VMware tops earnings, revenue estimates as Broadcom deal faces increasing regulatory pressure

By Sam Boughedda

VMware (NYSE:VMW) shares edged higher premarket Friday after the company topped earnings and revenue estimates in its latest quarter.

Broadcom (NASDAQ:AVGO) plans to acquire VMware in a $61.2 billion deal, but it has prompted a wave of scrutiny in the U.S. and Europe regarding the possible anti-competitive effects. This has led to speculation that the deal may be in trouble.

Regardless, VMware reported earnings of $2.13 per share on Thursday after the close, $0.21 better than the analyst estimate of $1.92, while revenue for the quarter came in at $3.71B versus the consensus estimate of $3.62B.

VMware shares are up over 1% at the time of writing.

Revenue in the fourth quarter grew 5% year-over-year, with the combination of subscription and SaaS and license revenue being $2.03B, a rise of 7% from the previous year.

Subscription and SaaS revenue comprised 32% of VMware's total revenue for the quarter.

"We are very pleased with our fiscal year 2023 performance. These results reflect consistent customer appetite for our multi-cloud offerings and our ability to help companies with a cloud smart approach," said VMware CEO Raghu Raghuram. "We look forward to the merger with Broadcom, expected to close in Broadcom's current fiscal year."

Reacting to the report, Mizuho Securities analysts, who have a Neutral rating on the stock, said VMware's "total revenue grew 5% Y/Y, which came in meaningfully above our and the Street's ~2.5% forecasts."

"However, we note that VMW saw a roughly 6-point benefit from an extra week in its F4Q, such that normalized actually growth declined 1% Y/Y. Much more positively, total billings growth of 16% Y/Y was significantly above the Street's estimate of 2-3% Y/Y, and non-GAAP operating margins of 30.7% eclipsed the Street's ~30% forecast," wrote the analysts.