Broadcom's bold VMware strategy pays off financially, but customers are unhappy with price hikes

Bottom line: Broadcom's acquisition of VMware has yielded awesome financial results, according to nan company's caller quarterly net report. For nan 4th ending February 2, Broadcom reported gross of $14.92 billion, marking a important 25% year-over-year increase. Net income surged to $5.5 billion, a singular 315% emergence compared to nan aforesaid play past year.

A cardinal driver of this maturation is nan integration of VMware into Broadcom's infrastructure package business unit, which posted revenue of $6.7 cardinal successful Q1 2025 – up from $4.55 cardinal successful nan aforesaid 4th past year.

Although Broadcom nary longer reports VMware's gross separately, nan important summation suggests VMware's contributions person been considerable. Before nan acquisition, Broadcom's package income knowledgeable only humble growth, pinch increases of 3% successful FY 2023 and 4% successful FY 2022.

To amended understand nan effect of VMware, it helps to analyse Broadcom's package gross earlier nan acquisition. In Q4 2023, Broadcom recorded $1.97 cardinal successful package revenue, bringing its full-year full for FY 2023 to $7.6 billion. VMware, successful its past 4th arsenic an independent company, reported $3.4 cardinal successful revenue. Given these figures, Broadcom has successfully accrued VMware's quarterly gross by astir $1 cardinal successful conscionable complete a year.

Graph by App Economy Insights

This crisp gross maturation is mostly attributed to Broadcom's strategy of bundling VMware products into higher-priced subscription packages alternatively than trading them arsenic standalone licenses.

The largest of these bundles is VMware Cloud Foundation (VCF), which includes a afloat stack of VMware technologies. During Broadcom's net call, CEO Hock Tan revealed that by nan extremity of Q1, astir 70% of nan company's apical 10,000 customers had adopted VCF. The displacement to VCF, mixed pinch higher costs for existing customers, apt accounts for nan important gross increase.

Additionally, immoderate of nan emergence successful nett income tin beryllium attributed to cost-cutting measures astatine VMware. In its last standalone quarter, VMware reported an operating separator of 16%. In contrast, Broadcom's package business delivered a 76% operating separator successful Q1 2025, up from 59% a twelvemonth ago.

Despite nan evident financial occurrence of nan acquisition, Broadcom's handling of VMware has sparked widespread customer dissatisfaction.

Reports bespeak that immoderate customers person faced value hikes ranging from 3 to six times their erstwhile costs, pinch nan astir utmost lawsuit being a reported twentyfold increase. As a result, galore are now astatine a crossroads, debating whether to stay pinch VMware aliases activity replacement solutions.

While Broadcom's financial results propose its strategy has efficaciously driven gross growth, nan semipermanent implications stay uncertain, arsenic concerns persist astir imaginable customer migrations distant from VMware.