VMware reports first quarter revenue miss despite subscription service strength

June 2, 2023 7:41 AM EDT -- VMware, Inc. (NYSE: VMW) posted lower-than-anticipated revenue in the first quarter, as the cloud computing group saw strength at its subscription and software-as-a-service (SaaS) offerings partially offset by a drop in licensing demand.

During the three months ended on May 5, revenue rose by 6.1% compared to the corresponding period last year to $3.28 billion but missed Bloomberg consensus estimates of $3.31B.

Sales at its subscription and cloud-based software delivery divisions spiked by 35% on an annual basis, constituting more than a third of the company's total revenue. However, licensing revenues slipped by just under a tenth to $517 million.

"This likely stemmed from a faster-than-expected model transition from license and maintenance to subscription deals. This is evident in the higher-than-expected deceleration in [on-premise] maintenance and license [revenues] growth," analysts at UBS said in a note following the earnings.

Meanwhile, VMWare did not provide any further updates around U.S. chipmaker Broadcom's (NASDAQ: AVGO) plans to acquire the Palo Alto-based company for $61B cash and stock. VMWare reiterated that Broadcom expects to complete the transaction, which has faced heavy scrutiny from competition regulators in the U.S. and Europe, during the 2023 fiscal year.

Shares in VMWare were widely flat in premarket trading on Friday.

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