Hot stock to watch: VMware, Inc. (NYSE: VMW)

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VMware, Inc. (NYSE: VMW) stock rose over 2.9% in the pre-market session of 27 November, 2019 (as of  8:09 am GMT-5; Source: Google finance) as the company has posted better than expected results for the third quarter of FY 20 and remain on track to close the acquisition of Pivotal by the end of the fiscal year. VMware has completed its acquisition of Carbon Black, which is a leader in cloud-native endpoint protection, in October. Carbon Black will be a part of VMware’s security offerings and has launched a new security business unit, including Carbon Black and the AppDefense offerings under the leadership of former Carbon Black’s CEO, Patrick Morley as General Manager. The company will continue to invest in the fast-growing Cloud businesses and anticipates that Carbon Black, along with the Tanzu portfolio including Pivotal, will further accelerate the hybrid cloud subscription and SaaS revenue. Carbon Black contributed over $10 million in total revenue in the quarter post acquisition

Moreover, VMW has delivered the non-GAAP operating income of $759 million and a non-GAAP operating margin of 30.9%. VMW has ended the third quarter with $7.9 billion in unearned revenue and $2 billion in cash. The growth in the revenue, plus the sequential change in unearned revenue, for the third quarter was 18% year-over-year. Growth in license revenue, plus the sequential change in unearned license revenue, was 21% year-over-year. VMware has reported the net income of $621 million.

VMW in the third quarter of FY 20 has reported the adjusted earnings per share of $1.49, beating the analysts’ estimates for the adjusted earnings per share of $1.41, according to FactSet. The company had reported the adjusted revenue growth of 12 percent to $2.46 billion in the third quarter of FY 20, beating the analysts’ estimates for revenue of $2.41 billion. License revenue for the third quarter grew 10% to $974 million. At the end of the third quarter, VMW had license backlog of $33 million and total backlog of $71 million.

For the full year, the company is expecting 12.5% increase in total revenue to $10.100 billion year-over-year.  The company expect license revenue to be of $4.245 billion for FY ’20, up 12% year-over-year. The company expect non-GAAP operating margin to be 33% and expect non-GAAP earnings per share to be of $6.58 on a diluted share count of 416 million shares for the fiscal year. Cash flow from operations is expected to be $3.850 billion and expect free cash flow to be of $3.570 billion for fiscal ’20.

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