VMware Inc. beat the earnings and revenue forecasts it had revised upward in January and raised guidance for the rest of the year, but investors responded apathetically, bidding the stock down slightly in after-hours trading.

The virtualization giant reported revenue of $1.74 billion in the fiscal first quarter of 2018, up 9 percent from the same quarter last year. In a software industry that is rapidly moving away from licenses and toward subscriptions, VMware is bucking the trend. License revenue climbed 7 percent to $610 million. The company slightly increased its revenue forecast for the entire year to $7.61 billion and license revenue forecast to $2.975 million.

VMware had $1.12 billion in services revenue in the quarter, up 10 percent from last year. Net income of $232 million was up 30 percent. It reported earnings per share of 99 cents, beating the target it raised in January. However, some online whisper reports forecast earnings per share of as high as $1.10, which may explain the modest post-announcement decline of about 2 percent.

“We were incredibly pleased with the bookings we saw in the first quarter and the momentum coming out from the first quarter,” said Chief Financial Officer Zane Rowe. “We couldn’t be more pleased with where the business is heading.”

For VMware, that’s in several new directions. Under pressure in its core market from open-source licensing and application container technology, as well as customers’ broader move to the cloud, VMware has been busy striking agreements with one-time rivals such as Amazon Web Services Inc. and Microsoft Corp., as well as spreading out into desktop virtualization, endpoint management, hyper-converged infrastructure and network virtualization.

On that last front, the company’s NSX virtualization layer appears to be resonating with customers. It was part of nine of VMware’s 10 biggest deals this quarter, said Chief Executive Pat Gelsinger. Nine of those deals also involved sales to countries within the European Union, leading an overall 11 percent growth in international revenue. Sales outside the U.S. now make up almost 51 percent of total revenue.

Partnerships also appear to be off to a good start. Gelsinger said the beta test of VMware cloud on AWS is “significantly over-subscribed” and alliances with Oracle Corp. on mobile enterprise and Google Inc. on Chromebooks are set to bear fruit this year.

This was also VMware’s first full quarter as part of Dell Technologies Inc. While it’s still early to quantify the benefits of that relationship, Gelsinger said it was responsible for about one-quarter of the growth VMware saw in this quarter, primarily by providing enhanced channel exposure, he said.

And in contrast to recent cautious statements by other data center heavyweights such as Hewlett-Packard Enterprise Co. and IBM Corp., the CEO said the tech spending environment looks to remain strong for the foreseeable future as customers warm to the concept of “digital transformation.”

“This idea is broadening of the role of technology, and the trend is accelerating growth for technology companies broadly,” Gelsinger said. “We’re feeling quite good about the overall tech spending environment and our ability to harvest it.”

Photo: Robert Hof/SiliconANGLE