Recently, VMware released its Q2 2020 results which showed strong subscription growth across its core businesses. The report puts VMware in a strong position going into the next quarter, with impressive results demonstrating its ability to adapt and sustain itself even in a difficult economic climate.
In this article, we will analyze and discuss the results of VMware’s Q2 2020 report and look at how the company is performing in terms of subscription growth.
Overview of VMware’s Q2 results
VMware (VMW) has reported its Q2 2020 results, showing a strong performance in software subscription revenue despite the ongoing impact from the Covid-19 pandemic. For Q2, total revenues came in at $ 2.68 billion, up 23% year-over-year. In addition, software license revenue increased 14% year-over-year to $ 1.32 billion and SaaS subscription revenues rose 74% year-over-year to $ 483 million.
Operating income grew 50% to $ 824 million and GAAP diluted earnings per share increased 76% over the same period last year, coming in at $ 2.34 per share. VMware’s management noted that its strategic direction remains firmly focused on delivering digital transformation solutions to customers, particularly software subscriptions and SaaS offerings, which continue to fuel the company’s growth trajectory.
In addition to continued focus on cloud technologies, VMware is investing in artificial intelligence (AI) capabilities across its product portfolio and investing more heavily into digital workplace initiatives such as virtual desktop infrastructure (VDI). Looking ahead into the remainder of 2020, VMware remains optimistic about their outlook. CEO Pat Gelsinger stated they are “confident that we will deliver our guidance for fiscal year 2020” when they announced their earnings results earlier this week.
VMware reports solid Q2 results with subscription
VMware’s second quarter results have shown that subscription growth is a major factor in the company’s success. This can be attributed to the increasing demand for customer subscription-based solutions, which offers several advantages for the company.
In this article, we will examine why subscription growth is fueling VMware’s success.
Overview of VMware’s subscription services
VMware, Inc. is a publicly listed software company that provides various cloud-computing services and solutions that help businesses in their digital transformation journey. Its portfolio includes products and services across cloud management, edge computing, virtualization, and network security. One of its most successful offerings is the VMware Cloud Services Platform. It provides developers an all-in-one secure edge compute platform to rapidly develop and deploy next-gen applications.
VMware reported strong second quarter results on the back of continued subscription growth. Subscription revenue was up 35% year-over-year with 11% year-over-year growth in total annualized recurring revenue (ARR). Of total ARR, 30 percent comes from multiyear/terminal contracts while the remaining 70 percent comes from renewal contracts.
Additionally, subscription services like CloudHealth by VMware and Validated Design bring new possibilities to VMware customers. They are designed to speed up service delivery workflows while unlocking agility around resource utilization in multi-cloud environments. The competitive advantages associated with the substantial investments made by VMware into subscription products should lead to higher customer satisfaction and promote a secure application environment for its end users. Developing an end user base dependent on such solutions means organizations can confidently depend on the solutions provided by VMware regardless of technological advancements in rival companies within their industry.
Furthermore, customers benefit from consistent support operations including proactive maintenance and troubleshooting assistance eliminating hardware performance issues due to lack of resources or outdated firmware drivers leading to less customer downtime related to hardware failure or malfunctioning software drivers.. As such, subscription growth continues to be important for both continued customer investment and organizational growth as a whole since it will completely redefine the future direction many businesses take over competitive markets across geography connected by internet access points.
Impact of subscription growth on VMware’s Q2 results
VMware, Inc’s second quarter fiscal 2020 results demonstrate the impact of the company’s ongoing transition to a cloud-centric, subscription-based business model. Subscription revenue grew 35% year-over-year and 77% of total revenue. This marks the eighth consecutive quarter that VMware has achieved growth in subscription revenue.
Total revenue for Q2 increased 8% year-over-year to $2.65 billion, with a large contribution from subscription bookings which grew 27%. Operating profit was up 15%, with operating income reaching $757 million.
The shift to cloud computing continues to drive migration and adoption of VMware’s virtualization solutions across multiple industries and markets. As a result, total license bookings for the period increased 5%. In addition, storage and networking solutions such as vSphere, vSAN and NSX showed solid traction this quarter with double digit license bookings growth of 13%. As a result, these product lines contributed 36% of total software related license bookings during Q2 2020.
Overall, this quarter marks 11 straight quarters of double-digit operating margin improvement enabled by strong cost control efforts combined with an expanding subscription base fueled by cloud adoption worldwide. Going forward into its next fiscal year, management believes subscription momentum will continue as enterprise customers adopt new technologies faster than ever before – driven by digital transformation initiatives at scale that require secure and agile IT infrastructure capabilities that VMware is well positioned to provide through its portfolio offerings.
Cloud Computing and Software-Defined Data Centers
VMware reports solid financial results in the second quarter of 2021, as subscriptions continue to fuel its success.
With the ever increasing adoption of cloud computing and software-defined data centers, VMware is well-positioned to capitalize on the opportunity.
In this article, we’ll look at how cloud computing and software-defined data centers are driving the growth of VMware, and why it’s so important for the company to continue to invest in these technologies.
Overview of cloud computing and software-defined data centers
Cloud computing and software-defined data centers have been gaining popularity as businesses look to reduce cost, increase capacity and agility. By eliminating the need for hardware upgrades, customers can get up and running quickly with cloud services from providers such as VMware and have access to the latest technology.
Cloud computing allows users to access vast amounts of computing resources on demand, providing flexibility and scalability for their business’ specific needs. On-premises data centers are no longer necessary as companies can leverage public cloud providers such as Amazon Web Services (AWS) or Microsoft Azure to host all or part of their servers. Furthermore, software-defined data center capabilities—such as server virtualization (VMs), storage, networking and infrastructure automation—can be readily available via the cloud.
Software-defined data centers also offer improved control over physical hardware components such as servers, storage systems, and networks. As a result of this control over both physical infrastructure components and application running on them software defined data centers offer higher scalability of IT resources. This includes greater flexibility in scaling availability based on workloads needs, which provides significant cost savings for organizations that can tailor deployments based on changing demands.
For instance, VMware recently reported solid Q2 financial results with 95% growth in subscriptions compared to 2019 numbers thanks largely in part by their resilient cloud offerings. This growth indicates an increased appetite for digital transformation via cloud computing solutions. It marks an important shift from traditional IT infrastructures towards a fully integrated software-defined data center approach.
Impact of cloud computing and software-defined data centers on VMware’s Q2 results
VMware reported solid Q2 results, largely driven by double-digit growth in subscription revenue. This can be attributed to the increased demand for cloud technologies and software-defined data center solutions.
Cloud computing enables organizations to store and access online applications, data, and services. It offers businesses superior scalability, cost savings compared to traditional infrastructure platforms, and faster deployment of digital services. Software-defined data centers (SDDCs) provide virtualization capabilities that enable IT teams to deliver automated and customized infrastructure services quickly and cost-effectively.
Both cloud computing and SDDCs have allowed businesses like VMware to offer customers increased flexibility in their IT investments, which has unlocked innovation opportunities for organizations worldwide. This trend is expected to keep up with the growing demands of modern day IT operations within an ever competitive environment.
VMware has achieved solid Q2 results due to its successful subscription growth. This growth has allowed them to maintain a strong customer base, generate high revenue, and continue to invest in their enterprise solutions.
In the coming quarters, VMware’s success lies in growing their subscription base and capitalizing on the new opportunities.
Let’s look after VMware’s strong Q2 results.
Summary of VMware’s Q2 results and outlook
VMware reported a strong second quarter for 2021, citing strong subscription growth and net revenue at $2.6 billion, up 4% year-over-year. The Palo Alto-based software provider also noted their deeply embedded customer base, with 91% of total license and subscription revenue coming from customers who have held subscriptions for over two years.
Also noteworthy were the 907,000 new customer subscriptions added in Q2 2021. VMware saw particular strength in Infrastructure-as-a-Service (IaaS) with a 148% YoY growth fueled by organizations wanting to rapidly spin up cloud workloads. Networking & Security’s rapid uptake in subscription was also impressive with 36% YoY growth as customers adopted advanced networking services such as SD-WAN offerings alongside their traditional networking frameworks.
As the pandemic steadily releases its grip on the global economy, VMware is looking forward confidently
to an influx of new opportunities in 2021 and beyond for technology modernization – both for public clouds and private / hybrid clouds – centered around networking & security as well as storage & compute solutions helped fuel a solid Q2 for VMware’s bottom line.