VMware's push beyond its core virtualization business toward offering a broad portfolio enabling hybrid and multi-cloud environments drove earnings that beat Wall Street's expectations for the company's second quarter of fiscal 2018.
The Palo Alto, Calif.-based software giant's product expansion into cloud and device management, as well as network virtualization, fueled 12 percent revenue growth to $1.90 billion in the quarter ended August 4, CEO Pat Gelsinger told investors during an earnings call on Thursday.
"Overall our cloud strategy is just really resonating with customers," Gelsinger said.
Going forward, a key component of that overall strategic shift will be VMware's partnership with Amazon Web Services. The forthcoming VMware Cloud on AWS hybrid service is just the beginning of a joint innovation roadmap between the two enterprise giants, Gelsinger said.
The joint offering soon to be released from the world's largest private and public cloud companies "continues to experience strong customer interest and remains on track," he told investors. "We really believe this is the beginning of a very powerful capability."
Customers see the multi-cloud future, and are looking for technology that both transforms their private infrastructure and enables embrace of public cloud services, he said.
The AWS integration, as well as partnerships with IBM and other certified providers part of the vCloud Air Network, changes the discussion to one more in line with customers' strategic goals, Gelsinger said.
Further positioning the virtualization vendor to seize share in the hybrid cloud market is its expanding portfolio of management products, including the vRealize suite for hybrid cloud management; AirWatch, an enterprise mobility management suite; and the integrated Workspace ONE for app and device management.
Another growth driver is the NSX network virtualization and security platform, included in all ten of VMware's largest deals of the quarter, Gelsinger said.
NSX, acquired from Nicira in 2012, enables VMware's leap into a network function virtualization (NFV) market that's about to experience an "enormous crescendo," Gelsinger told investors.
Communications service providers are still in the early days of NFV adoption, Gelsinger said, but as they transition to 5G networks, the market will rapidly scale and VMware's platform will be a frontrunner to power that infrastructure.
In the second quarter, VMware signed the largest telco deal in the company's history with Vodafone, a "huge step forward" for its NFV initiative, Gelsinger said.
The Internet of Things, and edge computing, also represents a "significant adjacent opportunity," Gelsinger said. VMware is working on extending data center capabilities into the field with strategic partners like Fujitsu.
At next week's VMworld conference in Las Vegas, the company will reveal much more about its coming cloud and container products, including the AWS offering.
Gelsinger said VMware Cloud on AWS will offer a smoother transition to hybrid infrastructure than Microsoft's competitive public-private combination of Azure public cloud and Azure Stack.
Whereas Microsoft "forces customers to fork to consume some new services from Azure" in the public cloud, the joint VMware-AWS offering allows VMware's current install base to "seamlessly go to the cloud and take advantage of the cloud service with the full VMware experience," he said in response to an analyst question.
Growth of VMware's licensing revenue in Q2 exceeded overall growth, up almost 14 percent from the same quarter of the previous year to $732 million.
The company posted non-GAAP earnings-per-share of $1.19. Analysts expected earnings of $1.15 per share on $1.88 billion in revenue.