’s stock declined about 6% in extended trading after closing at $118.12 in New York. The shares has fallen about 30% from a high of $167.06 in October.

©2022 Bloomberg L.P.