Analyst Note| Mark Cash |
Narrow-moat VMware's 9% year-over-year revenue growth and adjusted EPS of $1.81 in the second fiscal quarter easily beat CapIQ consensus expectations. For VMware, the pandemic has negative and positive effects. The on-premises licenses business faced headwinds with weakness in the Americas and markets greatly impacted by shutdowns, but VMware expects licenses to pick back up as economies return to normalcy. Alternatively, the subscriptions and SaaS business performed exceptionally well as VMware's cloud-based solutions as well as products for cybersecurity and application development are becoming rapidly embraced. VMware posted a solid quarter and provided upside to guidance in a tough IT infrastructure spending environment, which are testaments to the company's transformational efforts over the last few years, in our view. We are maintaining our $202 fair value estimate and believe investors have an attractive margin of safety.