Broadcom’s recent acquisition of VMware has proved to be a lucrative move, reflected in their latest earnings report showing a 20% year-over-year revenue increase, now totaling $15 billion for Q2 2025. Their net income skyrocketed by 124%, reaching $4.95 billion. A significant component of this growth is attributed to VMware’s integration into Broadcom’s infrastructure software segment, which itself grew 25% year-over-year to $6.6 billion.
However, this success comes amid backlash from customers as Broadcom has raised subscription prices significantly following the acquisition. CEO Hock Tan reported that 87% of VMware’s top customers have transitioned to the VMware Cloud Foundation (VCF), a comprehensive cloud solution priced above previous standalone offerings. While many have renewed their contracts, analysts speculate this could be a temporary solution while customers consider their future options.
Matt Kimball, an analyst at Moor Insights & Strategy, pointed out the strategic risk involved in transitioning to VCF, as some customers might feel trapped by the higher costs and fewer product choices. Prior VMware products that were available a la carte, like NSX Networking or vSAN, are now bundled, requiring customers to accept features they may not need.
Despite some claims of price increases reaching up to 500%, Broadcom maintains that they have not raised prices, considering the adjustments in licensing terms. Analysts expect that while large enterprises may take their time in deciding whether to switch vendors, smaller organizations could find it easier to explore alternatives.
Looking ahead, Kimball advises organizations to assess their cloud and AI strategies deeply. With vendor lock-in becoming a significant concern, he highlights the importance of staying aligned with a vendor whose vision reflects a company’s own objectives regarding cloud solutions and AI integration. Companies will have to weigh the long-term costs and benefits before making a decision about sticking with VMware or moving to another provider.
For organizations currently using VMware, careful planning and consideration of their unique long-term needs are essential as they navigate this evolving market.
