VMW - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to the VMware Third Quarter Fiscal Year 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Paul Ziots, Vice President, Investor Relations. Please go ahead, sir.

Paul Ziots

you. Thank and Third everyone, Earnings Fiscal to Call. Conference welcome afternoon, Quarter VMware's XXXX Good

we Gelsinger, Financial have and call, the On Pat Executive President Zane Chief Vice and Chief Officer. Rowe, Officer; Executive

we will Following their prepared take questions. remarks,

forward-looking the live are Our be to webcast, market is including files of of update this obligation in can SEC. conclusion We result this statements of is will be intend XX-Qs posted described risks to the make Slides, downloaded webcast. a statements. may with the with and factors, where and being website, risk XX-Ks, viewed press that VMware simultaneously from was remarks. our those and results which uncertainties. X-Ks no Actual currently various webcast release also as ir.vmware.com. after any assume today, in to not call materially call close at It forward-looking issued do differ can on accompany the such the conjunction subject this On and we

addition, to, for from will measures. should non-GAAP considered non-GAAP addition measures. These VMware's a as are discuss measures, isolation measures be we during which today's financial financial performance, used in certain or as In in substitute not call, of GAAP

the our measures transactions; rate. stock acquisition, amortization on non-GAAP or assets; Our GAAP items tax exclude stock-based on tax the related impacting losses and and employee discrete disposition including GAAP compensation; employer items, to results gains effect Pivotal of our other payroll acquired Software; intangible and

website. next company days in on link. for measures non-GAAP will additional of reconciliations find comparable including Relations the our The the website XX GAAP the this replay release can Investor available regarding call press our these and be webcast on under measures, You disclosures Investor Relations with

XXXX fiscal at the quarter begins quiet XXXX. of business, January Thursday, period XX, fourth close Our

of fiscal XXX that, and the financial XXXX, ASC on fiscal to XXX been press of sheet our has including for XXXX as adjusted for All of retrospective our XXX, year-over-year provide XXXX XXXX quarter have X release corresponding call adopted order and end this VMware XXXX to fiscal XXX. a third incoming XXXX Accordingly, the fiscal comparisons X, presented In basis as are our comparisons and to of balance turn for on X press statements discussed Pat. VMware November results X, for meaningful this the I'll the February With cash flows In over the periods guidance prior results prepared XXXX. and periods, in to of discussed third full the under release. on adjusted fiscal ended addition, forward-looking for ASC it quarter months XXX. ASC just call, comparisons for ASC on ASC effective included

Patrick Gelsinger

VMware. new Outposts. VMware, run, of Customers turn we're just conference, importance infrastructure expectations The expanding IT in Thank our increasing IT by VMworld increased U.S., you, scale the manage, now center this databases expansion re:Invent, join to VMware work core AWS This Jassy hosted software-defined Service private innovative as for tremendous on choice. allows revenue VMware-based set industry week, to and that This Barcelona. quarter, with of secure on We and centers Relational decisions across Cloud with new up, Asia AWS and engagement data towards including and projects. Las partners customers in AWS Paul. driven product quarter seamless strong In XX% the experience on-premises well earnings world. VMware two bring as partnerships operate cloud acquisitions, hybrid Vegas announce VMware. driving and product we multi-cloud, key new QX hybrid and share. XX% Database for Tokyo. I our customers me This geographies. multi-device environment. We growth in environments. later, customers infrastructure Amazon to of I customers with and use it further and expanded services Pacific, on Amazon pleased thousands as saw of pleased stage have a at had are VMware total our for past annual was VMworld, in globally, unveiled strength offerings, momentum broad-based them our per offerings XXXX will connect to on us was continue and Andy new to pleased portfolio to per hundreds to where results, two for which including multiple cloud make for to share Outposts to another and at all X QX, stage data was easy help their continue be their with Europe, non-GAAP Andy VMware applications join to and RDS their announced and regions offers Sydney across $X.XX to on diverse to of cloud year-over-year AWS

AWS, AWS such NSX, announced vRealize of offer Foundation Automation for Cloud VMware utilizing which Further, Cloud Insights, is a that ECX Outposts. data and software-defined as Network center experience, variant, key we AppDefense. Outposts As VMware AWS a specifically and we on extension VMware an customers provides the will technologies native designed for

vision rapidly, all a in these build about expanding infrastructure that they through will extend enables offerings VMware's for cloud Project deliver Project It innovative or sites and offerings approach. as VMware as-a-service new consistent at with a data AWS for to the beta edge, center with use centers, VMworld effort Dimension VMware We're a operations and extend is VMware cases. hyperconverged service cloud Cloud excited from of cloud upon an hybrid AWS as appliance and began consume partnership physically called and managed infrastructure our we customers. Our for Dimension. branch edge hybrid resides host to customers these data

and and and with containers. IBM announcements VMware we exciting across IBM major services will offering IBM formation companies services Watson expansion, new Kubernetes joint market. services IBM workloads extend support the a of even Cloud and customer this help to will innovation help partnership lab bring VMware mission-critical help The at use new also that VMware integrations series including a agreement a improve VMworld outlined joint them to with to a dedicated more that modernize of enterprises two made and announced portals. VMware year. migrate to and to the Together, business Europe also We solutions applications game-changing engineers the announced with to

challenges. across these, we acquisition set as which, global cloud Our CloudHealth Technologies. customers, of customers Google increasingly With announced help environments. well find significant over Azure, benefits, create Technologies of can To and as CloudHealth Microsoft address the operational operations navigating multi-cloud AWS, world, also Cloud a business VMware-based a platform a themselves X,XXX delivers unique

applications cost With view security for the CloudHealth can addition and resource multiple of Technologies, into performance and consistent and management, clouds. we actionable across deliver

broaden Heptio, we as help infrastructure de efforts Heptio's infrastructure organizations This enterprise continue modern Kubernetes will acquisition Kubernetes emerging clouds recently the leader Kubernetes offerings for extend enables applications. with with to operationalize facto As to a to and our establish Kubernetes. run products and in organizations and standard customers. as announce were expertise multi-cloud intent enabling deploy the that across PKS reinforce in native to VMware to our open our framework acquire open cloud the we environments, for excited ecosystem. an is

ONE, Center At consistent at of with networking pervasive for portfolio Workspace multi-cloud security to features XX momentum report as our Project the cloud profiling vision. the In across applications provider networking connectivity implement more an and is made new architecture, help to The both a automation, it the has and our and Virtual security innovation leader Dimension innovative to VeloCloud, data like of recently any was Cloud partners X.X Microsoft extend the multi-cloud joined expands significantly customer our capabilities leader recognized exceptional and in including NSX-T These a new WAN advanced secure as advancements management ability and cloud enable of key VMware for accelerate its These we multi-cloud software-based new Health announced and environments. their both offerings own to infrastructure. and VeloCloud AWS, VMware our Cloud Cloud new security ONE aimed and events, recognized As and intrinsic VMware exciting Cloud in on-premises significant expanding acquisition end-to-end VMware Infrastructure. VMworld Network experiencing VMware we ways. portfolio on-premises portfolio and VMware the public SAP with to in both additions Workspace in and and SaaS technologies plane across expansion. the NSX Cloud VMware plus advancements, addition customers which support demand environment. and AWS Quadrant the on NSX enterprises compelling Azure are security commitments completeness a and vendors of strong that VMware partnership, can Edge inaugural a Magic network and advance NSX Gartner to continues as another of execute expansion Data

applications introduced moving infrastructure threats, security to across VMware intrinsic edition control combines and addition into embedded data and hypervisor. in the to protect AppDefense, businesses foundations. native Platinum deliver security with regulatory security point front, to features threats integrated VMware customers' security resulting and digital to advanced On access security capabilities organizations as of increases, applications, these pressure the infrastructure, both vSphere from the risk help are address solutions. tools new vSphere's comprehensive, This To security fully delivery

digital our be workspace vision new and recently ONE, innovations to the also Workspace intelligence-driven delivered workforce. platform, how secured, to modern We services in workspace unveiled accelerate consumed can our furthering

at announced carbon and to for public blockchains. low-carbon Cross build foundation provide for Ships. VMware In with endpoint for economy. that it enterprise month, solutions that than XXXX this customer the company Windows we scheduled help leader the such decentralized Wave positioned Quadrant number the of to for commitment while secure achieved service enterprise-grade Quadrant. Dell Rounding beginning quarter, positioned XXXX Earlier security Blockchain, announcements Throughout XXXX. tech including XX-year of We a operations as we have Workspace permission announced company's as solutions in goal. force in as for as addition, will we more two VMware's the scalability, as reliability, pioneered customers VMware the stories demonstrated this services at deploy also benefit unveiled financial our We tools Red industry good was key blockchain Management, In customer provide that has our the which highlighting a VMware a XX. offering consortiums, International Gartner from the throughout Dell would delivering manageability. Mercy neutrality to a to ahead Magic will trust in global and customers history, the to innovative years out through Forrester for transition November continue a VMworld, Leaders In we Pro will management factory-configured is beta Endpoint and of recognition, VMware ONE, Unified was intrinsically published provide access believe

we are for with cash. for Finally, toward Technologies' pleased C Class a Dell proposed exchange Class stock Dell of Dell V Technologies' tracking common stock completing progress

the the transaction VMware's month, structure independence. Assuming and Dell's alignment maintaining while following simplify would this scheduled VMware capital closes for stockholder vote with next increase

and innovative our We key compute, for and and ONE, our in opportunities through six investments to continue exploring have to aligned hyperconverged, Workspace year cloud networking, closing, storage, strategic approaches, opportunities we invest development inorganic on and illustrate for and future around collaborate next these initiatives. software-defined software-defined organic In the Dell further teams beyond. with strategy continue areas:

We our continue customers. resonate strong and Thank you, with as solutions to performance Zane. Over strategy with to you. pleased our be our

Zane Rowe

revenue and Pat, license customers strategic we highlighted QX. subscription of and XX% the by with grew were initiatives. QX in year-over-year you, quarter revenue on year-over-year. performance, and the thanks and solid Total of pleased strong QX had compares grew in their especially Thank XX% for the expanded XX% cloud of over last the hybrid comprised today. seeing We success SaaS us partnerships Hybrid total quarter. revenue cloud large XX%, grew for we're you joining with which to well year, all to a We executing

We our as to the a will to strengthen cloud growing cloud SaaS agreement platform. of business, cloud as in well add recent investments and invest and our quarter. customers future growth will investments in the acquisitions and for portfolio acquire Heptio, to continue to hybrid help our presence. were strategic announced We which with which to in the definitive migrate announced CloudHealth acquired efforts number during further cloud business the These reinforce our QX

good XXX XX% Our year-over-year EPS Cloud revenue million billion. license compared strong totaled very which also license of strong this we Included unearned quarter sequential included VMware our as the end license count was diluted again its fourth in QX year-over-year billion. once the up with had operating We Program XX.X% deals, sequential non-GAAP and QX, $XXX with up at QX multiyear is up a in This with quarter. revenue, change change of well $XXX revenue investments of performance. on revenue, Provider follows XX% QX. margin share In plus unearned continued last one shares. at QX plus XX% in of as $X.XX, a revenue large year, the backlog our large in which is and was Cash in effective the million figure was total total year-over-year. deal strategic non-GAAP exited end $X.X for growth short-term DXC. Unearned million $XX.X

is end. backlog of the portion mentioned, license at As license unfulfilled quarter orders we've

rates product deals in quarter. broad-based QX. services Our experience VeloCloud, strong level our of including customer was We the success across we breadth customers. Also level our included of our in XX% License NSX adoption contributing bookings purchases highlight of top of over this XX platform, and this portfolio, and products from performance the satisfaction renewal which repeat year-over-year NSX in quarter quarter is of grew networking our X the for the portfolio. to saw

sold nearly strongest continue digits the with license of the bookings containers. for EUC bookings XX% is XX% NSX, management, digits customers and of single in high automation, of the growth for mid-single in growth top quarter deals majority SaaS. bookings digits Core bookings. the Our were the in vSAN which ONE driver public license 'XX. performance the benefited grew XX% year-over-year of compute license in fiscal component cloud X% VxRail, to 'XX bookings up on fiscal compute in of software well ONE expanding Workspace as compute single quarter year-over-year. year-over-year include high bookings license which and high year-over-year, the SDDC, as up the vSAN with grew total and categories. teens digits, in were largest uses once Year-to-date, the software year-to-date SD-WAN of QX Workspace in over bookings fiscal up EUC with we bookings, QX from total license both this strong and including management micro-segmentation compute total stand-alone of was in year-over-year. vSAN grew Compute single the low and embrace strategic the license bookings signed as and some and during combination booking's year-over-year year-over-year. bookings for X%, the increased grew were 'XX total flat of again bookings in Management

vSAN on quarter see can As variability we large quarter-to-quarter we've mentioned depending compute, performance, create before, in to of expect deals product with on and continued variability comparisons. an this impact deals in the year-over-year and large content EUC having

'XX an guidance up of synergies guidance increasing expected our now operating cash free expected million full shares. performance, our be a operations be earnings to share, year-over-year. and total to $X,XXX,XXX,XXX, increase in cash we're $X,XXX,XXX,XXX. we is XXX synergies result to flow. year million fiscal synergies flow 'XX and approximately be continue expect expect flow from revenue to 'XX fiscal XX% 'XX XX.X% of $X,XXX,XXX,XXX, Dell per with to of achieved year. revenue earnings $X,XXX,XXX,XXX. XX.X% in for from from prior from is license Non-GAAP achieving on pleased count year-over-year, diluted increasing cash non-GAAP cash 'XX, margin million with license guidance per for share $X.XX share increasing $X,XXX,XXX,XXX, for revenue, we to non-GAAP the QX for to fiscal operations and We of $X,XXX,XXX,XXX, Guidance from $XXX up last total fiscal $XXX of a are our flow is with We're for up prior year fiscal As revenue, be up the Free this

For total year-over-year, an XX.X% be to an and year-over-year. license be QX, revenue revenue $X,XXX,XXX,XXX, to increase we XX.X% of of $X,XXX,XXX,XXX, increase expect

be We on a per time share brief give a XXX be expect on I and million update a be thought to shares. this XX.X% our 'XX. outlook for to good count to non-GAAP diluted operating share would FY $X.XX earnings non-GAAP margin of you

growth, seeing for the margin business year non-GAAP planning of of growth total the on accelerating our revenue XX% revenue we're our is We future incorporates We're This SaaS and to includes continue which fiscal the to and we expect subscription FY in portfolio. strength for for this the next currently margin 'XX. hybrid planning SaaS. in to in growth investments FY for guided cloud XX% of are earnings approximately and 'XX, drive and operating cloud 'XX, ongoing which around including subscription to similar year at hybrid beginning investments

paid billion currently We of the planning special conditional dividend onetime toward to end are $XX for the be December.

dividend, we expect capital previous our allocation Following the special policy. to to return

We through repurchases. shareholders returning and the investments our making the will our in growth our and in capital summary, success. strategy investing our with value business, M&A share resonating drive successful our and In continuing is strategy via are we're organically portfolio partners, to customers shareholder driving in

reflect outlook for back as Our well 'XX the and With the guidance increased business. QX FY call FY our continue see that, turn strength to I'll results preliminary in the to for 'XX Paul. we as

Paul Ziots

we note Thanks, Zane. on started. V not tracking stock. proposed Dell's get let's [Operator Class exchange be will Instructions]. Please commenting Operator, of

Operator

take America Merrill first Bank from We'll question Kash of Instructions]. our Lynch. [Operator Rangan with

Kasthuri Rangan

demand change the give AWS we you continue perspective? Can to see the this trajectory announcement the Net-net, today AWS out? within versus VMware for very Certainly, you hear partnership upward things it wanted partnership. growth this as -- us years a for were negative how a How we and AWS at if were of also we to partnership to your positive pressures? think the relates I to how insight the VMware in And versus Pat's back? the week, get customers. potentially this on playing of earlier nature from out balance you does and the the pressures products do about do re:Invent couple

Patrick Gelsinger

I puts the yesterday's Database the on VMworld the customer that that. relationship. that with in the to uptake we Relational did clearly, at for announcement Outposts VMware great reinforce just We continue expansion see RDS and announcement Cloud pillar the partnership the that Overall, announcement momentum in with of we Service, we at that reinforced And think yesterday's Amazon. re:Invent another AWS, just have

many VMware environment. Cloud had It's the really the talked AWS market yesterday, Whirlpool, opportunity as for see few I'd now cases many had expand Chapter IHS new opportunity and partnership. strong. commitments AWS of VMware. we at X roll the And Markit, quarter. And the announced good continued VMware, on We're brands just clearly, the footprint momentum. on-premise. of saw for Cloud it's coming just the with at very with all VMware show the them participation VMworld major We re:Invent on on And on So on say, JetBlue, The accelerate Obviously, of people the only was see Cloud I VMware of a Foundation and just customer Cloud. an was acquisition we're can had overall, customer What expansions VMware TEPCO, VMware are breakouts, you momentum in conference Outposts major floors, you like ECX, and VMware we that participation, momentum those. platform, use that about Cloud we seeing not We to the for spectacular for expanding. the new activities, on And the the Outposts for Dimension. there. the this were and

position. we We have significant like and also see the those customers choice. believe that wouldn't that ECX, that with the multi-cloud NSX for of as to reinforced VMware are had now networking technologies role for heavily reinforcing as probably opportunity right, We our before Cloud strategic become platform just

enormous yesterday's and with opportunity, So accelerated more. seeing we're Amazon, overall, market that an even activities together just

Zane Rowe

'XX This I incorporated of add, be proponent of been expect, the that. and will just becomes always a in And I'll as know part model is changing. FY you've would were guidance. a the Zane. CAGR guidance is you you this whole of 'XX -- a Kash, FY our part bigger big our

for part see We 'XX FY the revenue bookings expect we in in because of exceed this growth large category. to

Operator

to We'll now next question DiFucci our Jefferies. move on John from with

John DiFucci

you Zane. than quarter. billings around greater is listen, for and question, do -- that XX% total the And here, there's put discussion is at Zane, and -- really up this isn't billings, growth has good not one been it's it My license to guys your one numbers first thing your is

true like have every quarter this happened there understand any to faster community. this an it's license revenue. which happening? investment lease business Or year. that's believe make you'd license, want that here. ASC in anything there's I -- sure good recognize term, just subscription of I versus past. a every business of like of the total think license said, future question. year, what's have simply recognize like just entire by Which, meaning VMware? this we and growing the you'd on And happening Is of of term a make this subscription, I And way, don't you frankly, think I impact the we, or amount indication to big want is upfront is total with maintenance I new XXX ton we just that, a upfront, of sort sure think to than don't of the shifting it quarter a I the indication would happened a here understand and I the

Zane Rowe

that is I business a them Yes, sure. touched big significant seen And think chunk categorized category. on we've growth as of in gets the that in seen lot That that, we've part driving John, the of SaaS a that number you true. and many subscription obviously, cloud on license. and mean, side. booking of aspects, our A are license that is of of I increases, hybrid all

basis. DXC has been of think there's we'll with and you no remarks driving. prepared total so those renewals, tremendous where still We At total customer the with on satisfaction, bookings comfortable dynamic I we're my about change bookings no the the execute There there. business because the highlight in SnS. little have license did duration pie. shift dynamic is with have in if So turn, in times, a a between will, year-over-year bit ELA, of large just on a significance slight the dynamics which and on a

we're with very mix. if the well we're -- in So the we're all the that comfortable the for QX comfortable guide it at as aggregate, with We're take mix in and highlighted you SaaS in that It's growing comfortable FY as obviously here hybrid VMware. cloud for guide 'XX. mix

So well fact performing we I business than confident very the heading there year. that the call out into other feel is nothing next the and would

Operator

Keirstead from We'll with question Deutsche our next Bank. take Karl

Karl Keirstead

the call this 'XX modeling. That at was was, me, of guidance the least fiscal of To highlight frankly, preliminary XX%. revenue is I what above appreciably

broader what variables So ask and there macro any Zane, in you And are just that to care to embedding in others, And other you explain you're CloudHealth what for assumptions are that maybe two-parter. that embedding XX% guidance? you'd revenues, I wanted Pat, good number demand that then acquired might a that highlight? outlook. and

Patrick Gelsinger

Karl. you, Thank Great.

you Sounds model. update to need like your

anything, with all say, next where cetera. for with So expect view. detailed well building as land right, in And for that, Overall, year. for we we to lines, appropriate Karl. et across was the business -- economic underway expecting some investments, year, indicated, dramatic, get planning product we're not next felt models it to I'll the we're the the direction we're time And

for positioned tech mobility, the breaking continue technology in of it supporting and that will outgrowing views. out by overall Zane planning broader our We of well be those economy and technology product of as more detailed important I've opportunities. just that the well believe as isn't is really we're we're the so year to we of to we're And powerful in is tech spend years plan of and described underway broader it in contributing build last what more that the with It continue with as next the describe But the that a business. as we tech superpower, the opportunities, these make well cloud, the particular new in that trends more you're new well. I've out, expect pieces as has a of AI, revenue, that described economic, as areas that areas little acquisitions calling SaaS inside bit and IoT some hybrid that cloud, as couple to that these

Zane Rowe

I Pat portfolio Karl, would profile. far a mentioned, on just does it as impact has revenue SaaS bigger the bookings than add, profile our the

growth we know, if than in with of the So say, attributed all growth, I'd next year, the see as the look that next would portfolio. would part for inorganic opportunities We're there increase to at you inorganic less X% year. of the it's pleased that all expect you be continued with to portfolio parts the very of emerging of the

Operator

Markets. question our take next Matt RBC with from We'll Hedberg Capital

Matthew Hedberg

feedback the could aid it's starting that, -- wondering aid fact, your 'XX I'll next wanted I'm know Platinum. in refresh I helpful. echo spot. vSphere any as refresh well. FY early, could and I ask be year to like And guide. your if about would there cycle initial on great Looks the growth comment your a perhaps but

that into kind Just outlook. of how wondering plays your

Patrick Gelsinger

Thanks, Matt. the as say, just I'll vSphere re:Invent our vSphere It have you was yesterday. running presents refresh -- think really, of great to customers. into we to enthusiasm more great that platform opportunity Overall, offer a vSphere at Platinum for

to product can't quite this problems us. the industry other aspect been, platform really NSX brings as But as to this Workspace about where that from to be any a the Customers on way, change is compelling GA-ed, and of is compute journey are out see customers intrinsic very you security security because is ONE, it solved of product. the position and literally we our part So with is and new intrinsic very intrinsic think it identity intrinsic, And we've a that. as exactly for opportunity. we're going Platinum as be there's has we in we think while security right, good. described, making And And solving fundamental our of its the head suggest, suggest, vSphere part a as this it really opportunity. very very the powerful you encryption vSAN, early a a about that industry And this that from micro-segmentation, pretty just the proposition security entire just excited and two that's elements security reinforces of done like response and to way, exciting. we're go as has really multiyear strategy: we've ensuring do flipping effective launched,

Now also opportunity us that we're And the a into that compute, is overall, Foundation complete our selling Cloud embedded platform. for full compute the VMC selling say almost one here cloud. selling right? We're selling where SDDC. a opportunity for VMware becoming solutions always We're sell, right? we is We're for I'd seldom

HCI selling and VMware Platinum, Foundation the vSAN selling are compute. selling we're when full we're for VCPP with our Cloud And security and full opportunities. partners. solution We our the VxRail We're selling hyperconverged

going board, aligns to selling, how is our forward really to about security aligning a the foundation, multi going we're cloud, business overall to across increasingly as has which that to much value workspace a and that digital our to against priorities. proposition as and solutions cloud, solution customers' deliver hybrid it's that's and customers higher of we're how going our about everything but native and that compute be That's talking we're almost So sell. we're doing network the

Operator

next William our Ader Jason with Blair. from take question We'll

Jason Ader

business figure between license And compute growth. here, total, the delta would the license trying below like usually for to imply maintenance and I'm compute is a that The maintenance mature be out down. this, just

you that? talk could about So

Zane Rowe

Zane. is This

and solutions, selling with in we're mentioned, license is which success that components grew if and XX% about revenue one the year-over-year to SnS an on towards Pat is And the of that of more it. we've VCPP, that all the component seen you As of dynamics a has think allocated none there, basis.

that year-over-year probably out. So largest that's calling driver you're the that in mix

So the business is going well.

compute. allocated between sort very standard and VCPP at we're curves, metrics the at by a just look you is we maintenance with look of SnS comfortable dynamic the If that. the This the and which

Patrick Gelsinger

maybe now, that service, call of cloud little business onto And which now a selling Yes. is compute posted XX% our basically, Provider just is over partners, VCPP, and we've VMware many to how are out for making X,XXX, what And bit, growth, we are our right? a Program, Cloud when plus pile of a lot row, aspect. a we've quarters the as us that in that solution sure,

announcements all change compute So this expanded service quarter, subscription the that couple of they're we relationship. space. It's IBM no one quarter revenue of VCPP, that of it this expansion, portion revenue, again right? of goes a in we the partnership business. and that through, carries so leading does nature had VCPP The that great a And that significantly maintenance partners our

and major Alibaba is to more announced Cloud we're overall, partnership their more partnership, our of just solutions selling program. another which And through of also that the VMware our We at Rackspace VCPP announced addition re:Invent. the for expansion, that. yesterday right,

see mix. a to the you're so total great in So that to that continue momentum going shift overall, bit of we're vSphere license in seeing business,

Operator

We'll Michael next with Turits question take our Raymond from James.

Michael Turits

talk revenue to very flattish you growth about guide -- strong little in down margins. next year-over-year but believe I bit Can investment year, or, down a actually, on

incremental the where's investment? So

Zane Rowe

Sure, of and on some Pat yes, then in let I'll those jump start opportunities.

similar what fiscal the I also significant so these but the want very businesses, on you talked shift expect that a over The and we've with are prepared level you don't is in has with we vSAN SaaS time, know on encouraged investment what remarks, about in general that with investment been that other seen not continuing. and spending business. historically the plan seeing We've areas category buckets in out Heptio business period. we buckets to biggest if in business or started of out As what And touch only emerging my in in you and investment bookings Pat, improved to to been nice see the NSX the both where XX% cloud the we've 'XX opportunities here you're in FY pointed see the increase year, spend. so I was recognition revenue over would by growth albeit to this we platform?

Patrick Gelsinger

points few add. A to

here way. view hasn't changed long-term Our any in

something hybrid leadership opportunity, VMware, the even the is positioned say positioned this to a present Amazon is that customers really yesterday's maximizing that with this prudent IBM unique subscription feel we're environments think everybody with and us I on-premise, And picking Hat our balancing years the and And that the investments the opportunity, the uniquely solution uniquely multi-cloud cloud to of as positioning very in for that for investment this model. taking industry need. we that's going announcement further, hybrid Clearly, or the move acquisition. position continue to around accentuates aligning to reinforced focus. we're leverage one to now a and X growth as is think to we Red just really been X the to around around last like are through hybrid world marketplace to a view The is cloud we're us middle is of We that pathway gives which that, represent hybrid balanced that a way. a and as-a-service that VMware in opportunities going position we've be in

Operator

next We'll Alex KeyBanc take Markets. our question Kurtz Capital from with

Alexander Kurtz

at next to guide core the hybrid at revenue 'XX for and back in is today I this the consensus as And look part of the about business driver where big you NSX, delta Zane, in being stand-alone fiscal and million the compute look cloud $XXX vSAN. the opportunities roughly year. Just a talked

upside core impacts year, the outlook, we look the sort where of Just and the we to the them into our are? how as as of think should about weight about that we next big are models through products driving kind think

Zane Rowe

our assumptions and each Yes. we've elements. I I pretty here mean, products on solid say, granular used, of a would I'd taken say at pretty the look

build view to midterm how changed we've as then momentum. at growth as that continuing is just growth the its has in grow It's on cloud build next compute, you as you none it year, grow SaaS of into into NSX general and our to to that, that continue as look those I the -- areas, getting larger business continue the given to and are seen the the beyond. as actually dramatically of which 'XX to look particular you past. on have more and similar to momentum, And in touched parts portfolio the at the product in business look think and assumptions we this portfolio the FY on trajectory in continuing portfolio, you we continue year and build we to we've expect continuing

the that outlook these fact So we're investing pleased the we and we're areas have guide, with the 'XX to continue very obviously, about with are that we pleased areas that the in and we albeit excited in. invest very

and updating that there's there at change I'd call -- announced inorganic in your practice haven't you sort no nothing that all out. we There's So nothing of models. think as nothing already about

Patrick Gelsinger

VMware of on if the go compute. bit a our becomes going to Maybe the solution, Management continues said, Cloud as right? the center we portfolio it. view delivering the focused of that to full increasingly, Yes. But little just in compute we're I It around no real core bit, point be change plus a be Foundation, offering.

compare. A this the, continue solid to indicated, growth had a and product. so VeloCloud that, growth but a and well. result mode, for last hyper very, see but so said, extremely very very solid we for right, I've superhot growth have and piece year the of to early that rapidly. to unique vSAN had NSX hybrid we in quarter right, we growth We rate -- continue that an a as we are out that in growing cloud family, quarter forward, the solid be As as extraordinary that point towards EUC very for business, great really vSAN continues offerings rates

performing I coming year outlook we've the of our continuing kind that for nicely where think for is So us, around. business plan very the really every of portfolio piece is and built

Operator

now Heather hear Sachs. We'll Bellini with from Goldman

Heather Bellini

get, wanted ahead. the for we terms most proficient expectations I you've Pat, in just of as to IT been spending look probably your

of how if also you the calendar the was budget growth So out for the say, wondering ball actually look crystal budget year? as about is kind upcoming you're the are versus, X% feel experiencing customers thinking laid you in this do growth surpassing I of IT this year's into that calendar year. And earlier budget kind your growth that you year,

Patrick Gelsinger

spend how And sustained for this the you you case a the above tech the going very the into for technology forward. years I for growth range. the outlooks. we more economic that Thank think but And every to for it could X, right, their turbulence, of indicated, and it's how will because I'll spend, see estate, believe, is you, be And a run every contributing sustainable growth year, business marketing, spite business, you're Part budgets IT is spend, upper spend do IT right, us, the kind points and X We critical going we done rates suggesting ball seeing so for taken believe come. run spend It's of IT is going and is is that rate there's that, we the mission a no spend say, in aspect the breaking in comfortable appreciate some how to CIO be I finance, idea bit, calling they're are this economic to believe driven rate, a the I you'll all tech, business think increasingly for you under are why that real on becoming for year. of be right? to be substantially above that, factory, every most obviously, of continue do analysts Heather, aspect areas that'll broad-based this into you some even Xs right? growth tech as overall believe IT to X%, crystal longer of that have do comments. said of growth spend how piece. more out for basis when the I X% you're where becoming economic there in be a

to pretty and come. we view, years economic industry. different the for driver year multiyear to comfortably see basis the next right, we're of no And a overall we shows independent on broadly several well that talking for spend of as IT that to tech think be So be customers will the a economic as than ahead across spend growth,

Operator

Ives now We'll from hear Daniel with Wedbush.

Daniel Ives

has question cloud from team. cloud the I especially workloads mean, the about and workloads? conversations just you're enterprises is I and what terms in complex market moving more to better talk there's one the and understanding to a that cloud, cloud no AI an types my on the than hybrid of Pat, with then of you seeing Just your move of Can -- maybe inflection know the yourself point and really

Patrick Gelsinger

Sure. and five _____, that’s we think happen. I ago going – cloud, broadly, as not you'll hard to more years think, And about

to have environment. on-premise rebuild We our

model loss year of you’ve the I laws have physics of Now, last is model, XXX economics. laws laws XXX of right the the latency that physics, of the if the land time, I of cloud do and a millisecond millisecond hybrid seen laws say the need can’t over say where I right, that and matters, everybody economics response round-trip the right three laws, described and

inference related right, My anything to our in resources. that's learning you're largely hey, You're in and say, be right? the of see my on-premise and do we're going maybe of not where things to to going the going to process and government to data cloud country. I national the need is You people infrastructure, computing for is send XYZ laws going image every to land, but in locally cloud, surveillance be to running country

believe going major So of those right, data their to and the the right, that's going firmly or more With data pronounced prominent, you're time. closer yesterday's effects, for cloud become form to demands that very cloud say, keep will now has to more meaningful hybrid have And edge are announcements, we in of to over with even use computing the think, a view forward be enormous become the cloud strategy. source some point because of everybody, we this going hybrid come from cases place. you providers telephony mega way, in as

I infrastructure, across a I and with I a lot become wow, this in really hybrid to point cloud industry a data that more got they And more it the of be that, secure, saying, and need must software. are right? of need I against of constancy seeing new environment. There's as my IT that. is of interest, delivering my now, form effectively how value, software. of need be grappling maybe we're more is As more to environment a business to this And that business underneath skilled and and onto secure fourth this are right, of build accomplish putting and the just go I'm businesses to right? more

So broader those we're would of be some that seeing. the trends

with growth strategy in see as uniquely benefits multi-cloud wow, and hybrid, I many delighted our very that them the just for energy world. solid customers, right, Very associated the our rates we're yesterday, the just they in think re:Invent companies of positioning reinforce well-positioned industry. this those really by reactions getting the and points we're from

Paul Ziots

I think, we a you Dan. conclude, Thank before And comment. Pat, may you, final have

Patrick Gelsinger

everybody Yes. strong us. for in the I'll again for was quarter just thanks QX call. another say

We continue with the pleased as resonate solutions very our to strong customers. strategy, with performance, be they

today. thanks our XXXX, of And on We bit to on to also to to we look pleased and preliminary you, and really it our talking giving reflects strategy. us fiscal time next And and continue see to business of our the in for forward all you little strength outlook the we holidays you call. your happy give a conference

Operator

conference. Thank you. Thank you all That today's for participation. does your conclude

You disconnect. may now

Vmware (VMW) 29 Nov 182019 Q3 Earnings call transcript