PALO ALTO, Calif. (

TheStreet

) --

VMware

(VMW) - Get Report

blew past Wall Street's estimates in its

third-quarter

results, boosted by an uptick in spending by the U.S. government.

The virtualization trailblazer reported revenue of $490 million, up 4% on the same period last year, and well above analysts' estimate of $474 million.

Excluding items, the software maker earned 24 cents a share on net income of $95 million, compared to 24 cents a share and net income of $93 million in the prior year's quarter. Analysts surveyed by Thomson Reuters had predicted earnings of 20 cents a share.

VMware's results provide yet more evidence of an IT spending

rebound

, although international sales look set to surpass its U.S. business. VMware's U.S. revenue declined 1% year over year to $246 million, whereas overseas sales grew 9% to $244 million over the same period.

"Our solid third-quarter results were driven by strength in the U.S. Federal sector, increased transaction volumes and particularly robust growth in our maintenance renewals," said Mark Peek, the VMware CFO, in a statement released after market close. "While the economic environment remains challenging, we have improved visibility into our business and believe that the next two quarters will follow seasonal patterns."

The company also issued bullish guidance. For the fourth quarter, VMware expects revenue between $540 million and $560 million, although the first quarter of fiscal 2010 will be down sequentially. Wall Street expects the virtualization specialist to report fourth-quarter revenue of $523 million.

Despite its strong guidance, VMware acknowledged that there are still clouds hanging over the tech sector.

"We still remain cautious about the speed and the pace of the economic recovery," said Peek, during a conference call after market close. "When you listen to the economic views of the largest companies in the industry there remains uncertainty."

VMware, which competes with

Microsoft

(MSFT) - Get Report

and

Oracle

(ORCL) - Get Report

, exited the third quarter with cash and equivalents of $2.2 billion. The company's cash haul, however, took a $356 million hit from its

acquisition

of

SpringSource

.

The software maker's strong results should nonetheless spell good news for parent company

EMC

(EMC)

, which reports its own

third-quarter results

before the market opens Thursday.

VMware shares rose 84 cents, or 1.89%, to $45.77 in extended trading.

--

Reported by James Rogers in New York