Broadcom Posts Strong Financial Growth Thanks to VMware
Broadcom's acquisition of VMware has produced impressive financial results, according to the company's latest earnings report. In the quarter ended February 2, Broadcom reported revenue of $14.92 billion, up 25% from a year earlier. Net income reached $5.5 billion, a jump of 315% from the same period last year.
A key driver of this growth is the integration of VMware into Broadcom's infrastructure software business. In the first quarter of 2025, that segment generated $6.7 billion in revenue, compared with $4.55 billion in the same period a year earlier.
Although Broadcom no longer reports VMware revenue separately, the strong growth suggests that VMware has contributed significantly to the company's results. Before the deal, Broadcom's software segment grew only modestly, with increases of 3% in fiscal 2023 and 4% in 2022.
For comparison, before the merger Broadcom had posted $1.97 billion in software revenue in the fourth quarter of 2023, bringing its full-year 2023 software revenue to $7.6 billion. Meanwhile, VMware reported $3.4 billion in revenue in its last quarter before the merger. These figures show that Broadcom lifted VMware's quarterly revenue by roughly $1 billion in just over a year.
Customers Push Back on Broadcom's New Pricing Strategy
Broadcom's strong revenue growth comes from its software bundling strategy. The company has moved from selling individual licenses to premium subscription bundles, the most prominent of which is VMware Cloud Foundation (VCF), a solution that brings all of VMware's technologies together.
According to CEO Hock Tan, by the end of the first quarter about 70% of Broadcom's 10,000 largest customers had switched to VCF. This change in business model, together with steep price increases for existing customers, may explain the company's strong revenue growth.
Beyond higher prices, part of the net income also comes from cost-cutting measures at VMware. Before the merger, VMware had an operating margin of 16%, while Broadcom reached 76% in the first quarter of 2025, up from 59% a year earlier.
Even though the deal has delivered major financial benefits for Broadcom, customer dissatisfaction is growing. Many reports indicate that customers are facing price increases of 3 to 6 times, and in some cases as much as 20 times. As a result, many businesses are weighing whether to leave VMware and look for alternatives.
While Broadcom's strategy has driven strong revenue growth, the long-term impact remains unclear. If customers keep leaving VMware, Broadcom could face market share risks down the road.
