Broadcom’s VMware Acquisition: One Year Later - Impact, Strategies, and Market Response

In November 2023, Broadcom completed its landmark $61 billion acquisition of VMware, assuming an additional $8 billion in debt for a total deal value of $69 billion. As we approach the acquisition’s 18-month mark, Broadcom’s aggressive restructuring of VMware’s business model and product portfolio has triggered significant changes in the virtualization and cloud computing landscape. This acquisition, one of the largest in tech history, continues to shape enterprise IT strategies and vendor relationships in 2025. Recent financial reports and market analyses provide valuable insights into how this acquisition is playing out for both Broadcom and its customers.

Broadcom’s Transformation of VMware: Current Status

Broadcom has wasted no time implementing sweeping changes to VMware’s business model. According to recent statements from CEO Hock Tan during Broadcom’s fiscal first-quarter 2025 earnings call, the company is “over 60% done” moving VMware users from perpetual to subscription licensing. This transition represents a fundamental shift in how customers access and pay for VMware’s virtualization technologies, moving from one-time purchases to recurring revenue models.

The product portfolio has undergone dramatic consolidation, with Broadcom eliminating approximately 56 standalone VMware products from its offerings. The company has strategically pivoted to focus on VMware Cloud Foundation (VCF) as its flagship product, integrating storage, networking, and data services into a unified private cloud solution. During the earnings call, Tan revealed that “approximately 70% of our largest 10,000 customers have adopted VCF” as of the end of Q1 2025. This suggests significant traction for Broadcom’s streamlined product strategy among enterprise customers.

Another notable change is in Broadcom’s financial reporting structure. The company no longer provides a breakout of VMware’s specific contributions to their infrastructure software sales, making it more difficult to isolate VMware’s direct financial performance. This integration into Broadcom’s broader business reporting reflects the complete absorption of VMware’s operations into the parent company.

Financial Performance Under Broadcom

From a purely financial perspective, the acquisition appears to be delivering strong results for Broadcom. In their first quarter fiscal year 2025 results announced on March 6, 2025, Broadcom reported impressive growth across key metrics:

The company generated total revenue of $14.92 billion, representing a 25% increase year-over-year. Infrastructure software revenue, which includes VMware, reached $6.7 billion, a remarkable 47% jump from the previous year. This segment now represents 45% of Broadcom’s total revenue, highlighting the growing importance of software in Broadcom’s business strategy.

Perhaps most striking is the profitability improvement. Net income surged to $5.5 billion, up from $1.33 billion a year earlier, while operating margins improved by 17 percentage points – from 59% one year ago to 76%. CEO Tan specifically attributed these improvements to their “disciplined integration of VMware and sharp focus on deploying our VCF strategy”.

Broadcom’s stock performance has been equally impressive, with prices doubling over the past year. However, this growth appears to be driven primarily by Broadcom’s AI initiatives rather than solely VMware integration.

Customer Impact: Pain Points and Challenges

While Broadcom celebrates its financial success, many VMware customers are experiencing significant challenges adapting to the new reality. The transition has not been smooth for many organizations, particularly those unprepared for Broadcom’s aggressive approach to restructuring.

Substantial Cost Increases

One of the most immediate and painful impacts for customers has been dramatically higher prices. Some organizations report price increases exceeding 1,000% under Broadcom’s new licensing structure. For example, Computershare CTO Kevin O’Connor was reportedly quoted a future price 10-15 times higher than what the company was previously paying for VMware hypervisor services under pre-acquisition contracts.

These substantial cost increases are forcing IT leaders to reconsider long-term technology strategies that previously seemed fixed. What once might have been unthinkable – migrating away from VMware’s deeply entrenched virtualization platform – has become a financially driven necessity for some organizations.

Support Quality Concerns

Beyond pricing issues, customers report significant deterioration in support quality. The transition to Broadcom’s support systems has created frustration among many long-time VMware users. Customers describe difficulties navigating the new Broadcom support portal, problems with entitlement visibility, and issues with support ticket handling.

Some users report their support tickets being redirected to third-party providers like Ingram Micro, with complaints about reduced quality of assistance. One customer lamented: “I’m really disappointed that my first interaction with the Broadcom support site has failed and this has a direct bearing on how we’ll be approaching our renewal in November 2025”. Such experiences suggest Broadcom may be sacrificing customer satisfaction for operational efficiency.

Product Consolidation and Reduced Flexibility

Broadcom’s elimination of numerous standalone VMware products has reduced customer flexibility. Organizations that previously purchased only specific components of VMware’s portfolio now find themselves forced to buy comprehensive bundles, potentially including unwanted or unnecessary services.

Small to medium-sized businesses (SMBs) appear particularly vulnerable to these changes. Broadcom has publicly stated its focus on enterprise-level businesses, raising concerns among smaller organizations that new product releases and support may not address their specific needs.

Customer Responses and Alternative Strategies

Faced with these challenges, customers are pursuing various strategies to adapt to the new VMware landscape under Broadcom.

Migration to Alternative Solutions

According to a survey cited in one report, approximately 32% of VMware customers are considering abandoning VMware entirely due to increased costs and rigid contract terms. This represents a significant potential exodus from what was once considered essential enterprise infrastructure.

Some organizations are already taking decisive action. Computershare, for instance, opted to migrate 24,000 VMware virtual machines to Nutanix rather than accept Broadcom’s price increases. According to their CTO, this decision is expected to break even within “single-digit months” and result in substantially lower IT operating costs over time.

Other companies are evaluating diverse alternatives including:

• Hyperconverged infrastructure (HCI) solutions, though these often come with their own high costs

• Standalone hypervisors from VMware competitors

• Public cloud platforms, which may require significant architectural changes but offer modern technologies like containers

• Hybrid approaches that retain VMware for critical workloads while transitioning other systems to alternatives

Strategic Waiting

Not all customers are rushing to make changes. Some organizations with existing perpetual licenses or favorable contract terms are strategically waiting before making major decisions. As one customer noted, their “perpetual support end date of November 2025” gives them time to evaluate options thoroughly before committing to Broadcom’s new subscription models or alternatives.

This waiting strategy reflects the significant complexity involved in migrating away from deeply integrated virtualization platforms. For many enterprises, finding the right combination of technologies to replicate their current VMware environment proves challenging, leaving some effectively trapped in the Broadcom ecosystem despite dissatisfaction.

Broadcom’s Forward Strategy

Broadcom shows no signs of altering its VMware integration approach. The company continues pushing its “full-stack VCF” strategy, focusing on upselling customers to more comprehensive solutions. This approach aligns with Broadcom’s historical acquisition playbook of maximizing profitability from acquired companies.

The company is also leveraging VMware to enhance its AI initiatives. VMware Private AI Foundation, announced in August 2023, is becoming a key part of Broadcom’s AI strategy, with 39 enterprise customers already using the platform in collaboration with NVIDIA. This integration demonstrates how Broadcom is positioning VMware capabilities within its broader technology portfolio.

Interestingly, during a recent earnings call, Tan dismissed the possibility of further acquisitions in the near term, stating: “M&A, no, I’m too busy. We’re too busy doing AI and VMware at this point”. This suggests Broadcom remains focused on fully digesting and optimizing the VMware acquisition before pursuing additional deals.

The Future of VMware Under Broadcom

The Broadcom-VMware story continues to evolve, with significant implications for the broader technology landscape. Industry analysts predict that VMware’s position in the market may eventually resemble that of mainframes – remaining essential for legacy and specific functions while new workloads increasingly migrate to alternative ecosystems.

For Broadcom, the acquisition has undeniably delivered strong financial results thus far. Revenue growth, margin expansion, and the shift to recurring subscription revenue all point to short-term success in terms of shareholder value. However, the long-term sustainability of this approach remains uncertain, particularly if customer dissatisfaction leads to accelerated migrations away from VMware technologies.

For customers, the next 12-24 months will be critical in determining whether Broadcom can balance its profit objectives with meeting enterprise needs. The success of VMware Cloud Foundation and customer adoption rates will be key indicators of whether Broadcom can maintain VMware’s market dominance despite higher prices and reduced flexibility.

What seems certain is that the virtualization and private cloud market will never be quite the same. Broadcom’s transformation of VMware has created space for competitors to gain market share while forcing enterprises to reevaluate fundamental aspects of their infrastructure strategy. Whether this ultimately proves beneficial or detrimental to enterprise computing remains to be seen, but the ripple effects will continue to shape IT decisions for years to come.