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Broadcom has won. 70 percent of large VMware customers bought its biggest bundle

Mar 07, 2025 - theregister.com
Broadcom's acquisition of VMware has proven successful, with significant revenue growth attributed to the integration of VMware's offerings into Broadcom's infrastructure software business. The company reported a 25% year-on-year revenue increase to $14.92 billion for Q1 FY 2025, with net income surging by 315%. Broadcom's strategy of bundling VMware products into more expensive subscription packages, particularly the VMware Cloud Foundation, has resulted in 70% of its largest 10,000 customers adopting the platform. This approach, along with cost-cutting measures, has contributed to a substantial increase in operating margins for Broadcom's software business.

In addition to software success, Broadcom has expanded its semiconductor business, securing two new hyperscaler clients for custom AI accelerators, bringing the total to four. The company is advancing its technology with the development of two-nanometer AI XPU packaging and plans for large-scale accelerator clusters. Despite a 25% drop in share price due to AI market fluctuations and potential impacts from US tariffs, Broadcom's stock saw a post-earnings rise. CEO Hock Tan dismissed acquisition rumors, emphasizing the company's focus on AI and VMware.

Key takeaways:

  • Broadcom's acquisition of VMware has significantly boosted its revenue, with a notable increase in software sales attributed to upselling VMware Cloud Foundation to its top customers.
  • The company has expanded its engagement with hyperscalers, now working with five customers on custom AI accelerators, and is advancing its technology towards 10,000 teraflops XPU and million-accelerator clusters.
  • Broadcom's CEO suggested that the US government should adopt more VMware-powered private clouds to reduce spending and modernize IT infrastructure, aligning with the objectives of the second Trump Administration.
  • Despite a 25 percent drop in share price for the calendar year, Broadcom's stock saw a post-earnings announcement increase, driven by strong AI-related product sales and networking solutions for hyperscalers.
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