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Good day, ladies and gentlemen, and welcome to today's VMware First Quarter Fiscal Year 2020 Earnings Conference Call. As a reminder, today's conference is being recorded. And at this time, I would like to turn the conference over to Paul Ziots, Vice President, Investor Relations.
Thank you. Good afternoon, everyone, and welcome to VMware's First Quarter Fiscal 2020 Earnings Conference Call. On the call we have Pat Gelsinger, Chief Executive Officer; and Zane Rowe, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website where this call is being simultaneously webcast. Slides which accompany this webcast can be viewed in conjunction with live remarks, and downloaded at the conclusion of the webcast from ir.vmware.com.
On this call today, we will make forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially as a result of various risk factors, including those described in the 10-Ks, 10-Qs and 8-Ks VMware files with the SEC. We assume no obligation to and do not currently intend to update any such forward-looking statements. In addition, during today's call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures which are used as measures of VMware's performance, should be considered in addition to not as a substitute for or in isolation from GAAP measures.
Our non-GAAP measures exclude the effect on our GAAP results of stock-based compensation, amortization of acquired intangible assets, employer payroll tax on employee stock transactions, acquisitions, dispositions and other related items, including the gains or losses on Pivotal software and discrete items impacting our GAAP tax rate. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in the press release and on our Investor Relations website.
The webcast replay of this call will be available for the next 60 days on our company website under the Investor Relations link. Our second quarter fiscal 2020 quiet period begins at the close of business Thursday, July 18, 2019.
With that I'll turn it over to Pat.
Thanks Paul. Q1 was a good start to fiscal 2020 across our diverse product portfolio. Total revenue for the quarter increased 13% year-over-year with non-GAAP earnings per share of $1.32 per share. We were especially pleased to announce important agreements during the quarter with key partners Amazon Web Services, Dell and Microsoft. Our EMEA and Asia-Pacific geographies had particularly strong results in Q1 while the Americas trailed the other geos after record-breaking year-over-year growth in Q4, 2019..
VMware's vision is to deliver a software architecture that enables any app on any cloud delivered to any device. Our comprehensive strategy to deliver on this vision is increasingly being embraced by our customers to enable their digital transformations. Customers continue to look to VMware for solutions across hybrid cloud, multi-cloud, modern apps, networking and security and digital Workspace. On the hybrid cloud front, our preferred cloud offering VMware Cloud on AWS continues to accelerate with AWS and VMware delivering major new capabilities every month.
We recently announced the resale agreement enabling customers the flexibility to purchase VMware cloud on AWS through AWS in addition to VMware. PennyMac, a leading national home lender and servicer was one of the first deals closed with the AWS reseller agreement in place. We also recently announced VMware cloud on AWS availability in Canada, Mumbai, Paris and Singapore, with the service now available in 14 regions globally. VMware Cloud on AWS was recently designated FedRAMP in process on the path to authority to operate at the FedRAMP high baseline level. The high baseline requirements are used to protect the government's most sensitive unclassified data in cloud computing environments.
One example of the customer momentum in hybrid cloud we are seeing is NHS Digital, the national information and technology partner for the UK's Health and Care System. They have made VMware Cloud and AWS available across its organization to help accelerate digitally-enabled care. At Dell Technology World in April, Dell Technologies unveiled Dell Technologies Cloud, a new set of cloud infrastructure solutions to make hybrid cloud environments simpler to deploy and manage. Within that offering, we announced VMware cloud on Dell EMC which will provide a simple, more secure, and scalable infrastructure delivered as a service to customers on-premises data center and edge locations. Featuring VMware's high-performance compute, storage, and networking software, the service will be fully managed by VMware, enabling customers to focus on business innovation and differentiation.
Dell Technologies and VMware also announced an expanded partnership with Microsoft, spanning cloud and client offerings. In cloud, the newly announced Azure VMware solutions enables customers to capitalize on VMware Cloud Foundation, a comprehensive offering of software-defined compute, storage, networking, and management that is sold and supported by Microsoft on their Azure Cloud. On the client side with this expanded agreement, mutual customers will be able to use Workspace ONE to manage the full productivity features of Office 365 across devices via cloud-based integrations with Microsoft Intune and Azure Active Directory.
In addition, VMware will extend the capabilities of Microsoft Windows Virtual Desktop to enable customers to further accelerate their cloud initiatives leveraging VMware Horizon Cloud on Microsoft Azure. As a further proof to VMware's multi cloud strategy, Microsoft and VMware are also exploring initiatives to drive further integration between VMware infrastructure and Azure such as integration of VMware NSX with Azure networking, an integration of specific Azure services with VMware management solutions.
We will also be exploring, bringing specific Azure services to VMware on-premises customers. This announcement marks a significant step forward in the Microsoft and VMware relationship. We also recently announced VMware Cloud Foundation 3.7, which is now available in VxRail integrated with VMware's flexible full stack HCI architecture ready for line of business applications. Additionally, this release supports the deployment of VMware Horizon 7 Virtual Desktop Infrastructure. In April, HPE announced the new HPE vSAN ReadyNode designed to help customers who want to build their own hybrid cloud. The ReadyNode removes complexity with a pre-configured server that features an optimized balance of CPU memory and network, as well as I/O controller and storage for data management and data analytics.
This quarter, we continue to drive advancements across our integrated VMware vRealize Cloud Management Platform. These new product releases will combine to provide expanded self-driving operations and enhanced programmable provisioning capabilities across private and hybrid clouds. We are also rapidly building out the CloudHealth platform, accelerating our ability to help customers gain control of their multi-cloud environment, while enabling them to achieve superior business outcomes. In Q1 as a result of the Heptio acquisition we introduced VMware essential PKS, an upstream open source Kubernetes distribution with enterprise support.
This edition rounded out our current modern apps portfolio of upstream kubernetes offerings which now allow customers to leverage either a highly customizable offering or one that is tightly integrated with vSphere and NSX. To accelerate and extend our multi cloud and kubernetes offerings, we recently acquired Bitnami, a leader in application packaging solutions providing the largest catalog of click to deploy applications and development stacks for major cloud and kubernetes environments.
On the networking front, we updated VMware NSX-T datacenter 2.4 and NSX Cloud, the newest release of NSX data center is designed to meet the virtual cloud networking needs of both enterprises, large and small. Communication service providers can leverage the cloud scale and performance of NSX-T data center to accelerate adoption of network function virtualization, as they build for the 5G and Telco cloud that is just beginning to be rolled into service.
I was pleased to talk more broadly about VMware security strategy during my keynote at RSA in March. We are committed to helping remove the complexity inherent with security today, and deliver intrinsic security from endpoint to cloud. During RSA, we also introduced the VMware Service defined firewall, an innovative approach to internal firewalling that dramatically reduces the attack surface for on-premises and cloud environments with security that is an intrinsic part of the infrastructure. Customers continue to be challenged with providing employees a great digital experience across all apps and devices, while maintaining the highest security standards. Our Workspace ONE platform helps customers with this balancing act.
We announced several innovations to our digital Workspace platform this quarter aimed to simplify our customers' digital Workspace journeys. Firstly, we announced the acquisition of AetherPal to extend our digital Workspace remote support capabilities. In addition, Dell unveiled Dell Technologies unified Workspace, a new offering bringing together Dell hardware services and support with Workspace ONE and SecureWorks to transform how customers deploy, secure, manage, and support endpoints.
Finally, with the announced partnership with Microsoft, mutual customers can now embrace Microsoft 365 and Workspace ONE together to meet their digital workplace needs. Reflecting on the momentum we experienced and our key Q1 announcements, VMware Cloud Foundation is now the Hybrid Cloud Infrastructure across multiple cloud models including one, customer manages clouds on custom built and hyper-converged solutions. Two, partner manage clouds such as IBM and now Azure along with our VMware cloud verified partners and three, VMware managed clouds with AWS and Dell EMC. With the expansion of our Microsoft partnership, Workspace ONE uniquely provides the best support and integration across every major client category. With our most recent NSX release, our virtual cloud network is the most comprehensive overlay Network for cloud datacenter and edge.
VMware software continues to serve as the essential ubiquitous foundation for the world's digital infrastructure. We remain committed to helping our customers harness the technology for their digital businesses and deliver superior experiences for their customers.
I'll now turn it over to Zane to talk more about our business performance.
Thank you, Pat and thanks to all of you for joining us today. We're pleased with our continued progress expanding our broad platform for hybrid and multi cloud environments, which is reflected in our results this quarter. Our recently announced enhanced partnerships such as those with Amazon Web Services, Dell and Microsoft have us well positioned to help customers accelerate their cloud journeys and support our future growth. In Q1, total revenue grew 13% and license revenue increased 12% year-over-year. Hybrid cloud subscription and SaaS comprised greater than 12% of total revenue and grew 35% year-over-year.
In addition to our VMware cloud provider program, the hybrid cloud subscription and SaaS category includes offerings such as Workspace ONE, Horizon Cloud, CloudHealth, Velo Cloud and VMware cloud on AWS. These services continued to drive recurring revenue growth. Q1 non-GAAP operating margin was 29.5% consistent with our guidance for the quarter and reflecting ongoing investments in our hybrid and multi cloud initiatives. Non-GAAP earnings per share for Q1 was $1.32 on a share count of 418 million diluted shares. Unearned revenue at quarter end was $7.1 billion and cash and short-term investments totaled $3.3 billion.
We saw a positive impact to both revenue and unearned revenue in Q1 due to the benefits from our sales momentum exiting the fourth quarter. Unearned revenue also benefited from an increase in the percentage of our business from hybrid cloud subscription and SaaS offerings. Growth in revenue plus the sequential change in unearned revenue for the quarter was 25% or up 20% when excluding an ASC 606 reclassification adjustment which reduced unearned revenue in Q1 of fiscal 2019. License revenue plus the sequential change in unearned license revenue grew 23% year-over-year or up 17% excluding the same 606 reclassification adjustment in Q1 of 2019.
We exited Q1 with $48 million of license backlog compared to $147 million at the end of Q4 for FY19. The NSX portfolio license bookings for Q1 increased over 40% year-over-year and NSX was included in all of our top 10 deals. We're especially pleased with the progress we're making in the number of VMware partner led deployments of NSX, an area we've been focused on for some time as we scale the business. vSAN license bookings grew over 50% year-over-year in Q1 with a total customer count growing to over 20,000. vSAN was included in 8 of our top 10 deals in Q1. We were also pleased with the performance of VxRail this quarter which included the first full quarter selling VxRail with all versions of vSAN.
This will open new market opportunities particularly through the commercial channel with Dell. EUC license bookings grew in the low teens year-over-year, driven by adoption of our subscription offerings such as Workspace ONE. EUC was included in 9 of the top 10 deals this quarter and we had our second-largest Workspace ONE deal ever with one of the world's leading manufacturers, which are using it globally across their lean mobility approach for over 30,000 employees. Over 50% of EUC product bookings are now sold to SaaS and we expect this percentage to increase over time. Core SDDC license bookings grew in the low teens year-over-year in Q1 with total Core Sddc bookings up in the low double digits.
Cloud management license bookings as well as total cloud management bookings grew in the strong double digits year-over-year. Cloud management license bookings growth was driven by vRealize and CloudHealth which increased the value in hybrid cloud management solutions for our customers. Compute license bookings grew in the mid single digits driven primarily by growth in VCPP with total compute bookings up in the high single digits year-over-year. In Q1, we repurchased $591 million in stock under our current repurchase authorization which had $243 million remaining at the end of the quarter.
We're pleased to announce an additional stock repurchase authorization of $1.5 billion through the end of FY21. Q1 was a good start to FY20 and we're maintaining our positive outlook for the year, which we shared last quarter. For the full year, we continue to expect total revenue growth of 11.8% year-over-year to $10.030 billion. License revenue growth of 12.8% to $4.275 billion, a non-GAAP operating margin of 33% and non-GAAP earnings per share of $6.49 per share on a diluted share account of 417 million shares.
We also continue to expect cash flow from operations of $3.950 billion and free cash flow of $3.630 billion. For Q2, FY20 total revenue is expected to be $2.425 billion, up 11.5% year-over-year with license revenue of $1 billion, an increase of 11.1% year-over-year. We expect a non-GAAP operating margin of 32.6% and non-GAAP EPS of $1.55 per share on a diluted share account of 417 million shares. Detailed guidance for Q2 and the full year is contained in the slide deck on our website accompanying this call.
In summary, we will continue to enhance our value to customers and partners with a premium technology portfolio providing foundation for hybrid and multi cloud environments. Q1 performance has us well-positioned to execute on our plans for the year and we're reiterating our previously issued guidance for revenue growth, profitability and cash flow generation. We look forward to updating you on our progress again next quarter.
With that I'll turn the call back over to Paul.
Thanks Zane. Before we begin the Q&A, I'll ask you to limit yourself to one question consisting of one part so we can get to as many people as possible. Operator, let's get started.
[Operator Instructions]
And first from RBC Capital Markets we have Matt Hedberg.
Hey guys, thanks for taking my question. I wanted to start out with a high-level question here and drill down a little bit more into the expanded Microsoft relationship that you guys talked about at Dell World. And I guess at a high level, how do you think about the Azure relationship versus AWS? I'm wondering if you could talk about that from both a technical perspective as well as how you think about it contributing to top line growth?
Hey, thanks, Matt. This is Pat and I appreciate the question, and obviously the market interest on this was high because ultimately customers were looking and think of these as customers with big VMware footprints who are starting to take advantage of Azure, and said, boy, I'd really like to see my strategic partners come together, and that was really what brought us together, and thus the announcements that Dell Technologies World with Microsoft, Dell, and Amazon.
And the Azure VMware solution is customer driven, further enabling customers to take advantage of VMware in their Azure environment, delivered by virtual streaming cloud, simple. It's a Microsoft offered service. In addition to that, we announced the client partnership Microsoft 365 Azure AD now fully capable in a Workspace ONE environment, and then some of the forward-looking things that we announced with Microsoft as well in networking management, Azure services on-premise. So, a very compelling announcement with them. In contrast, the Amazon relationship and AWS being the preferred partnership for VMware, really the VMware cloud offering is offered by VMware, is really the leading offer that we bring to the marketplace for customers to take advantage of the VMware footprint overall.
The way I like to think about this the VMware technology or the VMware Cloud Foundation is available three ways. One is customers can run it either the software or the software/hardware with our HCI offering. Second is our partners can run it for the customer; and examples of that are clearly IBM, the great momentum we've seen there, or now Azure and the other 4,000 plus cloud partners that we have, or VMware will run it for them. And we announced the VMware cloud on AWS two plus years, great momentum there, but we've also announced now VMware cloud on outpost as well as VMware cloud on Dell EMC on-premise.
So, we see that now this is comprehensive hybrid cloud strategy that really is unmatched in the industry and bringing Azure into that offering, a lot of excitement from Azure centric Microsoft customers, and we continue to see great momentum for VMware Cloud Foundation on-premise, and uniquely for a preferred offering with VMware cloud in AWS.
Hey, Matt. This is Zane. I'll just add, as we continue to grow that part of the business it will be part of our VCPP revenue which I highlighted earlier was part of our hybrid cloud and SaaS category which grew 35% nicely year-over-year. So we expect that area to continue to see continued growth augmented by the Microsoft relationship.
Next, we have Kash Rangan from Bank of America Merrill Lynch. Please go ahead.
Hi, congratulations on a fantastic start to the fiscal year. Pat, I had a question for you. When you look at the two big cloud providers you're partnering with AWS and Microsoft, previously the world [ph] top AWS was compression to your total available market and that Microsoft there is going to be the competition, so you got compression and competition. It turns out that you're partnering with them. I'm just curious to see if the partnerships at a fundamental level are really driven by the customer need for these companies to integrate for the technology or do you think that competition and compression have really changed and that this new opportunity that you're all playing into, I don't want to put words in your mouth, but it is a different one, it's not a zero-sum game, but it's net additive to everybody. So in that spectrum of zero-sum to completely additive in a new world, where are we and how can this -- how long can this marriage sustain? Is it a partnership or a marriage? Thank you.
Yes, and thanks for the question, Kash and appreciate the comments on a good quarter. And we really see that it's far in the end of the additive spectrum today. And ultimately if we go back to the highest level, we said it's a hybrid multi-cloud future. Customers now are uniformly agreeing with that positioning. Everybody believes there's going to be multiple clouds. They're going to take advantage of multiple clouds and inside of that this hybrid where I can migrate to the cloud not having to re-platform for the cloud is a powerful statement. And for that we've seen hybrid strategies now come forward from Amazon, Azure, Google, IBM have all agreed with that positioning that VMware began with five plus years ago.
So, we think that positioning is highly aligned with the customer interest and the industry is all supporting it. Also, clearly at this point, for us, it's about accelerating people's ability to expand their workloads, be able to move to this more efficient hybrid cloud world, and we're seeing customers accelerate their use of new technologies, and NSX is a great example where they're now benefiting from that in the VMware cloud. They're able to take on more automation, reduce their, I'll say IT and operations cost because we're running that stack for them.
So we're essentially expanding the effective TAM right because we're reaching into these operational costs that they would have. So I'd say at this point I'm continuing to see the great growth rate of the public clouds. Our growth rate, we would clearly say we're way on the end of the spectrum, but this is additive to the business opportunity for us long term, and every evidence we're getting from customers is we're on the right track.
Next from Jefferies we have John DiFucci. Please go ahead.
Thank you. Pat and Zane, on echo cash, the results here look really strong. And that just in the face of what really looks like sort of a generally soft quarter for many infrastructure software players. And also some apps players. I don't know even you guys didn't raise guidance. I don't want to spend --I don't want to spend too much time on that because it was really strong results here, but VMware aside I guess Pat then Zane two of you have anything to contribute here. Do you have -- you have a view that we don't have right like why do you think so many others are seeing some softness out there because they are. I mean I got three companies tonight and you guys are a lot better than the other two.
I don't know. Is it -- are there hardware issues out there like with tariffs and other things which is now trickled to infrastructure software and then apps, but that seems too early for something like that to happen. Do you have any thing you can share with us here? And also why hasn't this a really affected you?
Well, thanks John for the comments. We do think that that these mac-- some of the macroeconomic effects, they'll affect everybody right in that environment. As you've heard me say before, there's going to be some winners and losers on different technology trends in side of that. Overall, we continue to be optimistic. We can continue to be optimistic on the long-term view of the market that IT growth is going to outpace GDP growth. Enterprise and software growth will outpace IT growth. We see this sort of tech breaking out of tech and more businesses right being becoming centered on their technology differentiation.
Clearly, some of the trade aspects, some of the different cyclicality going on affects different players, but overall we remain optimistic. Our strategy is resonating well into the future and super pleased with the execution of my team to deliver a very solid quarter. Zane?
Yes. John, I would just add to Pat's point, we're not immune to it. We feel good about the start of the year as you pointed out. And we feel like we've had some consistency as we've thought about the year, and it's playing out to some degree in to some extent as we expected. I'll also point out that the customer ROI for their investment in our product portfolio is strong. So I think that resonates. I think the strategy resonates and we're benefiting from that. I think some of what you're seeing across the broader landscape, there's some volatility and obviously uncertainty tie to the macroeconomic environment. But beyond that we're comfortable with what we're seeing early and feel good about our forecast for the year.
Next question is from Raimo Lenschow with Barclays.
Hey, congrats from me as well and I actually wanted to stay on John's point. And like we know all --we all know how the game goes and software you kind of beat and raise. And you had a good Q1, your billings was actually -- billing score was actually stronger than the results we saw on Q1 but you cannot maintain the guidance is just, Pat was that Zane kind of overruling you being his conservative sales again or if anything you see on the horizon that kind of changed your normal approach? Thank you.
Well I'll start and Zane will certainly help me here. I mean we will say we maintain guide for the first half and for the year, right. And with it and with that we do feel comfortable. There is some uncertainty in the macro environment. We're certainly influences the view right in the marketplace. We are seeing a strong execution by our teams that are continuing to give us strength. We think our strategy is well positioned for it, but it's still early in the year. We got a lot of year to go execute yet with some of those uncertainties around us. And we're feeling quite good about the momentum that we see going into Q2 and for the second half.
Yes, Raimo. I'd just add it, it was actually a good conversation with Pat. So I think we're aligned on this one. It's a good start to the year. We did see a little bit of FX pressure early on in the year here that came in a little bit ahead of what we would have otherwise had thought for the year. And again I think we're confident that we're not naive to think about the global uncertainty out there. And as we look at, John mentioned, some of our competitors seeing a little bit of weakness and some volatility and variability quarter-to-quarter. So again we're comfortable where, how we're positioned for the year and like the forecast.
Next we have Karl Keirstead with Deutsche Bank.
Thanks. Question for you Zane. The adjusted total billings growth of 20% was the highest we've seen in a while against a pretty tough compare. I'm wondering if you could just elaborate on that strength. I think you mentioned that the hybrid cloud SaaS bucket contributed to it, but maybe you could add a little bit more. And just further to that I know most of the DR, our maintenance renewals, so I'm wondering what that strong total billings number says about the renewal environment that you're facing through the remainder of the year. Thank you.
Yes, sure, Karl. Happy to give some more color on that. I did mention that we clearly benefited from the strength that we saw in the fourth quarter. The teams have done a terrific job moving in and maintaining that momentum from the fourth quarter. So we feel good about the aggregate bookings number, SaaS bookings have been growing nicely and that's obviously a key part of the bookings element there. And then the renewals business has been strong too. We not only saw the benefit from some PSO strength in the quarter, which is from strong attach that we saw with ELAs towards the second half of last year. So we saw some good services side of the things. And then the renewals came in strong as well.
So generally speaking I'd say that's given us again the motivation to put out the guide and to maintain the guide that we put out earlier in the year, but that's the strength that you're seeing overall I'd say from the total booking side.
Next we have Walter Pritchard with Citi.
Hi, thanks. Similar question I guess for Zane on the license billings. I think that's a bigger spread that you've seen between the billings and the revenue growth rate. And I guess is we're thinking about this going forward is there anything that I guess logically we think that you might see license revenue growth accelerated bit from where it is now. Why wouldn't that be the case and maybe a little bit more detail similar to what Karl just asked about specifically the license billing performance.
Yes. It's a great question, Walter. I guess to add on to the Karl piece on total bookings, the license bookings as we've tracked and we've had some dialogue here with the team. The reason you'll see that spread increase I'd say for a period would be the growth that we've seen in SaaS bookings versus what comes to revenue. As you know, with the perpetual product the license bookings will translate into revenue faster than the SaaS bookings will translate into SaaS revenue. So we've been very pleased with the strength we've seen on the SaaS booking side. And as you would expect with any type of SaaS products and with our growing portfolio of SaaS products, you'll see more and more bookings come in and then the revenue will ramp as you would expect with any kind of SaaS products.
So it's a great observation. We like the strength we're seeing on both and again I point on the fourth quarter is both for total bookings, as well as SaaS bookings and license bookings. The strength we're seeing will obviously continue through the course of the year, but that discrepancy between the bookings and the revenue will be driven by unearned revenue on the SaaS side.
And just to pile onto that a bit, we've been emphasizing the hybrid cloud SaaS component of our business. And now up to 12% now of our business we're seeing the growth rate 35% this quarter. These are good numbers and the strategic relevance of VMware Cloud. We've expanded that VMware Cloud on outpost, VMware Cloud on Dell EMC, the expanding role of CloudHealth more of our Workspace ONE as a subscription and a service the VCPP strength, all of these are emphasizing in a direction that we as a company are highly committed to go drive this portion of our business over time. And starting to see that effect will have some of the financial implications, Zane, but it also is creating the strategic implications that we think is giving us the ability to present more value to our customers and right above some of these other effects that we might be seeing in the market.
Next we have JPMorgan or excuse me from JPMorgan we have Mark Murphy.
Sorry, Walter you did get cut off. Pat, I wanted to ask you if you had any thoughts on how the US Federal government's $10 billion JEDI contract will settle out just given that VMware is now the hybrid partner for both Amazon and Microsoft. You see that opportunity for VMware to participate in the JEDI contract.
Yes and the simple answer is our comments on the FedRAMP that we commented on in the call are exactly in that vein, right. We were off getting our FedRAMP approval. We're now in the FedRAMP approval process to achieve our ATO or authority to operate. That's a critical milestone for us as that occurs and obviously while we can't forecast the winners or losers in that and what protests may or might not occur a part of it, we are getting our offering ready to be able to be a cloud provider to government. And I'll also point out that our installed base with the federal governments with defense with the various military intelligence communities is very high.
So we see this as a significant opportunity and one that is an extension of our VMware cloud offering is quite critical to us. So we are aligning ourselves up in a way that I think positions us to be participating with that. Obviously, our partnership with Amazon of this area is very strong and important to us. And we're hopeful that becomes a nice piece of business over time.
Next from Raymond James we have Michael Turits.
Hey, guys, good evening. Two things, one, I was wondering if you could just be a little bit more specific about the components of SaaS and hybrid that were the most meaningful contributors to growth? And also I was wondering if you could comment on that trailing of the US business ?
Sure. I'll touch on the hybrid portion. I think we've laid them out, the majority of the revenue coming out of hybrid cum SaaS right now continues to be the VCPP program which as we've touched on has shown tremendous strength over the years. We've also done a great job. I also pointed out with EUC, our Workspace ONE product is now 50% SaaS. So I'd say that's another large contributor. And then on the new acquisition site, we're very excited about CloudHealth which as we acquired last year and then on the organic side we have a VMC on AWS that's showing great promise in the marketplace.
So combination with all of those and a growing portfolio continues to contribute to the 35% that we saw increase in that category.
And I won't tell Paul but I'm answering the second question which we cut you off at some. I'm a nice guy he's not, but the just a geo perspective for you, we had strength in EMEA and APJ, very strong quarters for both of them. And Americas was not as strong in Q1 but we --that comes on the back of an extraordinary Q4 record-breaking results in America in Q4. And we did take the opportunity to do some territory realignments and some adjustments to or to set us up for longer-term growth. We also brought in the new Americas leader, Dom Delfino, successful, proven internal leader who's stepping into this role in Q1.
So we feel good about the geo outlook and we think that we better set ourselves up for a long-term sustained growth.
Next we have Keith Bachman with BMO Capital Markets.
Thank you very much for taking the question. I wanted to revisit on compute specifically which has been really steady and very strong. And the context of the question is data center points even in the last quarter including Red Hat rail have gotten meaningfully worse arguably. And so I'm trying to understand what really driving the steady strength of compute and is mixed playing a role including the launch of vSphere Platinum? And Zane just as part of the question I was wondering if you could just comment on, are you still suggesting to investors that we think about compute growing, it comparable with rates to what you just provided in the current quarter. Thank you very much.
Sure, Keith. I'll start then I'll hand it over to Pat. We haven't changed our longer-term outlook which is I think we've talked about for some time now which is lower single digits for compute, but we've been thrilled to be outperforming that guide and outperforming that outlook for a variety of reasons. I touched on the growth that we've seen with VCPP and how that contributes to compute license strength. So we're comfortable with where, how things are progressing there, we have not changed our longer-term outlook however.
Yes and obviously as customers are betting on the VMware stack compute is essential element as I've described it the sort of the springboard for all of the other products to build on top of. It was built into every one of our large deals this quarter. The emerging solutions with cloud, VMware cloud on AWS with VxRail with VMware Cloud Foundation, all of those include compute as embedded element to it. And the breadth and depth of the portfolio that builds on that it really emphasizes that central role, but now it's expanding to the whole portfolio and customers are buying the whole portfolio. The renewal comments earlier, good renewal rates expanding or roles that we have for it's also in the face of no change really is a foundational element of our portfolio that shown much more endurance and strength and really looks positive for the future.
Thank you, Keith. Oh I am sorry Keith, on the Platinum comment, I'll say we're excited about the capability. We're starting to get traction. It's not a material element to the out performance at this point. And I hope to be able to update that comment in a more positive way in a quarter or two. But at this point, we say it's not material yet but getting very early positive signs.
Next from Bernstein we have Mark Moerdler.
Thank you very much. And thanks for taking my question. Changing focus a little bit to look at the all the work you've done and the investments you've done on the container side of the opportunity. Can you give us some sort of color on how much is the container business at this point is versus the server virtualization business is driving revenue and how you think that's going to change over time?
Yes. I'll say in the broadest sense and I think this would be an industry statement. Containers are very early in its life and the amount of production deployments of containers is very modest at this point. But there is consensus that people are going to move to a container centric model in the future. So it's one of these I'll say terrible wonderful situations where the business impact is quite modest at this point. But the consensus building in the industry around kubernetes and containers is really quite spectacular. And as I've described it more broadly, Mark, it's the Java of the next two decades, right. It was that important before. From a VMware perspective, VMware PKS continues to gain customer traction with the Heptio acquisition, we've expanded our portfolio.
We now have VMware PKS essentials as we've talked about full opens source version of kubernetes that we support, combined with PKS Enterprise. Our expanded position with the kubernetes community as seen at KubeCon this last week where VMware is now the second largest contributor to kubernetes and the CNCF, we're expanding our go-to-market capacity, as well as we've rolled out new partner programs in this area and with NSX-T our most recent version the enterprise PKS offering has gotten far more scalable and secure as well.
So all of these taken together VMware is looking at the kubernetes and container opportunity as a huge incremental opportunity for customers. And one that we believe we're going to be uniquely positioned to materialize in the marketplace.
Next from Cross Research we have Shannon Cross.
If you could restart your question, Shannon? We missed the first part of it.
Okay, sorry. No, I'm just curious if you can talk a bit more about what you're seeing with regard to the Dell relationship cross sales with Dell sales people having VMware as part of their quotas at this point. And if you're seeing any pushback from any of your other channel partners as maybe the family is getting to be a little closer. Thank you.
Thank you very much. And overall Dell, with Dell we had another strong quarter. So we've seen the Dell relationship continued to expand quite nicely. But even more than an expanding nicely what we're seeing is that the jointly engineered solutions, right, and that's really where I think the real value creation is really gaining a momentum super-excited with the announcement of the Dell Unified Workspace now fully built on Workspace ONE. The strong quarter for VxRail and you saw that in the overall HCI vSAN numbers for us and Dell's expanded programs and their partners becoming joint partners of VMware and Dell. That said the other partners and the rest of our channel is strong as well. And we saw a good growth in that area of our business.
We just completed in April our partner Leadership Summit where we've expanded our offerings and empowerment of our partners through new competencies, a new partner connect program. So Dell grew very strongly but we had good growth in the full set of partners including all of those aren't part of the Dell programs as well. And as Zane mentioned a couple of cases, we're starting to see partner generated sales of some of our new offerings, more momentum in NSX. Some of the first VMC deals done exclusively through the partner channels. And that gives us a great optimism for that area of our business going forward.
Thank you, Shannon. We have one more question in the queue. So this will be the last question.
The last question will come from Gregg Moskowitz with Mizuho.
Okay, thank you and glad I got in under the wire. I'd like to ask a question on NSX which had another very good quarter of license bookings. Pat, can you double click on this and tell us what you're seeing in terms of demand and use cases for NSX-T and NSX-V?
Yes. Thank you very much and NSX continues to be a crucial product for us and a continuing to see the great results is something that brings us great encouragement for the long-term position. And as we think about NSX what it really says is that customers are looking for a way to do multi-cloud networking that isn't depending on underlying infrastructure. And this is laid out in our virtual cloud networking strategy overall. And as we think about that being extended to the edge with Velo cloud, extended into the container environment with our service mesh capabilities and our PKS offerings now becoming part of the native cloud offerings with VMware cloud on AWS, the Azure network integration.
The bundling of it into our cloud foundation and our VMC solution and our VxRail solution, it just plays a central role in the VMware strategy. In Q1, 10 of our Ten top deals included it, it also has now become part of the standard selling motion of VMware and we're seeing a great success with customers who are now adopting it not in one use case, but really across and basing on their entire networking strategy, such as with a major insurance provider this past quarter we've seen it across industries as well into financial into retail the NSX-T launched as I mentioned earlier our biggest ever launch of NSX-T 2.4. And now supporting bare metal environments and public cloud environments.
So it really has become a platform for us in every respect. And as we're looking to do more in the security space with the app defense and the new announcement of the distributed firewall capabilities, we're really delivering functionality that was never possible before. And as customers look at that it really is sort of I'll just say the customer behavior now is like, okay, how do we do NSX now as opposed to why should we do NSX are looking at competitive alternatives, it's really now a question of okay we're bought in, now where do we begin this journey with you and that's an exciting phase of our NSX journey.
And clearly with the channel partners coming in, Dell's expanded offerings here, we think that run a track for continued strategic growth in this critical area of our business for the long term.
Thank you, Gregg. And Pat before your final remark just to since we have a few minutes and just to prove I'm not that terrible of a guy I want to Walter to see about his second question. And if you wouldn't mind I'll actually read it. It's about the expanded set of cloud relationships such as Microsoft and platforms like outpost. Do they open up new scenarios that are seeing customers have interest including that beyond the prior backup and disaster recovery and test and dev and data center evacuation type of use cases.
Yes and we'd say generally against that every one of these is just giving more use cases that customers can take advantage of. And for instance while we've talked about burst of workloads and cloud flexibility, it's been more of a desire on the part of customers and customers really haven't been able to materialize that yet. These expanded capabilities really create integrated hybrid ability where customers really can say, oh, I really can do workload balancing now. And we're starting to see this, I'll say hybrid operation starting to emerge as a real use case. Also some of the DR use cases, storage costs and network costs really didn't allow those at scale where some of these expanded capabilities are now offering them to be the case.
Also that in a number of cases, customers weren't able to empty in with workloads that had latency or governance issues where now they can be cloud managed on-premise, it's lowering the barriers for hybrid cloud adoption on the part of customer. So every one of these we believe is accelerating the opportunity for customers to get to the cloud in a more rapid cost-efficient and agile way. And as they become more production scale, right, more proof points in the marketplace, I think it looks forward to great things to come.
Thank you, Pat.
End of Q&A
Very good. Well, in conclusion Q1, pleased with our continued progress. Our broad platform for hybrid and multi cloud is continuing to grow. It's continuing to become more strategic and important both to our customers but also for our partner agreements that have been announced this quarter with Amazon Web Services, with Dell and Microsoft. We see ourselves as very well-positioned to execute in our plans for the full year. And we look forward to continuing to update you on our progress again next quarter. Thank you very much.
And ladies and gentlemen, that does conclude our conference for today. We thank you again for joining us. You may now disconnect.