VMware's Multi-Cloud Strategy Leads To Record Full-Year Revenues

VMware's expanding hybrid cloud portfolio and multi-cloud outlook powered the company's growth in the final quarter of its fiscal year, CEO Pat Gelsinger told investors Thursday.

The virtualization leader's sustained momentum "demonstrates the power of our broad-based portfolio," Gelsinger said in an earnings call that reported a record $7.92 billion in revenue for the full fiscal year ended Jan. 31.

"We believe we have the world's most complete and capable hybrid cloud architecture," Gelsinger said.

[Related: Partners Anxiously Anticipating Decision On Dell VMware Reverse Merger]

VMware's comprehensive suite of licensed products and cloud services, as well as an expanding set of prominent technology partners, contributed to year-over-year growth of 14 percent, yielding $2.31 billion in quarterly revenue. Earnings-per-share came in at $1.68.

One partnership, and related product, that didn't substantially contribute to the quarterly result, but is crucial to the company's long-term vision, is the VMware Cloud on AWS service, which expands next week into Europe, Gelsinger said.

The market is showing heavy interest in the joint hybrid offering from the industry's public and private cloud leaders that brings VMware's software-defined data center into Amazon's cloud, he said.

VMware Cloud on AWS is a "unique way for them to accelerate their move to the cloud without disrupting their applications."

That offering is "starting to build up" and, while it didn't materially affect the current financials, it will become a larger element of the business in subsequent earnings reports.

"In many cases this will be the fastest way for customers to experience the full software-defined data center," Gelsinger said.

VMware's success over the last year has benefitted from a trend Gelsinger was early to predict: particularly strong IT spending from enterprises over the last year.

This is a "positive market environment for well-positioned enterprise IT companies," Gelsinger again told investors—a prediction he made early last year.

That rising tide is part of the reason VMware's Cloud Provider Program, which encompasses partners who host clouds on VMware infrastructure, saw 30 percent growth, both for the quarter and year.

The IBM partnership through that program is particularly notable for signing name-brand enterprise customers, and its growth "has no end in sight," Gelsinger said.

Two acquisitions VMware made in the last quarter, CloudCoreo and CloudVelox, are being integrated into VMware's broader portfolio to help further round out the hybrid and multi-cloud opportunity.

CloudCoreo will help the company extend support of consistent operations across any cloud; CloudVelox will accelerate hybrid delivery in a multi-cloud world.

VMware is also experiencing "broad momentum from the Dell partnership," Gelsinger said. Dell, through its acquisition of EMC, owns 80 percent of the virtualization vendor.

Gelsinger started the earnings call by saying he wouldn't comment on reports that Dell Technologies is considering becoming a publicly traded company again through a reverse merger with VMware.

In response to a question on the impact on the market of the Meltdown and Spectre vulnerabilities, Gelsinger said it's still too early to assess the direct implications of the patches implemented to fix them.

VMware is working with other enterprise tech vendors, including Intel, to get a handle on the problem, he said. "At this point, I think everybody is still a little bit in triage mode," he said.

But company leaders haven't seen, at least of yet, any impact on customer buying patterns to compensate for performance degradation caused by the patches.

"There is some potential here over time that people will say I have to expand my capacity a bit. There will be a need for people looking hard at some of their security architectures."

Gelsinger also said the "container trend" is "clearly gaining momentum inside of enterprise customers."

"We're definitely feeling that interest on the part of the market overall," he said.

Enterprises are either wrapping existing applications into containers to enable ease of migration, or using the technology to embrace micro-services architectures for building scale-out applications.

Key partnerships with Pivotal and Google have yielded the Pivotal Container Service (PKS) that's the centerpiece of VMware's efforts on the container front.

The combined might of Pivotal Cloud Foundry, Google's Kubernetes container orchestration platform, with VMware technologies like NSX network virtualization software, is driving PKS adoption. But sales results are still nascent, he said, as the joint service just became generally available weeks ago.

"It's going to be a nice complement to many other areas of our portfolio," Gelsinger said.

VMware stock fell today thanks to news reports of Dell Technologies leaders contemplating a reverse merger with the company as a means to go public and stave off debt concerns. Shares closed down $8.09 (-6.14%) to $123.66.