According to Broadcom's recently released quarterly earnings report, the company's acquisition of VMware achieved impressive financial results. In the quarter ended February 2, Broadcom achieved revenue of US$14.92 billion, a significant increase of 25% year-on-year. Net profit soared to US$5.5 billion, a significant year-on-year increase of 315%.
The main driver of this growth is VMware's integration into Broadcom's infrastructure software business unit, which generated revenue of $6.7 billion in the first quarter of 2025, up from $4.55 billion in the same period last year.
Although Broadcom no longer reports VMware's revenue separately, the significant increase indicates that VMware's contribution is considerable. Before the acquisition, Broadcom's software sales were growing only slightly, up 3% in fiscal 2023 and 4% in fiscal 2022.
To better understand VMware's impact, let's look at Broadcom's software revenue before the acquisition. In the fourth quarter of 2023, Broadcom recorded $1.97 billion in software revenue, bringing its full-year fiscal 2023 total revenue to $7.6 billion. VMware's last quarter as an independent company had revenue of $3.4 billion. Looking at the numbers, Broadcom managed to increase VMware's quarterly revenue by about $1 billion in just over a year.
Much of the jump in revenue can be attributed to Broadcom's strategy of bundling VMware products into pricier subscription packages rather than selling them as standalone licenses.
The largest of these bundled services is VMware Cloud Foundation (VCF), which includes the full suite of VMware technologies. During Broadcom's earnings call, CEO Hock Tan revealed that as of the end of the first quarter, approximately 70% of the company's top 10,000 customers had adopted VCF. The shift to VCF, combined with higher costs for existing customers, is likely responsible for the substantial increase in revenue.
Additionally, part of the increase in net revenue was attributed to VMware's cost-cutting measures. In its last standalone quarter, VMware's operating margin was 16%. By comparison, Broadcom's software business's operating margin in the first quarter of 2025 was 76%, up from 59% a year ago.
Despite the clear financial success of the acquisition, Broadcom's handling of VMware sparked widespread customer dissatisfaction.
Reports show that some customers are facing price increases ranging from three to six times their previous costs, with the most extreme cases said to have increased by 20 times. As a result, many customers are now at a crossroads, hesitating whether to stay with VMware or seek other solutions.
While Broadcom's financial results suggest its strategy is effectively driving revenue growth, its long-term impact remains uncertain as concerns about potential customers migrating away from VMware remain.