By Sarah Roden

VMware, Inc. (NYSE:VMW) is a Palo Alto, California based virtualization software company  as well as a subsidiary company of EMC. VMware produces software and security products for desktops, servers, and cloud management. VMware released its Q3 results on Tuesday, October 21st, coming out ahead of analysts’ expectations.

During its Q3 results, VMware reported $0.87 earnings per share on a non-GAAP basis, beating the analyst consensus by $0.04. During the same quarter of last year, the company posted $0.84 earnings per share on a non-GAAP basis. VMware earned revenue of $1.52 billion for the quarter, beating the analyst consensus of $1.50 billion. The software company’s quarterly revenue increased 18% on a year-over-year basis. On average, analysts expect that VMware will post $3.51 earnings per share for the current fiscal year.

Despite an increase in revenue, profit declined for the technology company. This is largely due its $1.54 billion acquisition of Air Watch in January ’14 and the operating costs associated with it. Executives remained satisfied with the Q3 report as CEO Pat Gelsinger stated, “In every region of the world, customers are making a long-term bet on VMware to help them transform their businesses and embrace a new model for IT.” Likewise, CFO Jonathan Chadwick noted, “We are especially pleased by the performance of our newer businesses such as mobility, networking, storage, and hybrid cloud, which made significant progress in delivering against our long-term strategy.”

Shares of VMware, Inc. (NYSE:VMW) opened at $80.05 on October 22nd. The company has a 1-year high of $112.89 and a 1-year low of $76.51. The stocks daily moving average is $82.46 and has a 50-day moving average of $93.15. The market cap for VMware is 32.25B and its P/E ratio is 37.10.

On October 22nd, Rich Sherlund of Nomura Holdings downgraded VMW from Buy to Neutral with a price target of $95.00, down from $120.00. Sherlund explains that although the Q3 report beat analyst expectations, “billings growth disappoints and softer guidance for billing and CFO for Q4. Guidance to come in January for 2015 will likely be below [analyst consensus] as well, we suspect, making it hard for the stock to perform as billings momentum slows.” Sherlund has a 68% success rate recommending stocks with an average return of +9.6% per recommendation.

VMware

Separately on October 22nd, Matthew Hedberg of RBC Capital cut his rating from a Strong Buy to Outperform with a price target of $105, down from $120. Hedberg has a 36% success rate recommending stocks with an average return of -1.8% per recommendation. He has rated VMW 6 times with a success rate of 33%.

On average, the top analyst consensus for VMware is Moderate Buy.

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Sarah Roden writes about stock market news. She can be reached at [email protected]