VMware reported stronger-than-expected first-quarter fiscal 2021 earnings and revenue today driven by strong subscription and software-as-a-service (SaaS) revenue. This included its hybrid-cloud service with Amazon Web Services (AWS), which saw triple-digit growth during the quarter.

VMware’s Q1 revenue topped $2.73 billion, an increase of 12% from the first quarter of fiscal 2020. The company reported fiscal first-quarter net income of $386 million, or 92 cents per share, compared with $380 million, or 89 cents a share, a year ago.

Additionally, the combination of VMware subscription and SaaS as well as license revenue reached $1.23 billion during Q1, a 17% increase from last year. And subscription and SaaS revenue alone for the quarter grew 39% year over year to $572 million. This segment includes its end-user compute business, Carbon Black security business, and VeloCloud SD-WAN products, as well as VMware Cloud on AWS, all of which saw strong growth during the quarter.

“We have also seen that COVID-19 is not stopping customers from their cloud migration projects with customers like IHS Markit advancing their partnership with us this quarter and leaning on VMware Cloud on AWS to meet their needs,” said VMware CEO Patrick Gelsinger.

Also, for the first time since VMware and AWS announced the initial availability of their hybrid cloud service three years ago, VMware executives gave hinted at an uptick in VMware Cloud on AWS use. CFO Zane Rowe said the AWS partnership “had triple-digit revenue growth rates for the quarter,” although executives have yet to provide a specific customer count or revenue amount for VMware Cloud on AWS.

Gelsinger said it typically takes two years for a new product to gain traction in the market. “And when we first launched the VMC service on AWS, we thought we could do better than that,” he said on the earnings call. “Well guess what, it took two years, and starting late last year — the two-year anniversary — we saw it really start to take off nicely in the market, and seeing the triple-digit growth this quarter was really exciting. Consuming host counts in Q1 was up over 200% year on year so customers are starting to consume and utilize it.”

Carbon Black, which VMware bought for $2.1 billion last year, grew its customer count to more than 15,000 customers during Q1, Rowe said.

Earlier this year VMware COO Sanjay Poonen said since the Carbon Black acquisition, VMware is now a $1 billion security business. And just a couple weeks ago, the vendor announced it reached a deal to acquire Kubernetes security startup Octarine for an undisclosed amount.

On top of its security ambitions, Octarine also plays into VMware’s cloud-native and Kubernetes push, or what VMware calls its Modern Applications business unit. “Our Modern Applications business, which includes Pivotal, Heptio, and Wavefront, saw product bookings and performance ahead of expectations” in Q1, Rowe said.

VMware bought Pivotal last year for $2.7 billion, and it acquired Heptio for $550 million in late 2018. At its VMworld 2019 event, the vendor unveiled its overarching Kubernetes portfolio called Tanzu, which included both acquisitions plus Bitnami, which it bought for an undisclosed amount last May. And earlier this year, VMware embedded Kubernetes natively into vSphere, which allows developers and IT teams to use a single platform to manage both legacy workloads built on virtual machines (VMs) and newer, containerized apps.

Wavefront, meanwhile, is VMware’s cloud-native monitoring platform with microservices capabilities that it acquired in 2017.

While its Modern Applications unit is another one where VMware doesn’t break out specific revenue numbers, Gelsinger echoed Rowe’s statement about that part of the business beating Q1 expectations. He said he expects its Kubernetes portfolio to be “the most critical product area for us over the next couple of years.”

“The whole Tanzu business area performed well in Q1 overall ahead of our expectations,” he said. “We’ve seen it starting to come into our big deals as well. Five of our top 10 deals this quarter included Tanzu.”

When asked about the competitive landscape in the container space, Gelsinger said it comes down to five players: IBM with Red Hat, the three top public cloud providers (AWS, Microsoft Azure, and Google Cloud), and VMware.

“And when we think about those five, we’re uniquely positioned with a multi-cloud, hybrid-cloud strategy, deep partnerships with Amazon, and partnerships with Azure and Google as well, a huge footprint that we can leverage in vSphere that really allows us to present this integration of containers and VMs — we don’t think it’s an or, we think it’s an and,” Gelsinger said. “So we can do both of those and make it just seamless for customers to be more efficient with their Kubernetes and container strategies. We really like our strategy here, customers resonate with it. And we’re pretty excited about the good results we saw in Q1.”

One area where VMware didn’t shine was in its core software-defined data center (SDDC) products, which saw bookings decline to mid-single digits during the quarter and total SDDC bookings down 7% percent year over year. “These results were negatively impacted by COVID-19 and followed a particularly strong Q1 last year when core SDDC products and total bookings grew in the low teens year over year,” Rowe said.

Looking ahead to the rest of fiscal 2021, Rowe said he expects VMware’s on-premises products including SDDC to take more of a hit from the COVID-19 pandemic compared to “other emerging parts of the business” like cloud and SaaS products.