What happened

Software specialist VMware (NYSE:VMW) underperformed a weak market last month as the stock fell 13% compared to a 7% decline in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump removed just a portion of shareholders' recent returns, as the stock remains higher by 25% so far in 2019.

The inside of a server room.

Image source: Getty Images.

So what

Investors weren't thrilled with VMware's first-quarter earnings report, even though the announcement contained plenty of good news for the business. Sales rose 13%, the company said on May 30, and non-GAAP profitability held steady at 30% of sales. "Q1 was a good start to fiscal 2020 with strength across our... portfolio," CEO Pat Gelsinger said in a press release.

Now what

VMware affirmed all the key elements of its outlook and still expects revenue to pass $10 billion, up from $9 billion in fiscal 2019. Non-GAAP profitability should land at 33% of sales, which implies stronger financial results over the next few quarters. But the stock's long-term success will depend on VMware's ability to continue winning new customers through the inevitable ups and downs in the data center industry.