Over the past 12 to 18 months, an interesting split has opened up in the performance of enterprise IT giants: While companies depending heavily on hardware and IT services revenue streams have often struggled to deliver positive sales growth, several of their software-focused peers have fared much better.

The divide says a lot about how the adoption of cloud apps and infrastructure services has been a tsunami that certain types of old-guard enterprise IT firms are much better-equipped to handle than others. And also the degree to which IT spending, whether in the cloud or elsewhere, continues shifting toward software relative to hardware.

Virtualization software giant VMware Inc. (VMW) served up the latest evidence of this split on Tuesday, when it issued its second full-year guidance hike in less than three months. VMware now expects fiscal 2018 (ends in January 2018) total revenue and license revenue to each rise 10%, better than prior guidance for 7% and 6% growth. The company also hiked its July quarter guidance, estimating total revenue grew 11.9% to 12.6% and license revenue 12.9% to 14.4%.

Things looked very different in the first quarter of 2016. Then, VMware's license revenue (drives future maintenance revenue) fell 1% annually due to weak demand for its mainstay vSphere server virtualization platform amid growing use of cloud infrastructures relying on non-VMware virtualization software. Total revenue, propped up by maintenance contracts for past license deals, grew a modest 5%.

Today, enterprise vSphere sales are still under pressure. But VMware is offsetting this with strong growth for its NSX network virtualization and vSAN storage virtualization platforms, as well as healthy demand for its PC virtualization and enterprise mobility software offerings. The company is also getting a boost from software sales to cloud service providers that are part of its vCloud Air Network ecosystem, and -- though it's still early -- claims it's seeing strong interest for a managed cloud serviceit's launching for companies looking to run vSphere workloads in both their own data centers and on Amazon Web Services (AWS).

Microsoft CEO Satya Nadella.
Microsoft CEO Satya Nadella.

Microsoft Corp. (MSFT) has seen its top-line growth improved markedly in recent quarters as well. After excluding the impact of the LinkedIn acquisition, the company's total GAAP revenue rose 8% in the June quarter, a sharp contrast to the 9% decline seen in fiscal 2016 (ended in June 2016).

Watch More with TheStreet :

Admittedly, Microsoft's fiscal 2016 performance wasn't that bad after one accounts for the impact of Windows 10 revenue deferrals and a nosediving phone business that's no longer a priority, but there has nonetheless been a big pickup in growth rates for the company's enterprise-facing businesses. Surging Azure public cloud revenue is helping, as is strong Office 365 uptake and healthy demand for products such as Windows Server, Dynamics 365 (cloud business apps) and SQL Server (databases).

Oracle Corp. (ORCL) , meanwhile, has begun delivering meaningful revenue growth after many quarters of struggling to do so as its on-premise business app and database sales slumped due to cloud adoption. Larry Ellison's firm expects revenue to be up 4% to 6% in its August quarter, a turnaround from the 3% decline recorded in fiscal 2016 (ended in May 2016). Oracle's acquisition of cloud business app vendor NetSuite is helping, but so is strong organic growth for several cloud product lines.

Oracle archrival SAP SE (SAP) has had little trouble growing its top line in recent years, thanks to rising cloud app sales and growing adoption of the company's Hana in-memory database. SAP's total revenue grew 10% in Q2 with the help of 29% cloud revenue growth, and is forecast to rise 6% to 7% during the whole of 2017.

Oracle's Larry Ellison.
Oracle's Larry Ellison.

For their parts, Adobe Systems Inc. (ADBE) and Autodesk Inc. (ADSK) are growing as they continue successfully transitioning customers from up-front software license sales to subscriptions that cover PC, cloud and mobile apps. Adobe's revenue rose 26% in its May quarter with the help of a 34% increase in annualized recurring revenue (ARR) for its core Digital Media business. Autodesk's annual revenue, though having dropped by about $500 million over the past couple of years due to the short-term impact of its business model change, is expected on average by analysts to grow by over $1.2 billion from fiscal 2018 (ends in January 2018) to fiscal 2020.

By contrast, IT giants such as IBM Corp. (IBM) , HP Enterprise Co. (HPE) and Cisco Systems Inc. (CSCO) are struggling to keep hardware growth positive, partly because cloud giants are on the whole much less enthusiastic about using their hardware than Global 2000 enterprises.

IBM's Systems division revenue fell 10% in Q2 and 18% in 2016 (mainframe cyclicality played some role, but wasn't the only factor. HPE's Enterprise Group -- it provides IT hardware and related services -- saw revenue drop 13% in the April quarter. While Cisco has seen good software and security growth, its Switching and Data Center (server) segments each posted 4% product sales declines over the company's past three reported quarters.

What accounts for the difference? There are a few factors at work.

    1. While enterprises are often replacing their purchases of on-premise IT hardware with cloud services relying on commodity hardware made by Asian contract manufacturers, they're replacing purchases of on-premise software licenses with cloud subscriptions that often -- though not always, as Salesforce.com Inc. (CRM) and Workday Inc. (WDAY) will tell you -- come from the same software firms. And while these subscriptions produce less revenue over the short-term, the numbers posted by Microsoft, Adobe and others show they can produce more over the long run as more apps and services get added to packages.
    2. Total IT software spend is growing much faster than hardware spend. Gartner forecasts enterprise software spending will rise 8.6% in 2017 to $326 billion, while spending on "data center systems" will grow just 1.2% to $170 billion (on-premise spending growth will be negative). That's giving older software firms room to grow as businesses embrace not only cloud apps, but also products such as SAP's Hana, VMware's NSX and vSAN and Red Hat Inc.'s (RHT) operating systems and middleware.
    3. Overall, companies with a strong software focus are seeing better software sales growth than more diversified firms selling some mixture of hardware, software and services. IBM's big Cognitive Solutions software unit saw revenue drop 2.5% in Q2. HPE's Software unit, much of which is set to be spun off and merged with British software firm Micro Focus, posted an 11% April quarter revenue drop.

Markets certainly aren't oblivious to how many software-focused enterprise IT firms have been executing, as a look at the performance of their shares since early 2016 demonstrates. But given the underlying trends lifting them, some of these names might still have room to run if markets stay favorable and the companies continue executing well.

More of What's Trending on TheStreet:

More from Stocks

Goldman Sachs Really Doesn't Like Apple's Stock

Goldman Sachs Really Doesn't Like Apple's Stock

Lee Munson on the Market, Trade and the Possibility of a Recession

Lee Munson on the Market, Trade and the Possibility of a Recession

Buy These 3 Killer Tech Stocks, Says Wall Street's #1 Analyst

Buy These 3 Killer Tech Stocks, Says Wall Street's #1 Analyst

How Tariffs Can Impact the U.S. and the Global Capital Markets

How Tariffs Can Impact the U.S. and the Global Capital Markets

Here's Why Alphabet, Facebook and Amazon Earnings May Overshadow Tariff Worries

Here's Why Alphabet, Facebook and Amazon Earnings May Overshadow Tariff Worries