On its fiscal Q1 2021 earnings call VMware CEO Pat Gelsinger said that in many ways the COVID-19 pandemic had driven a decade of digital transformation in a few short weeks, and that chief information officers had become more important than ever to many businesses.
“I think I’ve talked to probably a couple of hundred CEOs over the last two months, and it really has been spectacular how quickly they’ve been able to adjust,” said Gelsinger, according to a Seeking Alpha transcript. “We’ve seen decades of momentum in weeks. We’re surprised how quickly customers were able to adapt into a work-from-home environment. It has been particularly startling.”
VMware, itself, has shifted to a work-from-home mode, and the company will join the ranks of other tech firms that plan to have a more distributed workforce over time. Gelsinger said the company wants to enable its employees to choose their work environments.
Of the economic impact of the current health crisis, Gelsinger said he sees cloud and software as “several points stronger than tech overall,” and tech in general as stronger than gross domestic product. “Everybody will get affected by a major GDP impact," he said. "But technology, digital transformation is more important. We expect that uniquely positioned technology companies, as we see VMware, will emerge from the crisis even stronger than we entered it.”
VMware reported a strong Q1 2021 with total revenue for the quarter of $2.734 billion, up 12% year-over-year. And non-GAAP earnings per share of $1.52, up 41% year-over-year.
Nevertheless, VMware recently cut raises and suspended its 401 (k) retirement fund matches, and Gelsinger and other members of the executive team are taking salary reductions to help manage the company’s finances through the current economic uncertainty.
On its earnings call, Gelsinger indicated that the future is uncertain, and he wants to be conservative. He said customers have gone through “three phases of the response….triage, new normal, new opportunity….And I think many of those implications aren’t fully realized through the economy yet. And as a result, we expect the next couple of quarters to be tough quarters overall for the market.”
VMware CFO Zane Rowe said it’s difficult to provide guidance for Q2 and the remainder of the year but given the status of the company’s pipeline, it’s forecasting total revenue for Q2 of approximately $2.8 billion.
During Q2, VMware saw triple-digit growth in its VMware Cloud on AWS offering, which the company launched about 2 ½ years ago. It's starting to garner big wins for VMware Cloud on AWS with an eight-figure deal with IHS during the quarter.
VMware is also working with other cloud providers including Microsoft Azure, Google Cloud, Dell EMC and Alibaba Cloud.
Gelsinger also called out VMware’s telco cloud. “We continue to see extraordinary interest in a software-driven approach to the 5G network and VMware’s telco cloud. We now see the opportunity to extend these benefits to the radio access network using virtualized RAN deployed on telco cloud. We’re pleased to be expanding our partnership with Intel to address carrier needs in this area.”
On its earnings call, Gelsinger said, “Telco, we think, is a huge opportunity. And the telco environment, if anything, has proven more important, more resilient to this period of time. And the focus on 5G is one that VMware’s been driving and focused on for several years now.”