VMware Sales Rise To $3.2B Helped By Surging SaaS Revenue
Broadcom CEO Hock Tan said at the May announcement of the $61 billion takeover that he wants more of VMware’s revenue to come through subscription. VMware, which has also been aiming for higher subscription revenue rates, delivered 20 percent growth in subscription revenue growth, and 24 percent growth to its annual recurring revenue.
VMware CEO Raghu Raghuram said the company’s sales met expectations this past quarter, rising one-percent, aided by double-digit subscription revenue growth as the company’s potential takeover by chipmaker Broadcom marches forward.
“This past quarter we demonstrated that our innovation engine is flourishing, as we unveiled many new offerings across our portfolio, including VMware vSphere 8, VMware vSAN 8 and VMware Aria,” Raghuram said in a statement Tuesday. “We remain committed to and engaged in helping customers transform their businesses and unlock the full potential of multi-cloud.”
Sales for its third quarter of fiscal year 2023 came in at $3.21 billion, up from $3.18 billion a year ago. Net income for the quarter meanwhile was down 42 percent to $231 million from a year ago when it came in at $398 million.
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Broadcom CEO Hock Tan said at the May announcement of the $61 billion takeover that he wants more of VMware’s revenue to come through subscription. VMware, which has also been aiming for higher subscription revenue rates, delivered 20 percent growth in subscription revenue growth, and 24 percent growth to its annual recurring revenue.
All told, subscription revenue now accounts for 31 percent of the Palo Alto, Calif.-based company’s total third quarter sales.
“SaaS ARR growth of 24 percent reflects increased adoption of our multi-cloud product portfolio and recently introduced customer programs,” said Zane Rowe, executive vice president and CFO, VMware, in a statement. “By continuing to meet the evolving needs of our customers, we increased our mix of subscription and SaaS revenue to 31 percent of our total revenue this quarter.”
VMware has not hosted a public call to discuss earnings and take questions from analysts since Broadcom announced its intentions to buy the company on May 26. CRN reached out to VMware asking why it now forgoes the practice but did not immediately hear back.
VMware shareholders approved the merger on Nov. 4. The deal is now in the hands of regulators in the U.S. and in Europe.
One of the top customer concerns around the merger is how Broadcom may change pricing, said Gartner analyst Andrew Lerner. VMware CEO Raghu Raghuram spoke with CRN in October telling VMware partners to renew their customers now if they are afraid of Broadcom raising prices.
“For customers that are worried that Broadcom will come in and raise prices post-close, there’s plenty of time. There are customers who have said, I want to come in and do an early engagement with VMware, do an early renewal, and we are doing that all day long,” he said. “For the partners, you have to be aware of that. If customers express a high degree of uncertainty and say, ‘What is VMware going to do?’ Introduce certainty (by offering early renewal).”
VMware was forced to pay $8 million by the SEC in September for misleading investors for two years by carrying forward sales from one quarter to the future quarter in order to help meet revenue targets. In fiscal year 2020, VMware would have missed its earnings estimates in three quarters, the SEC said, had it not shifted sales figures from one quarter to another.