VMware’s shares plummet on profit decline of 8.05%
21:54, 26 August 2021
VMware’s share price plummeted Thursday after the digital infrastructure company reported a decline in profit during its latest fiscal quarter.
The share price was down 6.17%, or $9.80, at $149, in after-hours trading in New York. The stock had closed up modestly (0.22%) following regular trading hours.
Net income down 8.05%
Palo Alto, Calif.-based VMware saw its net income drop 8.05% to $411m from $447m a year earlier. But VMware boosted revenue 9% year-over-year to $3.14bn from $2.88bn as demand for cloud computing services remained strong.
“Our customers are evolving their strategies from a ‘cloud first’ to a ‘cloud smart’ philosophy where they are picking the right clouds and cloud services for the right workload, and turning to a multi-cloud environment,” said Raghu Raghuram, VMware’s CEO, in a news release accompanying the company’s quarterly earnings report.
“We are delivering the multi-cloud platform for all applications, enabling the digital innovation and enterprise control that our customers need to accelerate their businesses today and in the future.”
Based on the company’s accounting procedures, the latest quarter was the second of fiscal year 2022.
VMware’s second-quarter operating income dipped 2% year-on-year to $525m from $534m.
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Firm still enjoys big gains
But the company still enjoyed some big gains elsewhere. Subscription and software-as-a-service annual recurring revenue (ARR), rose 26% year-over-year to $3.2bn.
“Our performance in (the second quarter of fiscal-year 2022) reflects strong year-over-year product bookings growth in major categories, including our multi-cloud and modern applications businesses along with end-user computing,” said CFO Zane Rowe.
Meanwhile, the company’s operating margin climbed to 16.7% from 9.3% in the year-earlier period. VMWare said it is working with Zoom to enable better and more stable hybrid work environments. The effort is intended to improve customers’ ease of use, software-application and network performance, and security, said VMware.
The share-price drop and report come after an analyst predicted on Tuesday (24 August) that cloud computing will continue to boom.
Cloud gathers
While commenting on US President Joe Biden’s cybersecurity summit in a research note, Daniel Ives of Wedbush Securities said cloud computing security represents a $300bn-plus growth opportunity over the next few years.
Ives said only 40% of workloads are currently on the cloud and poised to reach 70% by 2025.
VMware said it remains on track for a planned spin-off from parent company Dell. Dell confirmed later Thursday in its own quarterly report that it expects the spin-off to close in November.