Virtualization software provider VMware (VMW) reported its first-quarter results after the market closed on May 30. The company kept revenue and adjusted earnings growing despite macroeconomic headwinds and a tough data center market, and it reiterated its guidance for the full year. Here's what investors need to know.

VMware results: The raw numbers


Q1 2020

Q1 2019

Year-Over-Year Change


$2.27 billion

$2.01 billion


GAAP net income

$505 million

$942 million


GAAP earnings per share




Non-GAAP earnings per share




Data source: VMware.

What happened with VMware this quarter?

  • VMware's GAAP net income included a $132 million unrealized gain on its investment in Pivotal Software. Net income in the first quarter of fiscal 2019 included a $781 million gain related to Pivotal Software.
  • License revenue was $869 million, up 12.3% year over year.
  • Services revenue was $1.40 billion, up 13.2% year over year.
  • Hybrid cloud subscription and software-as-a-service revenue accounted for greater than 12% of total revenue during the quarter, up from 10% of revenue in the fourth quarter of fiscal 2019.
  • NSX license bookings rose 40% year over year, and NSX was included in all of VMware's top 10 deals during the quarter.
  • vSAN license bookings were up 50% year over year, and vSAN was included in 8 of VMware's top 10 deals during the quarter. vSAN now has a customer count over 20,000.
  • Enterprise agreements accounted for 43% of total bookings, with 16 deals valued at over $10 million.
  • Developments during the quarter include the announcement of Azure VMware Solutions, which is sold and supported by Microsoft, the acquisition of Bitnami, an application packaging solutions provider, and the acquisition of digital workspace remote support company AetherPal.
Servers in a data center.

Image source: Getty Images.

What management had to say

During the earnings call, VMware CFO Zane Rowe commented on the impact of macroeconomic issues and the slowdown hitting some data center companies:

We're not immune to it. ... I think some of what you're seeing across the broader landscape is some volatility and obviously uncertainty tied to the macroeconomic environment, but beyond that we are comfortable with what we're seeing early and feel good about our forecast to the year.

CEO Pat Gelsinger discussed the company's opportunities related to the U.S. federal government's $10 billion JEDI contract:

And obviously, while we can't forecast the winners or losers in that and what protests may or may not occur part of it, we are getting our offering ready to be able to be a cloud provider to government and also point out that our installed base with the federal governments with Defense, with the various Military Intelligence community is very high. ... So we see this as a significant opportunity and one that is an extension of our VMware Cloud offering is quite critical to us.

Looking forward

VMware provided the following guidance for the second quarter of fiscal 2020:

  • Total revenue of $2.425 billion, up 11.5% year over year.
  • License revenue of $1 billion, up 11.1% year over year.
  • Non-GAAP earnings per share of $1.55, up from $1.54 in the prior-year period.

For the full year, VMware left its guidance unchanged:

  • Total revenue of $10.03 billion, up 11.8%.
  • License revenue of $4.275 billion, up 12.8%.
  • Non-GAAP earnings per share of $6.49, up from $6.33 in fiscal 2019.
  • Free cash flow of $3.63 billion.

A weak data center market is hitting some companies much harder than it's hitting VMware. VMware's numbers are holding up fine so far, although there's no guarantee that the pain won't eventually flow through to the company's results. For now, VMware is weathering the storm as it continues to grow revenue at a double-digit pace.