Why VMware’s Stock Could Rise after Its 2Q16 Results
Earlier in this series, we discussed analysts’ expectations from #VMware ’s (VMW) soon-to-be-announced 2Q16 results. In the last five quarters, VMware’s quarterly results have managed to beat analysts’ expectations on revenues and earnings. Despite providing weak guidance for 2016, VMware’s 1Q16 results beat analysts’ estimates, which helped its stock to rise by 10% after its results were released.
In mid-June 2016, VMware launched VMware TrustPoint, a new endpoint security solution. To leverage its dominance in the virtualization and data center space, VMware devised its cloud strategy, which focuses on hybrid cloud infrastructure and development. In 2016, VMware and #IBM (IBM) announced a strategic partnership that would be symbiotic to both players in the hybrid cloud space.
VMware’s 1Q16 revenues grew by 5.2% to $1.6 billion on the back of strong results from NSX, the company’s network virtualization platform. #NSX, a part of VMware’s #SDDC (software-defined data center) architecture, is a virtual networking and security software platform. VMware stated that NSX license booking, which is its network virtualization business, continued to grow by over 100% on a YoY basis in 1Q16.
VMware’s strategic focus on NSX in the #SDN (software-defined networking) market is opportune. IDC’s (International Data Corporation) 2016 report stated that it expects the SDN market to grow at a CAGR1of 53.9% between 2014–2020 to reach $12.5 billion by 2020.