Broadcom has won. 70 percent of large VMware customers bought its biggest bundle
(2025/03/07)
- Reference: 1741325707
- News link: https://www.theregister.co.uk/2025/03/07/broadcom_q1_fy2025/
- Source link:
Broadcom’s acquisition of VMware appears to be a big success, on the balance sheet at least, after the company announced a big majority of its top 10,000 customers have decided to acquire its Cloud Foundation stack and posted strong growth.
The chips-and-code company today [1]announced its results for the quarter ended February 2nd, its first for FY 2025. Revenue of $14.92 billion represented 25 percent year-on-year growth. Net income of $5.5 billion was a 315 percent increase on the result from Q1 2024.
Broadcom no longer breaks out VMware revenue: sales of Virtzilla’s wares are all now lumped into its infrastructure software business unit, which posted $6.7 billion revenue for Q1, up from $4.55 billion for the same quarter last year. Direct comparisons of those numbers are not wise as Broadcom owned VMware for four fifths of Q1 2024.
[2]
Consider, instead, the $1.97 billion Q4 2023 and $7.6 billion FY 2023 software revenue that Broadcom recorded before it acquired VMware. Know, also, that Broadcom’s software sales grew by just three percent in FY 2023 and four percent in FY 2022.
[3]
[4]
That slow growth means the jump from $1.97 billion software revenue in Q4 2023 to $6.7 billion in Q1 2025 is likely due to VMware, which in its last quarter as an independent company reported $3.4 billion revenue.
It therefore looks a lot like Broadcom has added around $1 billion to quarterly VMware revenue in a little over a year.
[5]
How did it do that? As The Register has often explained, Broadcom stopped selling standalone VMware products and now only sells bundles of code and support under subscriptions that are more costly that Virtzilla’s previous licenses.
The biggest of those bundles is VMWare Cloud Foundation (VCF) and on Broadcom’s earnings call CEO Hock Tan told investors “We are upselling customers to a full stack VCF … and as of the end of Q1, approximately 70 percent of our largest 10,000 customers have adopted VCF.”
Bigger bills for existing VCF customers, and upselling others to VCF, probably explains the extra revenue.
[6]
Some of the extra net income probably comes from cutting costs at VMware, which in its final standalone quarter reported operating margin of 16 percent. Broadcom’s software business delivered 76 percent operating margin in Q1, an improvement on the 59 percent reported a year ago.
The Register continues to hear of [7]big migrations away from VMware, but on the numbers Broadcom’s plans appear to have succeeded.
[8]Broadcom starts beta for VMware Cloud Foundation 9, the release it reckons will douse user anger
[9]Talk of Broadcom and TSMC grabbing pieces of Intel lights fire under investors
[10]Ingram Micro to 'stop doing business' with Broadcom, downgrade to 'limited engagement' on VMware
[11]Apple reportedly building AI server processor with help from Broadcom
Hyperscale heaven
The other eye-catching news in Broadcom’s results came in the form of news that two additional (and un-named) hyperscalers have engaged the company to create custom AI accelerators. Broadcom already had three active customers for those “XPUs”. Now it has four that Hock Tan described as “deeply engaged”.
Buyers of custom silicon tend not to reveal the specs of the stuff they buy, but Tan gave a hint by revealed Broadcom is taping out “the industry's first two nanometer AI XPU packaging as we drive towards a 10,000 teraflops XPU.” He also mentioned work to deliver current hyperscale customers clusters that run 500,000 accelerators, then push to the million-accelerator clusters Broadcom’s three existing hyperscale customers want to run by 2027.
Tan mentioned accelerated R&D on Broadcom’s Tomahawk Ethernet switches and said million-accelerator clusters will use Ethernet too.
Semiconductor revenue hit $8.2 billion, an 11 percent year-on-year lift.
$4.1 billion of it came from AI-related products, 77 percent year-on-year growth and $300 million ahead of forecasts thanks to “stronger shipments of networking solutions to hyperscalers on AI.”
Selling to, and living with, Donald Trump
On the same day as Broadcom’s results announcement, the CEO also used his [12]blog to suggest the US government should build more VMware-powered on-prem private clouds in line with what he described as the second Trump Administration’s “two key objectives: reduce excessive federal government spending and advance the modernization of the federal government’s IT infrastructure.”
Tan’s post reveals that since acquiring VMware, Broadcom has consolidated 42 datacenters into seven facilities.
Asked about the Trump administration’s policy of introducing tariffs, Tan said it is too early to predict their impact.
For what it is worth, Broadcom’s share price is off by about 25 percent for the calendar year. One likely reason is the hit all AI-related stocks took after DeepSeek’s debut led to a rethink of how much hardware will be needed to run AI workloads. Trump’s tariffs may be another, as most Broadcom products are manufactured outside the USA.
After-hours trading following Broadcom’s earnings announcement saw its scrip jump from around $180 to settle at just over $200 apiece. That’s still well below the price for most of January and February 2025, but above the price per share through calendar 2024.
One more thing: Tan was asked if he’s shopping for more companies. “No, I'm too busy,” he replied. “We're too busy doing AI and VMware. We're not thinking of it at this point.”
So maybe those rumors about [13]Broadcom buying a chunk of Intel were just that – rumors. ®
Get our [14]Tech Resources
[1] https://investors.broadcom.com/news-releases/news-release-details/broadcom-inc-announces-first-quarter-fiscal-year-2025-financial
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2025/02/05/rackspace_vmware_planet9_migration/
[8] https://www.theregister.com/2025/03/04/vmware_vcf_9_beta_starts/
[9] https://www.theregister.com/2025/02/20/intel_carveup/
[10] https://www.theregister.com/2024/12/16/ingram_micro_vmware_broadcom_deal_ends/
[11] https://www.theregister.com/2024/12/12/apple_ai_chip_broadcom/
[12] https://www.broadcom.com/blog/for-cost-and-mission-effective-federal-it-modernization-go-private
[13] https://www.theregister.com/2025/02/17/intel_acquisition_speculation/
[14] https://whitepapers.theregister.com/
The chips-and-code company today [1]announced its results for the quarter ended February 2nd, its first for FY 2025. Revenue of $14.92 billion represented 25 percent year-on-year growth. Net income of $5.5 billion was a 315 percent increase on the result from Q1 2024.
Broadcom no longer breaks out VMware revenue: sales of Virtzilla’s wares are all now lumped into its infrastructure software business unit, which posted $6.7 billion revenue for Q1, up from $4.55 billion for the same quarter last year. Direct comparisons of those numbers are not wise as Broadcom owned VMware for four fifths of Q1 2024.
[2]
Consider, instead, the $1.97 billion Q4 2023 and $7.6 billion FY 2023 software revenue that Broadcom recorded before it acquired VMware. Know, also, that Broadcom’s software sales grew by just three percent in FY 2023 and four percent in FY 2022.
[3]
[4]
That slow growth means the jump from $1.97 billion software revenue in Q4 2023 to $6.7 billion in Q1 2025 is likely due to VMware, which in its last quarter as an independent company reported $3.4 billion revenue.
It therefore looks a lot like Broadcom has added around $1 billion to quarterly VMware revenue in a little over a year.
[5]
How did it do that? As The Register has often explained, Broadcom stopped selling standalone VMware products and now only sells bundles of code and support under subscriptions that are more costly that Virtzilla’s previous licenses.
The biggest of those bundles is VMWare Cloud Foundation (VCF) and on Broadcom’s earnings call CEO Hock Tan told investors “We are upselling customers to a full stack VCF … and as of the end of Q1, approximately 70 percent of our largest 10,000 customers have adopted VCF.”
Bigger bills for existing VCF customers, and upselling others to VCF, probably explains the extra revenue.
[6]
Some of the extra net income probably comes from cutting costs at VMware, which in its final standalone quarter reported operating margin of 16 percent. Broadcom’s software business delivered 76 percent operating margin in Q1, an improvement on the 59 percent reported a year ago.
The Register continues to hear of [7]big migrations away from VMware, but on the numbers Broadcom’s plans appear to have succeeded.
[8]Broadcom starts beta for VMware Cloud Foundation 9, the release it reckons will douse user anger
[9]Talk of Broadcom and TSMC grabbing pieces of Intel lights fire under investors
[10]Ingram Micro to 'stop doing business' with Broadcom, downgrade to 'limited engagement' on VMware
[11]Apple reportedly building AI server processor with help from Broadcom
Hyperscale heaven
The other eye-catching news in Broadcom’s results came in the form of news that two additional (and un-named) hyperscalers have engaged the company to create custom AI accelerators. Broadcom already had three active customers for those “XPUs”. Now it has four that Hock Tan described as “deeply engaged”.
Buyers of custom silicon tend not to reveal the specs of the stuff they buy, but Tan gave a hint by revealed Broadcom is taping out “the industry's first two nanometer AI XPU packaging as we drive towards a 10,000 teraflops XPU.” He also mentioned work to deliver current hyperscale customers clusters that run 500,000 accelerators, then push to the million-accelerator clusters Broadcom’s three existing hyperscale customers want to run by 2027.
Tan mentioned accelerated R&D on Broadcom’s Tomahawk Ethernet switches and said million-accelerator clusters will use Ethernet too.
Semiconductor revenue hit $8.2 billion, an 11 percent year-on-year lift.
$4.1 billion of it came from AI-related products, 77 percent year-on-year growth and $300 million ahead of forecasts thanks to “stronger shipments of networking solutions to hyperscalers on AI.”
Selling to, and living with, Donald Trump
On the same day as Broadcom’s results announcement, the CEO also used his [12]blog to suggest the US government should build more VMware-powered on-prem private clouds in line with what he described as the second Trump Administration’s “two key objectives: reduce excessive federal government spending and advance the modernization of the federal government’s IT infrastructure.”
Tan’s post reveals that since acquiring VMware, Broadcom has consolidated 42 datacenters into seven facilities.
Asked about the Trump administration’s policy of introducing tariffs, Tan said it is too early to predict their impact.
For what it is worth, Broadcom’s share price is off by about 25 percent for the calendar year. One likely reason is the hit all AI-related stocks took after DeepSeek’s debut led to a rethink of how much hardware will be needed to run AI workloads. Trump’s tariffs may be another, as most Broadcom products are manufactured outside the USA.
After-hours trading following Broadcom’s earnings announcement saw its scrip jump from around $180 to settle at just over $200 apiece. That’s still well below the price for most of January and February 2025, but above the price per share through calendar 2024.
One more thing: Tan was asked if he’s shopping for more companies. “No, I'm too busy,” he replied. “We're too busy doing AI and VMware. We're not thinking of it at this point.”
So maybe those rumors about [13]Broadcom buying a chunk of Intel were just that – rumors. ®
Get our [14]Tech Resources
[1] https://investors.broadcom.com/news-releases/news-release-details/broadcom-inc-announces-first-quarter-fiscal-year-2025-financial
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Z8rR2h54Ytz0ztFCF7UHywAAAAk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2025/02/05/rackspace_vmware_planet9_migration/
[8] https://www.theregister.com/2025/03/04/vmware_vcf_9_beta_starts/
[9] https://www.theregister.com/2025/02/20/intel_carveup/
[10] https://www.theregister.com/2024/12/16/ingram_micro_vmware_broadcom_deal_ends/
[11] https://www.theregister.com/2024/12/12/apple_ai_chip_broadcom/
[12] https://www.broadcom.com/blog/for-cost-and-mission-effective-federal-it-modernization-go-private
[13] https://www.theregister.com/2025/02/17/intel_acquisition_speculation/
[14] https://whitepapers.theregister.com/
Re: For now
Roj Blake
We're in the same boat. Our renewal was too close to be able to safely move away from VMWare in time, but we're actively looking at a couple of alternatives.
Re: For now
Geoff Campbell
That was exactly my first thought. Migrating a big virtual installation isn't trivial, so customers will be buying time to evaluate and plan.
GJC
Re: For now
Doctor Syntax
The opposite site of that 70% figure is that the other 30% have already made their escape and may well represent the future.
For now
We use VMware at work, and recently renewed our support contract for 12 months.
Not because we like VMware and the way Broadcom are conducting themselves, but we feel it's a massive change and one we're ill equipped for right now. So within the next 12 months we will be leaving to use something else.
And I'm fairly sure if you asked the guys in these companies why they renewed, a good number of the 70% would tell you a similar story.