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(This June 1 story corrects paragraph 10 to show VMware's Q1 billings was $1.67 bln, not $1.35 bln, and above, not below, Wall Street estimates. Also removes reference to analyst comments)
(Reuters) - Virtualization software maker VMware Inc (VMW.N) on Thursday reported a better-than-expected first-quarter profit and raised its full-year forecast, fueled by strong demand for its software used by companies to boost cloud computing efficiency.
Still, VMware shares fell as much as 6.6 percent in extended trading after the company released its results, but pulled back to trade down about 2 percent after VMware provided the forecast on a call with analysts.
VMware has benefited from strong demand from businesses for its virtualization software that allows one computer or server to perform the work of multiple machines by emulating them, which boosts efficiency and helps cut costs.
The company's net income rose 44.1 percent to $232 million, or 56 cents per share, in the first quarter ended May 5. Excluding one-time items, it earned 99 cents per share.
The company said revenue climbed 9.3 percent to $1.74 billion, with services revenue rising 10.7 percent to $1.13 billion.
Analysts had expected a profit of 95 cents per share and total revenue of $1.71 billion, according to Thomson Reuters I/B/E/S.
VMware's adjusted operating margin of 28.5 percent was lower than its margin of more than 30 percent in the past three quarters.
The company, which is majority-owned by Dell Technologies Inc (DVMT.N), said research and development costs jumped 18.2 percent, while sales and marketing expenses rose 3.7 percent.
VMware's billings of $1.67 billion was above Wall Street's estimates of $1.61 billion.
The company's revenue forecast for the current quarter was better than expected, while it raised its full-year revenue forecast.
VMware forecast current-quarter revenue of $1.84 billion-$1.89 billion, while analysts' were expecting $1.81 billion.
Its profit forecast of $1.11-$1.14 per share for the period edged past analysts' estimate of $1.09.
The company raised its full-year revenue forecast to $7.61 billion from a prior forecast of $7.57 billion.
Shares of Palo Alto, California-based VMware have risen about 58 percent in the last 12 months.
Reporting by Laharee Chatterjee in Bengaluru; Editing by Sai Sachin Ravikumar