VMware, Inc. reported its fiscal year 2023 second quarter results. The company saw a 4% increase in total revenue compared to a year ago. During the quarter, VMware also achieved non-GAAP operating income of $1.2 billion, representing an increase of 28% year-over-year. Other financial highlights include a cash flow from operations of $1.3 billion, up 37% compared to a year ago.
Revenue
Revenue for the second quarter of 2023 was $4.13 billion, an increase of 11% from the second quarter of 2022. License and Services revenue was $3.02 billion, an increase of 14% from the second quarter of 2022; License revenue grew 11%, driven by increases in product license and subscription & SaaS transactions, and Services revenue increased 19%. Maintenance and Professional Services revenue was $883 million, an increase of 6% from the second quarter of 2022; product maintenance entered a period with a larger percentage of weighted average prior year ARR coverage due to higher contracts signed in April 2021, which led to 7% growth in maintenance revenue and 5% growth in Professional Services revenue.
Total Revenue generated by regions included:
- Americas: $2.16 billion with a 16 percent YoY increase in Q2 2023
- Europe, Middle East and Africa (EMEA): $1.11 billion experiencing 10 percent YoY growth
- Asia Pacific (APJ): $867 million exhibiting 1 percent YoY decrease
Operating Margin
VMware reported GAAP operating income of $857 million for the second quarter of fiscal year 2023, an increase of 11% compared to the same period last year. Non-GAAP operating income was $1.2 billion for the quarter, an increase of 18% from the second quarter of fiscal year 2022. In addition, the company’s GAAP operating margin was 19% and non-GAAP operating margin was 26%. Comparatively, VMwares’ GAAP operating margin in the same period last year was 18% and it’s non-GAAP operating margin was 26%.
The company’s higher year-over-year margins are largely attributable to increased software sales due to its launches in digital workspaces, cloud infrastructure, distributed networks and automation during this period. In addition, VMware attributed its improved profitability to revenue growth outperforming its estimated costs in product development and go-to-market investments. VMware also realized benefits from cost reductions associated with change initiatives across both cost categories during this period.
Net Income
VMware reported second quarter net income of $558 million, or $0.93 per fully diluted share, on total revenues of $2.66 billion for fiscal year 2023. The net income was up 21% from the previous year’s second quarter net income of $460 million and up 12% from the previous quarter’s net income of $500 million. Net income is calculated by deducting total operating expenses and taxes from total revenue. It is the main measure used to gauge a company’s profitability over a certain period.
Total revenues increased 15% yearly due to strong growth in core product line ups and customer demand worldwide, primarily from Asia-Pacific. Gross margin increased by 450 basis points to 83%, primarily driven by a shift towards higher-margin services offerings and improved operational efficiencies across all product lines. Operating expenses for the quarter were well managed at 23% of total revenues, representing a 40 basis point increase from the prior quarter as management invested in new hires and marketing activities to drive larger opportunities in the future periods.
Operating Highlights
VMware reported strong second quarter 2021 results with total revenue of $3.18 billion, an increase of 13.8% from the same period a year ago. VMware’s operating income was $769 million and its non-GAAP operating income was $982 million. VMware had $9.2 billion in cash and investments as of the second quarter and $10.2 billion in total debt.
Let’s go over the operating highlights in more detail.
Subscription and SaaS Revenue
During the second quarter of fiscal year 2023, subscription and SaaS revenue totaled $2.1 billion, representing 30% total operating income. This represented a 38% y-o-y increase over last year. In addition, growth in our products across the commercial and enterprise businesses enabled us to close the quarter with subscription and SaaS ARR of $7.2 billion compared to $5.3 billion one year ago, a 37% increase y-o-y. We also closed 24 new commercial contracts over $200K in ACV, with four larger than $1 million in ACV.
Attainment of milestones from our strategic partnerships with Microsoft Azure, AWS and Google Cloud drove total platform coverage to more than 85%, up from around 80% at the end of FY2022 Q2. Recent wins with AWS EC2 on VMware Extended Capacity Software combined with enhancements for hybrid cloud workloads on vRealize Automation 8 further demonstrate momentum for our cloud strategy as we continue to strengthen our foundation as the only digital foundation & cloud management platform that can power any applications across any cloud infrastructure & environment. It will enable customers to unlock significant IT modernization cost savings while managing their hybrid and multi-cloud environments.
Cloud Services Revenue
Cloud services revenue for the second quarter of fiscal year 2023 was $1.9 billion and grew 37% year-over-year. This growth demonstrates VMware’s commitment to and successful adoption of our cloud solutions as customers look to drive greater operating efficiencies, scalability and increased agility.
VMware Cloud Provider Platform revenues grew 70%, and our Software Defined Data Center (SDDC) stack solution deployments were up 20%. We also added 57 new cloud provider partners in the second quarter, bringing the total number of active providers to 172.
Additionally, VMware Cloud on AWS revenue grew significantly in the quarter, with a 125% annualized revenue run rate increase and a 3x YoY increase in deal size as buyers showed increasing confidence in self-managed workloads on AWS environments. As a result, total MSPs consuming cloud services on VMware Cloud on AWS more than doubled YoY, while consumption of other VMware Cloud Services within partner datacenters grew exponentially.
Operating Expenses
For the quarter ended March 31, 2023, VMware reported total operating expenses of $1.2 billion, a year-over-year decrease of 17%. The decrease in total operating expenses was driven primarily by lower payroll and personnel costs, which decreased 19% year-over-year to $440 million.
Other expense categories included research and development, which decreased 1% to $421 million; sales and marketing, which increased 6% to $258 million; and general and administrative, which decreased 25% to $162 million.
VMware further realized cost savings by implementing automation initiatives in its manufacturing process.
Business Highlights
VMware Inc. reported its financial results for the second quarter of the fiscal year 2023. These results highlight the company’s continued operational and financial strength despite the pandemic. It reported record revenue, non-GAAP operating margin, and outstanding cash flow from operations. The company also made strategic investments in its multi-cloud business, leading to strong performance across its portfolio.
Let’s take a closer look at these business highlights.
Product and Service Offerings
VMware, Inc. reported financial results for the second quarter of its fiscal year 2023 ended March 31, 2021. The company reported revenue of $2.54 billion, an 8% increase year over year (YoY).
Within VMware’s product and service offerings, VMware Cloud Foundation and other cloud-native platform services saw strong YoY growth of 48%. Likewise, SaaS corporate applications saw a 29% YoY increase; network and security services, general technology management products and storage software all saw more modest upticks of 5%, 4% and 1% respectively.
The company also reported that for the second quarter of fiscal 2023 it had 1 million commercial customers globally with an average contract size estimated to be around $41 thousand per customer. This showcases the multiple iterations and value proposition associated through various product lines, signifying strong customer loyalty.
In addition to the above offerings from VMware, the Company continues to innovate on their vRealize operations offering which is expected to see further adoption in large enterprise customers increasingly relying on cloud-native architectures for integrating their applications and infrastructure.
Strategic Partnerships
VMware established and strengthened strategic relationships with key technology partners during the third quarter of fiscal year 2023. VMware launched a joint solution offering with IBM, establishing a multi-cloud foundation to unify and simplify IT operations. This solution provides customers a simplified user experience to access Kubernetes applications on hybrid cloud environments.
Additionally, VMware initiated collaborations with Microsoft Azure and Google Cloud, to enable customers to extend VMware’s virtualization platform technologies into the public cloud environment. These collaborations will provide customers greater flexibility in selecting their IT environments for scalability and cost efficiency.
VMware also announced expanded support of Intel’s Optane persistent memory to its vSphere platform. The new capability enables virtualized workloads in the private data center or public cloud environments to take advantage of Optane’s enhanced speed and performance characteristics. This will enable companies to optimize data center operations for optimal cost/performance characteristics leveraging superior technologies from leading industry partners.
tags = VMware, 2023 Second Quarter Results, VMware, Inc, leading innovator in enterprise software, SaaS ARR, vmware q2 nov.condonzdnet 3.14b 3.1b 776m, Non-GAAP,
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