Could VMware, Inc. (NASDAQ:VMW) Crumble On Earnings?

VMware Inc VMW
Photo Credit: Glenn Harper, Flickr

VMware, Inc. (VMW) Information Technology – Software | Reports April 19, After Market Closes

Key Takeaways

  • The Estimize consensus is calling for earnings per share of 96 cents on $1.68 billion in revenue, 1 cent higher than Wall Street on the bottom line and $5 million on the top
  • VMware continues to make major advancements in new and old products which has them well positioned in the fast growing cloud space
  • VMware faces a number of near term risks including stiff competition, soft IT spending and economic uncertainty in some of its key markets
  • What are you expecting for VMW? Get your estimate in here!

Cloud computing has been the fastest growing industry in the tech space over the past 5 years consisting of three major components; SaaS, IaaS, and PaaS. One of the leaders in SaaS has been the fast rising VMware. This Monday, VMware is scheduled to report Q2 earnings with hopes that its robust package of services and products will carry the stock to new heights. Shares of VMware just breached their 50 day moving average, momentum on their side heading into Monday’s report.

The Estimize consensus is calling for earnings per share of 96 cents on $1.68 billion in revenue, 1 cent higher than Wall Street on the bottom line and $5 million on the top. Compared to a year earlier this represents a 4% increase in earnings and 5% in sales. Shares are up 15% in the past 6 months but over a year they have dipped 25.8%.

On the heels of its report, Barracuda announced strong quarterly results that sent shares surging over 25%. Both Barracuda and VMware’s businesses are highly related so good news for one often implies good news for the other. There is already a high likelihood that VMW beats estimates this Monday. On average the company beats Wall Street and Estimize in 99% and 79% of reported quarters, respectively. VMware is well positioned to leverage its leading position in the virtualization market to other markets such as data centers, hybrid cloud and mobile devices. These three markets will likely be the fastest growing segments in cloud computing over the next several years. VMware also continues to form strong partnerships and ended 2015 with relationships with Samsung and Google.

During the quarter the company has released updates to its VMware Workspace ONE and announced a new endpoint security solution power by Tanium. They have also seen an uptick in colleges implementing their products.

A few major concerns still stand in the way of its success, including stiff competition, soft IT spending and macroeconomic uncertainty in some of its key markets. Currently, the company operates in the same environment as Microsoft, Citrix and Amazon. Staunch competition has initiated a pricing war within the industry, effectively marginalizing profits and margins.
Do you think VMW can beat estimates? There is still time to get your estimate in here!

Photo Credit: Glenn Harper