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

[Skye Jacobs]

Bottom line: Broadcom's acquisition of VMware has yielded impressive financial results, according to the company's recent quarterly earnings report. For the quarter ending February 2, Broadcom reported revenue of $14.92 billion, marking a significant 25% year-over-year increase. Net income surged to $5.5 billion, a remarkable 315% rise compared to the same period last year.

A key driver of this growth is the integration of VMware into Broadcom's infrastructure software business unit, which posted revenue of $6.7 billion in Q1 2025 – up from $4.55 billion in the same quarter last year.

Although Broadcom no longer reports VMware's revenue separately, the substantial increase suggests VMware's contributions have been considerable. Before the acquisition, Broadcom's software sales experienced only modest growth, with increases of 3% in FY 2023 and 4% in FY 2022.

To better understand the impact of VMware, it helps to examine Broadcom's software revenue before the acquisition. In Q4 2023, Broadcom recorded $1.97 billion in software revenue, bringing its full-year total for FY 2023 to $7.6 billion. VMware, in its last quarter as an independent company, reported $3.4 billion in revenue. Given these figures, Broadcom has successfully increased VMware's quarterly revenue by approximately $1 billion in just over a year.

Graph by App Economy Insights

This sharp revenue growth is largely attributed to Broadcom's strategy of bundling VMware products into higher-priced subscription packages rather than selling them as standalone licenses.

The largest of these bundles is VMware Cloud Foundation (VCF), which includes a full stack of VMware technologies. During Broadcom's earnings call, CEO Hock Tan revealed that by the end of Q1, approximately 70% of the company's top 10,000 customers had adopted VCF. The shift to VCF, combined with higher costs for existing customers, likely accounts for the substantial revenue increase.

Additionally, some of the rise in net income can be attributed to cost-cutting measures at VMware. In its final standalone quarter, VMware reported an operating margin of 16%. In contrast, Broadcom's software business delivered a 76% operating margin in Q1 2025, up from 59% a year ago.

Despite the apparent financial success of the acquisition, Broadcom's handling of VMware has sparked widespread customer dissatisfaction.

Reports indicate that some customers have faced price hikes ranging from three to six times their previous costs, with the most extreme case being a reported twentyfold increase. As a result, many are now at a crossroads, debating whether to remain with VMware or seek alternative solutions.

While Broadcom's financial results suggest its strategy has effectively driven revenue growth, the long-term implications remain uncertain, as concerns persist about potential customer migrations away from VMware.

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

 

[bviktor]

Yeah, it pays off, until the contracts expire and the migrations end. We’re dumping them too, they just don’t know it yet.

 

[VariableSpike]

Yeah, it pays off, until the contracts expire and the migrations end. We’re dumping them too, they just don’t know it yet.

Exactly, heard from plenty of friends in the industry that renewals happened because of technical reasons and migrations not being able to be done before renewal, not because there is any love left for vmware / broadcom

 

[NumberNine]

This isn't sustainable. Eventually they'll need to create value or sink.

Would be interesting to hear from a VMware employee how their daily life has changed since the acquisition.

 

[Axeia]

There's two types of VMware customers, those looking for alternatives and those currently testing alternatives.
None is using it because they think they're getting a fair deal. They've been exploiting their customer base so hard that massively losing customers can't be that far away.

The only other company I've seen screwing up their pricing so bad is Adobe.

 

[toooooot]

We won't know if this was the right move till some time passes. If their business dips in 5 years, this would be why. If everything is perfect, then VM is this much better than the rest of similar products

 

[A Tabby Person]

Can Broadcom do an Adobe or is it akin to Qualcom, that just got Sherlocked by Apple? How strong is the BC ecosystem? Will the competition break BC's VM lock-in? Will customers stay & pay the new BC tax? As toooooot wrote, this will take lotsa tech time.

 

[s3thra]

We're planning to move away from them. If they hadn't of jacked up the price so high we wouldn't have ever thought to consider an alternative hypervisor. We're still on their old perpetual license, so we're good for now, but sooner rather than later we'll need to begin migrating off.

 

[Theinsanegamer]

We won't know if this was the right move till some time passes. If their business dips in 5 years, this would be why. If everything is perfect, then VM is this much better than the rest of similar products

We've already seen major customers move away from VM ware, anything they can move to other hypervisors they are moving, post haste. Anyone who has stuff they cant migrate fast enough they are migrating everything around it.

Can Broadcom do an Adobe or is it akin to Qualcom, that just got Sherlocked by Apple? How strong is the BC ecosystem? Will the competition break BC's VM lock-in? Will customers stay & pay the new BC tax? As toooooot wrote, this will take lotsa tech time.

There are multiple competent enterprise VM alternatives. VMware shot themselves in the gut with a bazooka and is still in the cope phase telling themselves they're gonna be juuuuust fine.

 

[The Talking Tech]

It's so sad to see people "unhappy with price hikes" but they still buying from those corporations... people have such a defeated mentality that all they do is comply with the corporate abuse.

 

[Burty117]

I’ve got plenty of customers looking to move away from VMware because of the price hikes.

Out of curiosity, what hypervisors have people been promoting? Hyper-V? ProxMox? XCP-ng? Would love to hear what people have been picking as alternatives for various client sizes.

 

[RudyBob]

Has anyone EVER met a customer that was happy about a price increase? Honestly you are owed nothing but the pursuit of happiness as well as life and liberty

 

[s3thra]

I’ve got plenty of customers looking to move away from VMware because of the price hikes.

Out of curiosity, what hypervisors have people been promoting? Hyper-V? ProxMox? XCP-ng? Would love to hear what people have been picking as alternatives for various client sizes.

Early days, but I'm going to look seriously into Hyper-V with System Center Virtual Machine Manager (SCVMM). We are a mostly Microsoft shop, so I figure looking into this first makes sense.

 

[Jyrkz]

It will never pay off. Without people using it, it will go extinct. We have massive AI around the corner. do they really think that uppping the price would fix their ****. Its as stev jobs said that he figured it out. Market sellers get more to climb the ladder then the real company people. So in the end you have a marketer running a company that has 'no soul', is for only profits.

 

[Theinsanegamer]

It's so sad to see people "unhappy with price hikes" but they still buying from those corporations... people have such a defeated mentality that all they do is comply with the corporate abuse.

I suppose you've either never worked in IT, or at least nowhere that wasn't a fly-by-night operation, but you dont just......drop your contractor overnight. You've got to do explorational outreach to analyze your different options, get pricing plans, write up plans for how you are going to implement these, frankly, massive changes without impacting normal operations, set up new support contracts, pass ALL this through management, ece. Then you have to actually MOVE all this stuff, and it's not a word file, you cant just import a VM and hit "go". ATT is still trying to move some of their critical infrastructure over a year later.

These things take time, unless you'd like to explain tot he boss why you're costing them so much per minute in lost operations that VMware's insane cost looks like a loose penny on the street.

 

[Bao Nguyen]

Moved to proxmox and won't be looking back

 

[Watzupken]

The share price spiked because in the short run, profits will be elevated. But such poor business practice will drive customers away. It’s a mafia business model that burns any goodwill.

 

[VariableSpike]

Moved to proxmox and won't be looking back

Use proxmox for my homelab already and it works great, the going rate seems to be switching to hyper v if they are a microsoft shop, or proxmox/xcp-ng if not

 

[Beerfloat]

There's two types of VMware customers, those looking for alternatives and those currently testing alternatives.

What is this 'customers' thing you mention?

We at Broadcom only know about hostages.

 

[ScottSoapbox]

It's so sad to see people "unhappy with price hikes" but they still buying from those corporations... people have such a defeated mentality that all they do is comply with the corporate abuse.

You understand their customers are other corporations, right? So "defeated end consumers" does not apply.

Changing major IT systems at large companies takes time. They are paying just long enough to switch to a competitor. Next year's profits won't be nearly as good.

 

[koohansen]

Almost all of my customers are migrating out of VMware, including clients who are sensitive to changes are moving out after being spooked by the price jump

 

[TheBigT42]

This isn't sustainable. Eventually they'll need to create value or sink.

Would be interesting to hear from a VMware employee how their daily life has changed since the acquisition.

A LOT of high education intuitions are ACTIVELY searching for alternatives. Also, the search is being made easier by Veeam expanding the Hypervisors it works with. Proxmox and Nutanix seam to be the front runners. XCP-ng (Based on XEN) with Orchestra could possibly replace both VMware and Veeam.