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Broadcom’s VMware strategy is producing the financial results it wanted, but not universal customer approval. In the quarter ended May 4, 2025, Broadcom reported GAAP net income of $4.965 billion, up about 134% from $2.121 billion a year earlier—not 124%—while customers and partners reported sharply higher VMware renewal bills after the shift to bundled subscriptions and per-core licensing.
What Broadcom actually reported
Broadcom announced its second-quarter fiscal 2025 results on June 5, 2025. Revenue reached $15.004 billion, up 20% year over year. GAAP net income rose from $2.121 billion to $4.965 billion, a calculated increase of approximately 134%. Non-GAAP net income increased 44%, from $5.394 billion to $7.787 billion.
The 124% figure used in some coverage does not match the GAAP figures in Broadcom’s release. It should not be described as VMware’s standalone profit growth: Broadcom reports VMware within its infrastructure-software segment rather than publishing a separate VMware net-income line.
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Infrastructure-software revenue was $6.596 billion, up 25%. Broadcom’s semiconductor business also contributed heavily: AI semiconductor revenue exceeded $4.4 billion, up 46%. The earnings increase therefore reflects both VMware-related infrastructure software and strong semiconductor demand, especially from artificial-intelligence customers.
Broadcom’s Q2 FY2025 release provides the reported figures and quarter dates.
How much of the improvement came from VMware?
VMware was acquired on November 22, 2023, so the year-over-year comparison increasingly includes periods under Broadcom ownership. It is not a clean before-and-after experiment. Still, several mechanisms clearly support Broadcom’s improved economics.
Higher recurring revenue
Broadcom has moved VMware customers from many perpetual products toward subscription offers, principally VMware Cloud Foundation (VCF) and VMware vSphere Foundation. Recurring contracts make revenue more predictable and give Broadcom greater control over renewal, packaging and support revenue.
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Broadcom chief executive Hock Tan said VMware’s quarterly operating cost base fell from roughly $2.4 billion to $1.2 billion, while margins increased from below 30% to approximately 70% by the fourth quarter of fiscal 2024. Those are management-reported VMware figures, not separately audited standalone results. The Register reported the claims.
A smaller portfolio
Broadcom says it reduced VMware’s portfolio from more than 160 products to a smaller set centered on VCF and vSphere Foundation. Fewer products can reduce development, support, sales and channel complexity, while bundles can raise revenue per customer.
Per-core licensing can also expand the billable base as server CPU core counts rise. These changes explain why revenue and margins can improve even if some smaller customers leave or reduce their VMware footprint.
What changed for VMware customers
Broadcom’s post-acquisition model changed both what customers buy and how capacity is measured.
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Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →- Sales of relevant standalone perpetual VMware products ended, and support or subscription renewals for perpetual products are being phased out according to offer and contract timing.
- VCF became the flagship enterprise private-cloud bundle; vSphere Foundation became the simplified platform aimed at smaller and midsized customers.
- Licensing shifted toward subscriptions and per-core measurement rather than the older socket-oriented model.
- Bundles may include storage, networking, security and management capabilities that a customer did not previously license.
- Minimum-core rules, reduced discounting flexibility, longer commitments and changed partner arrangements can increase the effective bill.
- Broadcom introduced subscription portability for certain VCF deployments on supported hybrid-cloud endpoints.
Broadcom describes the changes as portfolio simplification and a predictable subscription model. Customers experience the financial effect through their actual renewal quote, which depends on edition, licensed cores, support tier, discount, contract term, geography, partner involvement and hardware plans.
How large are the reported price increases?
There is no cited Broadcom-wide average increase. Industry reporting has described selected customer and channel experiences ranging from roughly 200% to 500%, with some sources citing threefold to tenfold increases. The Register and CRN reported those ranges.
Those reports are not evidence that every customer received the same increase. A bill can rise because of subscription conversion, per-core minimums, bundled functionality, lost standalone options, support changes or a different discount—not simply because a published list price went up. Anecdotes claiming increases above 1,000% should be treated as individual cases, not market averages.
Why Broadcom’s strategy can raise profit
- Predictable revenue: subscriptions replace one-time perpetual-license economics with recurring contracts.
- Higher account value: bundles can attach more capabilities to each customer and reduce the ability to buy only one component.
- Core-based expansion: charging by core can increase fees when organizations refresh servers with denser CPUs.
- Lower complexity: a smaller portfolio can reduce product, support, sales and channel costs.
- Pricing leverage: VMware’s deep operational integration makes immediate migration difficult for many enterprises.
The trade-off is retention risk. Aggressive monetization may prompt customers to shrink VMware estates, standardize on alternatives or avoid future purchases. Short-term financial success does not by itself prove long-term customer loyalty.
Broadcom’s defense of the model
Broadcom argues that the former VMware portfolio was too complex and that an integrated private-cloud platform can reduce total cost of ownership. It positions VCF as a combination of virtualization, storage, networking, security and management, with subscription funding for continuous development. Broadcom also says portability can let qualifying VCF customers use the platform across supported hybrid-cloud endpoints.
Broadcom’s claim that VCF lowers total cost of ownership depends on assumptions about utilization, staffing, hardware life cycles, automation, workload density and avoided public-cloud spending. Without comparable customer baseline data, lower TCO remains a vendor position rather than a universal result. Broadcom announced general availability of VCF 9.0 on June 17, 2025; its announcement describes the platform’s intended role.
Are customers staying or leaving?
Broadcom chief executive Hock Tan said about 87% of VMware’s top 10,000 customers had signed up for VCF in the second quarter of fiscal 2025, according to Network World and The Register. Earlier milestones cited by Broadcom included roughly 70% of that group in the first quarter and 4,500 customers by the end of fiscal 2024.
“Signed up,” “licensed,” “adopted” and “implemented” are not interchangeable. Purchasing VCF can reflect switching costs, compliance requirements and the lack of time to migrate, rather than enthusiasm. Some customers may sign a contract while reducing workloads, delaying implementation or planning a phased exit.
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Who is most exposed to higher costs?
- Large estates running many CPU cores.
- Customers using products discontinued or folded into bundles.
- Organizations approaching a perpetual-license support-renewal date.
- Service providers and cloud operators whose economics depend on VMware licensing.
- Universities, nonprofits and smaller organizations that previously received special discounts.
- Teams with limited staff for testing and migration.
- Regulated organizations facing lengthy platform-approval cycles.
A small, standardized vSphere deployment may have more migration flexibility than an enterprise using vSAN, NSX, Aria, Tanzu, disaster recovery and private-cloud management together.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to do before renewing
- Inventory the metric: document sockets, cores, virtual machines and any minimum quantities in the proposed contract.
- Map actual usage: separate features you use from features included in the bundle but not required.
- Model terms: compare one-, three- and five-year total contract value, including annual versus upfront payment.
- Test growth: model CPU-core increases after hardware refreshes and the effect on subscription charges.
- Right-size support: confirm whether the proposed support tier matches operational and regulatory requirements.
- Price migration honestly: include discovery, retraining, parallel licensing, application certification, downtime risk and rollback.
- Negotiate through alternatives: obtain comparable proposals from Broadcom and authorized partners, with every assumption written down.
When migration is realistic
A migration business case should cover network and storage redesign, backup and disaster recovery, Kubernetes dependencies, identity integration, infrastructure-as-code, application certification, staff training, parallel operation and exit obligations. Compare five-year total cost, not just the first-year hypervisor license.
| Platform | Most suitable when | Important limitation |
|---|---|---|
| Nutanix AHV | An integrated hyperconverged platform and enterprise management layer are acceptable. | It changes the broader infrastructure platform, not just the hypervisor. |
| Microsoft Hyper-V / Azure Local | The organization is standardized on Windows Server, Azure, identity and Microsoft management. | Economics depend on Microsoft licensing, hardware and Azure requirements. |
| Red Hat OpenShift Virtualization | VMs and containers should converge on Kubernetes/OpenShift. | It requires OpenShift skills and can be excessive for virtualization alone. |
| Proxmox VE | A capable team wants an open-source, lower-cost, self-managed platform. | Enterprise certification, support and ecosystem depth may be less suitable. |
| Scale Computing | Distributed edge, retail, healthcare or midsized sites prioritize simplicity. | It may not replace VMware-specific integrations and automation. |
The strategic verdict
Broadcom appears to have extracted substantial financial value from VMware quickly through recurring subscriptions, bundling, cost reduction and pricing leverage. The official Q2 FY2025 figures support approximately 134% GAAP net-income growth, while AI semiconductors and other businesses make it misleading to credit VMware alone.
For customers, the rational answer is not automatically “renew” or “leave.” Measure the proposed per-core bundle against actual usage, migration risk, staffing and five-year costs. Broadcom’s strong conversion numbers show VMware’s embeddedness and bargaining power; they do not settle whether the new model will retain customers once contracts expire and credible alternatives are fully tested.
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