VMware sales jump to $3.2 billion aided by rising SaaS revenues

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O’Ryan Johnson

Broadcom CEO Hock Tan said in the May announcement of the $61 billion acquisition that he wants more of VMware’s revenue to come from subscription. VMware, which has also targeted higher subscription revenue rates, reported 20% growth in subscription revenue growth and 24% growth in its annual recurring revenue.

Raghu Raghuram, CEO of VMware, said the company’s sales met expectations in the recent quarter, rising 1%, aided by double-digit subscription revenue growth while the potential acquisition of the company by the chipmaker Broadcom advances.

“We demonstrated last quarter that our innovation engine is thriving as we introduced many new offerings across our portfolio, including VMware vSphere 8, VMware vSAN 8 and VMware Aria,” Raghuram said in a statement on Tuesday. “We remain engaged and committed to helping customers transform their businesses and unlock the full potential of multi-cloud.”

Sales for the third quarter of fiscal 2023 were $3.21 billion, up from $3.18 billion a year ago. Meanwhile, net income for the quarter fell 42% to $231 million from a year ago when it was $398 million.

[RELATED STORY: Broadcom’s Golden Parachute For Top 5 VMware Execs May Total $169.4M]

Broadcom CEO Hock Tan said in the May announcement of the $61 billion acquisition that he wants more of VMware’s revenue to come from subscription. VMware, which has also targeted higher subscription revenue rates, reported 20% growth in subscription revenue growth and 24% growth in its annual recurring revenue.

All told, subscription revenue now accounts for 31 percent of the Palo Alto, California-based company’s total third-quarter sales.

“SaaS ARR growth of 24 percent reflects increased adoption of our portfolio of multi-cloud products and recently introduced customer programs,” said Zane Rowe, executive vice president and CFO at VMware, in a statement. “Continuing to meet the evolving needs of our customers, we grew our mix of subscription and SaaS revenue to 31% of our total revenue this quarter.”

VMware hasn’t hosted a public call to discuss earnings and answer analyst questions since Broadcom announced its intentions to buy the company on May 26. CRN reached out to VMware asking why they are now forgetting the practice but didn’t respond immediately.

VMware shareholders approved the merger on November 19. 4. The deal is now in the hands of regulators in the US and Europe.

A top customer concern about the merger is how Broadcom might change prices, said Gartner analyst Andrew Lerner. VMware CEO Raghu Raghuram spoke to CRN in October telling VMware partners to renew their customers now if they fear Broadcom hikes prices.

“For customers fearing Broadcom’s arrival and post-shutdown price hikes, there’s plenty of time. There are customers who have said, I want to come in and make an early commitment with VMware, do an early renewal, and we’re doing that all day long,” he said. “For partners, you need to be aware of that. If customers express a high degree of uncertainty and say, “What will VMware do?” Introduce certainty (by offering early renewal).”

VMware was forced to pay $8 million by the SEC in September for deceiving investors for two years by advancing sales from one quarter to the next quarter to help meet revenue goals. In fiscal 2020, VMware reportedly missed its earnings estimates in three quarters, the SEC said, had it not moved its sales figures from quarter to quarter.


    Learn more about O'Ryan Johnson

O’Ryan Johnson

O’Ryan Johnson is a veteran journalist. He covers the data center beat for CRN and hopes to hear from channel partners how he can improve his coverage and write the stories they want to read. He can be reached at ojohnson@thechannelcompany.com..


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