Virtualization solutions provider VMware (NYSE:VMW) reported its first-quarter results after the market closed on June 1. The top and bottom lines expanded, driven in part by the rapid growth of businesses like NSX and vSAN. Here's what investors need to know about VMware's first-quarter results.

VMware: The raw numbers

Metric

Q1 2018

Q1 2016

Year-Over-Year Change

Revenue

$1.74 billion

$1.59 billion

9.4%

GAAP net income

$232 million

$161 million

44.1%

GAAP EPS

$0.56

$0.38

47.4%

Non-GAAP EPS

$0.99

$0.86

15.1%

VMware revised its fiscal calendar on Jan. 1. Data source: VMware.

What happened with VMware this quarter?

Revenue and profit jumped on solid license and services growth.

  • License revenue grew 6.6% year over year to $610 million.
  • Services revenue grew 10.7% year over year to $1.13 billion.
  • License revenue plus the sequential change in unearned license revenue rose 7% year over year.
  • VMware sold its infrastructure-as-a-service business, vCloud Air, to OVH Group.
  • Hybrid Cloud and software-as-a-service revenue grew more than 30% year over year, surpassing 9% of total revenue.
  • VMware closed 6 deals valued at over $10 million.
  • NSX customer count totaled more than 2,600, with NSX license bookings growing by more than 50% year over year.
  • vSAN customer count totaled more than 8,000, with vSAN license bookings growing by more than 150% year over year.
  • 90% of VMware's top 10 enterprise deals included NSX, while 60% included vSAN.

VMware provided guidance for the second quarter and the full year:

  • For the second quarter: Revenue between $1.81 billion and $1.89 billion and non-GAAP EPS between $1.11 and $1.14.
  • For the full year: Revenue of $7.61 billion, non-GAAP EPS of $4.91, and free cash flow of $2.44 billion.
A VMware sign.

Image source: VMware.

What management had to say

VMware CEO Pat Gelsinger discussed the success of the company's partner ecosystem in driving its first-quarter results:

We are very pleased with our strong Q1 results. Our strategy is resonating across the regions and driving increased customer interest for our SDDC and cloud portfolio as well as our digital workspace offerings. We also drove momentum across our partner ecosystem, featuring announcements with Dell, EMC, Google, Microsoft and Oracle providing customers more complete solutions across clouds, applications and devices.

CFO Zane Rowe added: "Q1 was a great start to the year. We're pleased with our performance and remain committed to providing value to our customers as they build out their private, public and hybrid cloud strategies."

Looking forward

VMware continues to generate high-single-digit revenue growth and double-digit earnings growth. The company unloaded its IaaS business during the first quarter, likely seeing no way to compete with major players like AWS and Azure. Hybrid cloud and SaaS remain a small part of VMware's overall business, but it's growing at more than triple the rate of the company as a whole. The NSX and vSAN businesses are growing even faster. Going forward, these smaller businesses should continue to drive growth for the company.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends VMware. The Motley Fool has a disclosure policy.