VMware Reports Fiscal Year 2024 Second Quarter Results

VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the second quarter of fiscal year 2024:

Quarterly Review

• Revenue for the second quarter was $3.41 billion, an increase of 2% from the second quarter of fiscal 2023.
• Subscription and SaaS revenue for the second quarter was $1.26 billion, an increase of 34% year-over-year.
• Subscription and SaaS revenue constituted 37% of total revenue for the quarter.
• Subscription and SaaS ARR exiting the second quarter was $5.31 billion, an increase of 36% year-over-year.
• GAAP net income for the second quarter was $477 million, or $1.10 per diluted share, up 34% per diluted share compared to $347 million, or $0.82 per diluted share, for the second quarter of fiscal 2023. Non-GAAP net income for the second quarter was $792 million, or $1.83 per diluted share, up 11% per diluted share compared to $697 million, or $1.64 per diluted share, for the second quarter of fiscal 2023.¹
• GAAP operating income for the second quarter was $547 million, a decrease of 3% from the second quarter of fiscal 2023. Non-GAAP operating income for the second quarter was $977 million, up 1% compared to the second quarter of fiscal 2023.
• Operating cash flow for the second quarter was $444 million. Free cash flow for the second quarter was $350 million.
• RPO for the second quarter totaled $12.88 billion, up 6% year-over-year.²

“We delivered solid Q2 results. Our customers continue to invest in our Multi-Cloud offerings as they modernize their infrastructure to run enterprise, cloud-native, and new AI workloads,” said Raghu Raghuram, CEO, VMware. “At the recent VMware Explore Las Vegas, we unveiled new offerings including the next evolution of VMware Cloud, NSX+, vSAN Max, and an enhanced Tanzu Application Platform, all designed to help customers innovate faster and reduce total cost of ownership. We also introduced VMware Private AI Foundation with NVIDIA to accelerate AI-enabled applications in the enterprise.”

“We are pleased with our Q2 performance, which reflects the continued strength of our Subscription and SaaS portfolio and execution of our business model transition,” said Karen Dykstra, executive vice president and CFO, VMware. “Subscription and SaaS ARR reached $5.31 billion to exit the quarter and grew 36% year-over-year, highlighting the momentum of our multi-cloud offerings.”

Business Highlights & Strategic Announcements

• Last week at VMware Explore 2023 Las Vegas, the company introduced several new offerings, including:
  • The next evolution of VMware Cloud, empowering customers to invest in digital transformation and growth while helping them innovate faster, increase operational efficiency, improve threat defenses, and recover from ransomware attacks faster.
  • An expanded Tanzu portfolio to help customers develop, operate, and optimize apps on any cloud with an enhanced Tanzu Application Platform, new Tanzu Intelligence Services with artificial intelligence (AI)/machine learning (ML) capabilities for deeper insights, and updates to Tanzu Hub.
  • The new VMware Edge Cloud Orchestrator (formerly VMware SASE Orchestrator) which will provide unified management for VMware SASE and Edge Compute Stack—an industry-first offering to bridge the gap between edge networking and edge compute.
  • New Digital Experience (DEX) Insights based on greatly expanded data and ML algorithms that enhance DEX remediation capabilities. These updates broaden access to data, help strengthen VMware Insights, and allow for remediation of more issues.
• Also at VMware Explore Las Vegas, VMware unveiled its perspective on generative AI in the enterprise with the introduction of Private AI, which serves as an architectural approach that balances the business gains from AI with the practical privacy and compliance needs of an organization.
  • VMware Private AI Foundation with NVIDIA is a new integrated offering that will enable enterprises to customize models and run generative AI applications, including intelligent chatbots, assistants, search, and summarization. The fully integrated solution will feature generative AI software and accelerated computing from NVIDIA, built on VMware Cloud Foundation optimized for AI.
• VMware released VMware Cloud Foundation 5.0. This major release delivered increased scalability, security and several key enhancements that address requirements for cloud scale infrastructure as a service (IaaS), simplified deployment of on-premises clouds, and enhanced protection against cyberattacks.
• VMware Cloud on AWS continued to expand globally, with new regions opening in Melbourne, Australia and Zurich, Switzerland. This brings the total number of global regions for VMware Cloud on AWS to 25.
• VMware joined forces with AMD, Samsung, and members of the RISC-V Keystone community to simplify the development and operations of confidential computing applications, which have the potential to secure workloads no matter where they run including in Multi-Cloud and edge settings. The companies will collaborate on and contribute to the open-source Certifier Framework for Confidential Computing project.
• VMware received recognition from analyst firm Omdia³ citing that VMware’s take on SASE builds on two key strengths: its broad set of technologies and products and its strong presence in SD-WAN.
• VMware released its 2023 Environmental, Social and Governance (ESG) report, sharing its Smart Impact strategy and progress made over the last year toward the company’s 2030 Agenda. VMware also received recognition for its ongoing ESG and diversity, equity, and inclusion (DEI) leadership including:
  • Awarded 100% score on the Disability Equality Index® and recognized as a DEI Best Place to Work for Disability Inclusion.
  • Ranked in the top 5% on USA Today’s inaugural America's Climate Leaders List, which ranks companies based on their emissions reductions year-over-year.
  • Recognized by Newsweek as one of America’s Greatest Workplaces, receiving a 5/5 workplace score.

About VMware

VMware is a leading provider of multi-cloud services for all apps, enabling digital innovation with enterprise control. As a trusted foundation to accelerate innovation, VMware software gives businesses the flexibility and choice they need to build the future. Headquartered in Palo Alto, California, VMware is committed to building a better future through the company’s 2030 Agenda. For more information, please visit vmware.com/company.

Definitive Agreement to be Acquired by Broadcom

VMware has entered into a definitive agreement to be acquired by Broadcom Inc. (“Broadcom”). The transaction, which is expected to be completed on October 30, 2023, is subject to the receipt of regulatory approvals and other customary closing conditions. Please refer to the May 26, 2022 announcement entitled, “Broadcom to Acquire VMware for Approximately $61 Billion in Cash and Stock,” available on news.vmware.com.

Additional Information

VMware’s website is located at vmware.com, and its investor relations website is located at ir.vmware.com. VMware’s goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about VMware, all of which is made available free of charge. The additional information includes: materials that VMware files with the SEC; announcements of investor conferences, speeches and events at which its executives talk about its products, services and competitive strategies; webcasts of its earnings calls, investor conferences and events (archives of which are also available for a limited time); additional information on its financial metrics, including reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures; press releases on quarterly earnings, product and service announcements, legal developments and international news; corporate governance information; ESG (environmental, social and governance) information; other news, blogs and announcements that VMware may post from time to time that investors may find useful or interesting; and opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.

VMware, Explore, NSX+, vSAN Max, and Tanzu are registered trademarks or trademarks of VMware, Inc. or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective organizations.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”

Annual Recurring Revenue (“ARR”)

ARR is an operating measure VMware uses to assess the strength of the Company’s subscription and SaaS offerings. ARR is a performance metric and should be viewed independently of, and not as a substitute for or combined with, revenue and unearned revenue. ARR represents the annualized value of VMware’s committed customer subscription and SaaS contracts as of the end of the reporting period, assuming any contract that expires during the next 12 months is renewed on its existing terms and any applicable termination for convenience rights are not exercised, except that, for consumption-based subscription and SaaS offerings, ARR represents the annualized quarterly revenue based on revenue recognized for the current reporting period.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding the momentum of, customer investment in and expected benefits to customers, partners and stockholders of VMware’s strategy, offerings, collaborations and partnerships; and the proposed acquisition of VMware by Broadcom, related timing of its consummation and benefits to customers of combined VMware and Broadcom solutions. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (1) the satisfaction of the conditions precedent to consummation of the pending acquisition, and the ability to consummate the pending acquisition, on a timely basis or at all; (2) business disruption following the announcement of the pending acquisition, including disruption of current plans and operations; (3) the effects of the pending acquisition, the spin-off of VMware from Dell and changes in VMware’s and Dell’s commercial relationships and go-to-market strategy on VMware’s ability to (a) enter into, maintain and extend strategically effective partnerships, collaborations and alliances, (b) maintain and establish new relationships with customers, partners and suppliers, and (c) maintain operating results and VMware’s business generally; (4) difficulties in retaining and hiring key personnel and employees, including due to the pending acquisition; (5) the ability to implement plans, forecasts and other expectations with respect to the business after the completion of the pending acquisition and realize synergies; (6) the ability of VMware to transition its business model and adapt its offerings, business operations and go-to-market activities to changes in how customers consume information technology resources, such as through subscription and SaaS offerings and its subscription and SaaS portfolio; (7) changes to VMware’s and Dell’s respective financial conditions and strategic directions, including potential effects of the pending acquisition of VMware by Broadcom, that could adversely impact the VMware-Dell commercial relationship and collaborations; (8) the continued risk of on-going and new litigation and regulatory actions, including the outcome of any legal proceedings related to the pending acquisition; (9) adverse changes in general economic or market conditions; (10) delays or reductions in consumer, government and information technology spending, including due to the announced acquisition; (11) competitive factors, such as pricing pressures, industry consolidation, entry of new competitors into the industries in which VMware competes, as well as new product and marketing initiatives by VMware’s competitors; (12) rapid technological changes in the virtualization software, cloud, end user, edge security and mobile computing and telecom industries; (13) the uncertainty of VMware’s customers’ acceptance of and ability to transition to emerging technologies, including, for example, AI and ML, and new offerings and computing strategies in the industries in which VMware competes; (14) VMware’s ability to protect its proprietary technology; (15) changes to product and services development timelines; (16) risks associated with cyber-attacks, information security and data privacy; (17) disruptions resulting from key management changes; (18) risks associated with international sales, such as fluctuating currency exchange rates and increased trade barriers; (19) changes in VMware’s financial condition; and (20) other impacts to VMware’s business, including those related to industry, market, economic, political, regulatory and global health conditions. These forward-looking statements are made as of the date of this press release, are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware’s most recent reports on Form 10-K and Form 10-Q and current reports on Form 8- K that VMware may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.