Looks like things aren’t so troubled at VMware Inc. after all.

Coming off the first quarter of what management has termed a “transition year,” and following a string of executive departures as well as confusion about its cloud strategy, the virtualization giant beat first-quarter revenue and earnings estimates, reaffirmed guidance for the year and surprised investors with a $1.2 billion stock buyback plan.

VMware’s business has been challenged by a combination of factors, including declines in overall customer spending on data center infrastructure, a challenge from containers and a late start in moving to the cloud. The company’s focus this year is on diversifying its product portfolio into network infrastructure with its NSX network virtualization platform as well as boosting its end-user computing business via the AirWatch mobile management platform.

So far, the transition appears to be going well. VMware said revenue grew five percent to $1.6 billion, in line with analysts’ expectations. Profits were $161 million, or 38 cents a share, compared with a $196 million, or 45 cents a share, a year earlier. VMware had earlier adjusted this quarter’s estimates downward, causing its stock to drop 40 percent at the time, so analysts were heartened when the company beat profit estimates by two cents per share. VMware shares were up nearly nine percent in after-hours trading.

Growth story

More important is the company’s growth story. VMware said cloud revenue surged 20 percent in the quarter and NSX license bookings more than doubled. The company now has more than 1,400 NSX customers and the technology “is proving to be the premier net overlay solution across any hardware infrastructure,” said Chief Financial Officer Zane Rowe.

Sales of the Virtual SAN storage platform tripled, including a deal with a bank customer that Rowe said was the company’s largest ever. And the customer base for AirWatch grew by 1,000 businesses in the quarter to 63,000.

AirWatch is strategically important to VMware because it represents diversification of the company’s portfolio beyond its data center roots into end-user computing. The company said 90 percent of the deals it signed in the quarter had end-user computing components.

In an upbeat earnings call, Rowe and CEO Pat Gelsinger expressed confidence in VMware’s growth potential and financial stability as exemplified by the stock buyback. “Our growth businesses are performing well. Our balance sheet is strong and we will leverage our broad ecosystem to building on our reputation as one of the world’s top software companies,” Rowe said. VMware ended the quarter with a $8.2 billion in cash and investments, up about 10 percent from the previous quarter.

Gelsinger said worries about the prospects that management turnover would damage the business were overblown. The company has attracted strong new leadership through “a combination of the strength of our bench, our employees base and our attractiveness,” he said. “We’ve managed through these transitions quite effectively.”

“VMware is seeing good growth in end-user computing with Horizon and Airwatch, virtual SANs and NFX,” said Stu Miniman (@stu), principal research contributor at Wikibon. “The cloud strategy, with vCloud Air and vCloud Air Network, has gone through some retooling and is struggling to grow revenue.”

But VMware executives were upbeat about vCloud Air. The company’s cloud computing platform has been a source of confusion over the past few months. After initially positioning vCloud Air as a mainstream infrastructure-as-a-service platform, VMware pulled back in reluctant support of a bungled effort by parent EMC to position its Virtustream subsidiary as the preferred cloud play for its federated companies.

VCloud Air was eventually repositioned as a bridge to hybrid cloud, and it appears to be fitting there pretty well. VMware said it now has 4,200 vCloud Air partners and that cloud revenues are on plan for the year. Gelsinger noted that the recently announced partnership with IBM, “has already closed a number of deals and this is the biggest revenue amplification opportunity we’ve had in vCloud Air.”

Wikibon’s Miniman said VMware can do just fine without being a leading public infrastructure provider. “While cloud remains a challenge, VMware remains a core component of enterprise IT,” he said.

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