Backside line: Broadcom’s acquisition of VMware has yielded spectacular monetary outcomes, in accordance with the corporate’s current quarterly earnings report. For the quarter ending February 2, Broadcom reported income of $14.92 billion, marking a major 25% year-over-year enhance. Internet revenue surged to $5.5 billion, a outstanding 315% rise in comparison with the identical interval final 12 months.
A key driver of this development is the mixing of VMware into Broadcom’s infrastructure software program enterprise unit, which posted income of $6.7 billion in Q1 2025 – up from $4.55 billion in the identical quarter final 12 months.
Though Broadcom not studies VMware’s income individually, the substantial enhance suggests VMware’s contributions have been appreciable. Earlier than the acquisition, Broadcom’s software program gross sales skilled solely modest development, with will increase of three% in FY 2023 and 4% in FY 2022.
To raised perceive the influence of VMware, it helps to look at Broadcom’s software program income earlier than the acquisition. In This autumn 2023, Broadcom recorded $1.97 billion in software program income, bringing its full-year complete for FY 2023 to $7.6 billion. VMware, in its final quarter as an impartial firm, reported $3.4 billion in income. Given these figures, Broadcom has efficiently elevated VMware’s quarterly income by roughly $1 billion in simply over a 12 months.
This sharp income development is basically attributed to Broadcom’s technique of bundling VMware merchandise into higher-priced subscription packages reasonably than promoting them as standalone licenses.
The most important of those bundles is VMware Cloud Basis (VCF), which features a full stack of VMware applied sciences. Throughout Broadcom’s earnings name, CEO Hock Tan revealed that by the tip of Q1, roughly 70% of the corporate’s prime 10,000 prospects had adopted VCF. The shift to VCF, mixed with greater prices for present prospects, probably accounts for the substantial income enhance.
Moreover, a number of the rise in web revenue will be attributed to cost-cutting measures at VMware. In its closing standalone quarter, VMware reported an working margin of 16%. In distinction, Broadcom’s software program enterprise delivered a 76% working margin in Q1 2025, up from 59% a 12 months in the past.
Regardless of the obvious monetary success of the acquisition, Broadcom’s dealing with of VMware has sparked widespread buyer dissatisfaction.
Studies point out that some prospects have confronted worth hikes starting from three to 6 instances their earlier prices, with probably the most excessive case being a reported twentyfold enhance. Consequently, many at the moment are at a crossroads, debating whether or not to stay with VMware or search different options.
Whereas Broadcom’s monetary outcomes recommend its technique has successfully pushed income development, the long-term implications stay unsure, as considerations persist about potential buyer migrations away from VMware.
